How to Invest in Foreign Real Estate
Investing in foreign real estate can yield profits, but at greater risk than investing in domestic real estate due to currency fluctuations and tax complications. Real estate tends to rise in value along with the economic growth of the area in which it is located. When the economy booms, real estate values go up along with it as more people and businesses clamor to move to the hot new area. Investing directly in foreign real estate may also be complicated by local regulations, but investors may get around that by investing in foreign real estate companies rather than directly into property.
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Instructions
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Direct Property Investment
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Research property investment in the country where you would like to buy land or structures. You may need to contact a law firm in the country in question to get more accurate information about regulations for foreign investing. In some countries, you may be subject to taxation from both the United States and that country for capital gains realized from property sales.
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Review the currency value trends of the country where you would like to invest. If the currency has a developed a marked trend of weakening relative to the dollar, your money will likely buy more property than if the reverse is true. If the currency is strengthening relative to the dollar, however, your investment will appreciate more quickly in dollar terms.
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Visit the property that you would like to purchase to ensure that it's appropriate for your investment goals. If you're purchasing a commercial property, review income statements to ensure that you're purchasing it at a proper valuation.
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Close the real estate deal with the advice of local legal counsel. Keep copies of all contracts and documents for your records. If you won't be living on the property yourself, hire a manager to oversee the care and upkeep of the property during your absence.
Real-Estate Investment Trusts
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Research Real-Estate Investment Trusts (REIT) for investment. These securities are set up in a way similar to mutual funds, but for real estate properties. The company purchases a number of properties in a particular country, usually of a particular type, and the share value alters relative to the values of the underlying properties. Many major mutual fund companies offer REIT funds that have different weightings. For example, there are funds that focus on the Tokyo apartment market or on properties in Swiss alpine resorts. The IRS obligates REITs to be composed of at least 75% real estate properties.
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Invest in an REIT through a brokerage account. Check the REIT for fees and past performance to ensure that you're working with a good company.
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Monitor your investment and decide what actions to take if any. Continue researching foreign real estate markets to inform your decisions.
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