Owning foreign real estate is a sexy idea. You can brag to your friends about your house in some exotic location and you can feel like a sophisticated and worldly investor.
But how many people do you know that actually own real estate in a foreign country? And more importantly, of those people who own real estate in a foreign country, are they making a return on their investment? Or are they just burning their money for some pipe dream?
Personally, I’ve found that you need to focus on three main areas when investing in foreign real estate:
A Real Market
This may sound obvious, but many people invest in countries because they have visited the location a couple times. This is especially true in spots where people like to vacation, such as tropical locations with a beach or the mountains with great skiing.
While this might make sense for personal enjoyment, the investment side is usually a disaster. That’s because vacation destinations are extremely cyclical with a high season and a low season. And, if you buy real estate in one of these places, it’s likely that you will actually be using the property during the high season, which means you’ll be occupying the place during the exact time when you could be making the most money.
So, you need to be looking for real estate in a location that offers year round reliability. There needs to be a steady flow of short term tenants, or a reliable market of long term renters, depending on the strategy you’re targeting.
Fair Values (that can actually yield cashflow)
Again, another obvious thing to look for, but surprisingly difficult to find. Typically, real estate markets that are hot are expensive… for obvious reasons. The trick is to find a market that is inexpensive because of an arbitrage opportunity (with currencies) or that are up and coming.
Finding a market like that – one that is relatively cheap, but with an improving market and reputation – takes A LOT of time to find. Not only will you physically have to travel to these locations, but you’re also going to have to do a lot of research.
And, unless your full time job is traveling and researching real estate markets, it’s going to be very hard to find one of these cities that is great to invest in. Also, another problem is that usually when you hear about ‘the next great place to invest in real estate’ it’s usually too late.
On The Ground Partners
This is BY FAR the most important part of buying foreign real estate for investment, and for that matter, any real estate that you are going to have managed.
Buying foreign real estate requires you to understand a different currency, a different language, different laws, different cultural nuances, and an entire list of ‘different’ things. The truth is that unless you physically move to a new country and completely dedicate your life to a real estate market, you will never fully understand what you’re getting into.
That’s why it is so important to have on the ground partners that you trust and also have skin in the game with you. They must make money when you do, and lose money when you do – interests must be aligned.
Finding a team like that is incredibly difficult and requires a lot of your personal time to develop those relationships. But, when you do find that on the ground partner, your investments can become wildly successful as there are few competitors due to the high barriers to entry.
What Do You Do?
The thought of investing in international real estate can be very intimidating, as there are countless ways to go wrong. But, if you take a patient and calculated approach, the returns can be far superior to the local market you live in.
In addition to the three must-haves above, make sure that you invest a small amount of money and time in research before jumping into a new market. You should, at a minimum, physically visit the location where you are investing at least once.
There are literally dozens of markets throughout the world right now where you can be making returns in the high teens and beyond.
One of those markets is Colombia, which is where we will be visiting soon.
Due to logistics, we have to limit the number of people who can join us. (This literally means that we can’t take a huge group of people to tour real estate, because like herding cats, things start to get crazy with too many people!)
We already have quite a few people registered to attend, so if you are interested in joining us you need to register soon. We do not know when we will reach capacity, but we are well over half full already.