Look to diversify
With the current instability in the U.S. real estate market, you may want to consider enlarging your horizons. You could expand your overall portfolio by buying overseas investment property. It’s always a good idea to diversify your real estate portfolio of investment properties if possible. And one solid way is to investigate looking at acquiring overseas investment property.
Buying on your own
Areas with emerging and burgeoning economies are good places to start looking. Pacific rim countries like China, Japan and the Phillipines are all doing well right now. In Europe, countries like Turkey, Latvia and Romania are in fine shape, with low debt and rapidly increasing economies.
Meanwhile, the usually reliable spots for investors, like Italy, France and Spain, are all currently struggling. However, if you stay in major cities like London or Paris, there is much more stability in real estate valuations. Of course, if you’re unfamiliar with specific areas, you’ll need to do a good amount of research first before investing. You’ll need to make sure the market has been relatively stable over the past 5 to 10 years.
Another main concern you would have when looking to purchase residential overseas investment property, is whether you’re going to be able to make on-site trips at regular intervals to check on your properties and inspect them. If you don’t normally go to these areas that you’re considering purchasing, it may be a bad idea to be looking to purchase overseas investment property individually. If you want to own the property outright, you may consider having an on-site manager who lives in the same town or the same building, to deal with any problems, especially emergencies on your rental property.
However I don’t recommend purchasing individual overseas property unless you plan on making at least one or two visits there per year. While there, you’re going to want to make a detailed physical inspection of the property, check on your tenants, and make sure the property doesn’t need any major repairs.
Some investors create overseas investment properties out of former vacation homes that they own. If you do the same, you’ll have a leg up since you’ll be very familiar with the area, and already know it’s vagaries. You’ll also be able to have the option of screening tenants yourself when you’re there.
Using specialty REITs
Of course if you haven’t been to a particular overseas country that you’re considering investing in, it may not be a good idea to be looking for an individual piece of overseas investment property. Familiarity is very important. As an alternative however, especially if you’re searching for higher yields than U.S. real estate is throwing off, it’s a good idea to try to look for Real Estate Investment Trusts (REITs) that specialize in overseas properties, both residential and commercial.
Many top REITs in the U.S. have enlarged their scope of properties to include overseas divisions. REITs such as Prologis and AMB Property (soon to merge), Simon Property Group and Kimco Realty are good places to start your search. Compared to REITs that invest solely in U.S. property, most overseas REITs tend to have higher cost structures, and may have relatively higher share buy-ins compared to strictly stateside-invested REITs. However, compare their 1,3,5 and 10 year yields to get a better idea of how they are outperforming the U.S. market.
Investing in REITs that specialize in overseas property investment can be a very lucrative way of going. Be sure to do your homework, and then choose the correct REIT that meshes well for you. You’ll find expanding your real estate portfolio to include some form of overseas investment property is the smart way to go for long term growth.
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