Why It’s Always A Good Idea To Invest In Real Estate Overseas
It’s no secret that real estate is one of the best investments that you can make.
Real estate is a hard, real asset that will always retain its value. That is, unlike stock, you won’t have to worry about your real estate investment going to zero.
Investing in real estate overseas (or outside your home country), however, puts you into another dimension.
It doesn’t get much better than foreign real estate when it comes to asset protection among other things.
In fact, Lief Simon, real estate investment and offshore diversification expert at Live and Invest Overseas, a well respected international real estate and lifestyle publication, refers to foreign real estate as the “New Swiss Bank Account”.
Here’s what I know….
With Real Estate You’ve Got Control
When you invest in real estate, YOU can do things to increase its value or profitability.
You can list your rental property on different online booking sites to increase occupancy. You can raise your nightly rental rates to improve your profitably.
If you need to, you can change your rental model from short-term to long-term or vice versa.
Further, you can make improvements (kitchen or bathroom remodel) to drive up your property’s value.
With a stock investment you’ve got to pretty much sit on the sidelines as you don’t have any say as to the direction that the company is going in.
Several Ways To Get An ROI
You’ve got several ways to generate an ROI on a real estate investment.
There’s rental cashflow which can be broken up into three categories…
- Short-term rental (less than a week)
- Extended stay rental (one to six months)
- Long-term rental (six months or more)
Typically, investors just look at short- and long-term rental as their only options but there’s a segment of travelers, digital nomads as they’re called, who like to spend extended periods of time (one to three months) in different parts of the world throughout the year.
There are long-term rental opportunities in the Dominican Republic, particularly in Punta Cana, as well. This area is popular with North Americans, mostly Canadians, who break to the DR to escape the brutal winters. These folks, known as snowbirds, will do six-month rentals and, in a lot of cases, stay longer.
Aside of rental cash flow, you’ve got capital appreciation. Again, like rentals, capital appreciation can be a short- or long-term play.
For example, an investor’s appreciation strategy might be to buy and hold for seven years then resell for a profit. On the other hand, you could invest in a property in the pre-construction stage of development to immediately resell and exit the investment once construction has completed.
The investment strategy that you’ll use will depend on your investment objectives, desired rate of return, and timeline.
Noval has real estate investment options that’ll work for all of these strategies.
Layers Of Diversification
Some will argue that the stock market or a mutual funds gives you a more diversification versus real estate.
This is not true… especially, when it comes to overseas real estate investments.
Investing in real estate overseas can provide you with several layers of diversification by:
- Type of asset (beachfront condo for rental, mountain villa, lot)
- Geographic location (Dominican Republic, Brazil, Punta Cana, Santo Domingo)
- Currency that the asset is held in (U.S. Dollars, Pesos)
- Currency that real estate income is earned in (U.S. Dollars, Pesos)
- Rental Market (Retirees, Snowbirds, Tourists, Digital Nomads)
- Buyer Market (Domestic and international)
Who’s investment portfolio is more diversified?
Cindy owns a long-term rental property in Los Angeles, a short-term rental property in Punta Cana, and a extended stay rental unit in Santo Domingo.
Bob owns stock in Apple and Home Depot along with a mutual fund investment. Plus, he’s a got a non-income generating home in Texas.
All of Bob’s equity investments are tied to the U.S. stock market. He’s toast if the stock market crashes.
On the flipside, Cindy’s rentals are situated in three different locales, serving three different rental markets, and generating rental income in two different currencies.
You Can Use Leverage (Financing)
Financing is available for real estate.
Overseas real estate developers typically offer in-house financing, sometimes at no-interest, depending on the stage of development. The terms will vary from 20% to 60% down with the balance to paid within three to five years.
In the Dominican Republic, bank financing in available to foreigners or non-residents. Banks will typically offer 70% LTV financing up to 20 years at 7% to 12% interest per year for non-residents. Foreigners who have Dominican residency can get more favorable terms and interest.
With the financing option, real estate investors have more cash to acquire more property or improve on existing ones.
Further, you can use your rental cash flow to pay for your property 100%.
To find out more about Noval’s real estate investment options in Punta Cana, get in touch with one of our investment consultants at [email protected].
Until next week.