Pros and Cons of Investing in Real Estate Overseas

Many people find that investing in real estate gives them a chance to earn money with few risks. Investing in real estate overseas can also help you earn income, but this activity has a different set of pros and cons that you should consider before making your investment.

Pro: You Have a Wider Variety of Markets to Consider

Real Estate Markets

Image Courtesy of pmo via Flickr

If you only focus on real estate investment opportunities in your home country, you have a limited number of markets, which could make it difficult for you to earn the highest return on your money.

You could, for instance, purchase real estate in countries like Italy or Greece, where markets have fallen below traditional value. This could make a good long-term investment strategy by letting you wait for the markets to recover and increase the value of your investment.

Con: You Could Face Legal Uncertainties

Real Estate Laws

Image Courtesy of kevin dooley via Flickr

Depending on where you buy real estate, you could face complicated legal matters that make your investment less enticing. Vietnam, for instance, has strict limits on how much money investors can take out of the country. This could severely limit your ability to access the money you make from your investment.

Other countries don’t have title insurance or clear ways of defining ownership. Buying property in a remote area of China might sound like a good idea. What happens, though, when the local rulers decide that they want to keep the property as their own? Since certain countries don’t have rigid legal systems, you could find that your “ownership” means little or nothing when it comes time to sell the property.

Pro: You Can Diversify Your Investments

Diversify Real Estate Investments

Image Courtesy of FlyingSinger via Flickr

By purchasing real estate in other countries, you diversify your investment to hedge against risk. It’s similar to buying a diverse range of stocks. If you’re lucky, then all of your investments will increase in value. As long as you diversify by buying real estate in several countries, you don’t have to worry about the value of each individual property. Instead, you think about the overall value of your investment.

This is a great way to protect yourself from changes in the global economy. No one can predict what will happen to the economy in various parts of the world. When you have real estate spread across the world, those fluctuations and potential depressions matter less because you can rely on areas that remain stable.

Con: Currency Exchange Rates Can Negatively Impact Your Profits

Currency Exchange Rates

Image Courtesy of Images_of_Money via Flickr

The U.S. dollar certainly has more value than many currencies used around the world. Over the last decade however, currencies have become quite volatile. If you choose to purchase real estate in a country that has a deflating currency, then you could lose a lot of money.

Imagine buying a home in Mexico while the peso is worth US$.08. If the peso dropped to US$.04, then you have just lost half of your investment.

Can you think of other pros and cons of buying foreign real estate?

Speak Your Mind