Real estate investments abroad: analysis of the markets
Now before investors especially sharply there is a question of the choice of investments that promises the greatest income at a minimum risk. Among Russians long time was considered that purchase of the real estate abroad promises extra profits and guarantees safety of ownerships. Whether it is true or the real estate abroad not a lifebuoy from financial crises any more.
Main objectives of investment into the foreign real estate it is possible to call preserving of money, income acquisition, receiving a type on residence or nationality of other country. Purchase of the real estate is used as one of options of diversification of an investment portfolio as the real estate is considered more reliable asset, than securities or funds.
More and more Russians consider overseas purchase as means of an investment of money for profit earning, but not as giving at the sea. To pay attention to the real estate in other countries, to look for more reliable options of preserving of assets and spare airfields the unstable economic situation forces.
In what benefits of investment into the foreign real estate:
- Profitable real estate value, possibility of receiving a mortgage at the European rates which in total provide higher passive income in comparison with the Russian real estate.
- Upon purchase of the profitable real estate in foreign resorts the buyer has an opportunity to use it not only as a profit source, but also for own rest or further moving.
- Purchase of the real estate in the different countries allows to distribute the capital in assets of various states that increases stability of an investment portfolio in crisis.
But similar investments have also some shortcomings:
- Unfamiliar, often the unclear procedure of the transaction result in need to address competent lawyers or the realtor which services make rather serious amount. Of course, it will save from serious mistakes, but on condition of the competent choice of the agency and the specialist.
- The additional expenses arising upon purchase can make up to 10% of real estate value. For example, it can be taxes or stamp duties upon purchase which need to be given to the budget of the state.
- The dependence on laws of other state creates additional difficulties as the real estate duties of foreign citizens or on income from leasing can be at any time lifted.
Most of buyers consider the real estate abroad as more or less reliable method of capital preservation at a minimum risk. Practice shows that the real estate is restored in the price after falling of economy for a certain time frame. For this reason more and more investors at the moment try to keep the capital at minimum risks.
How it is possible to gain income from purchase of the real estate abroad?
First, purchase of the real estate for the purpose of the subsequent resale at higher cost. Income is calculated on growth of capitalization and on increase in prices for the earth. More than a half of buyers expect to resell property within 2 – 7 years, are ready to wait only for a small amount of investors more. And it means that the capital leaves turnover for rather long time frame. And it is rather difficult to predict pricing in the real estate market of any country for 3-5 years ahead as this process depends as on an economic and political situation and also a set of other factors. Therefore it is impossible to predict precisely investment term for receiving the planned income. Also you should not count on rapid growth of the prices, rather real estate prices are stable and can slightly decrease or increase. On average it is necessary to be guided by average height about 3-5% a year, in the best cases up to 7%.
If to choose a similar type of investment, then it is necessary to choose:
- objects at a construction stage, it is the best of all at a stage of a ditch or the base. The cost of a new building can be in that case 15-20% lower market, but in this case there are significant risks, such as bankruptcy of builder, freezing of construction, the broken terms of commissioning of the object. Therefore it is necessary to approach carefully the choice of the builder, to study its reputation, history and responses about the company and also not to stint to insure the risks.
- the real estate from bank or the auction real estate. Similar options enter the market with considerable discount that provides attractiveness of similar transactions.
Secondly, purchase of the real estate for the purpose of the subsequent leasing. This type of investment is most popular among buyers as they get profit on a rent, but not just wait for increase in prices for an object. However the similar type of investment demands support of local managing company which will provide solvency test of tenants and also will undertake service of an object and ensuring support and check of its state, payment of accounts and collecting of a rent. Independent attempts to do rent business often lead rather to losses, than profits.
Having decided to purchase the real estate abroad for leasing, the investor faces a question and that to it to purchase and in what country. Definite answer to these questions does not exist. Everything depends on the amount of investments. At the budget to one million, even to two million euros, it should be taken into account purchase of student's apartments and also apartments or profitable houses in the popular cities. It gives the chance of further property sale and provides demand for leasing.
At the budget in several million euros it is necessary to consider acquisition of a commercial real estate: hotel, office center, trade cent, etc. But here it is better to choose objects with the signed lease agreements, that is, in fact, to buy the building in which there are already tenants. The longer lease agreement in that case, the better. And it concerns both shopping centers, and hotels. To conduct management of hotel, especially if it is absolutely unknown type of activity, very not easy. Such options, undoubtedly, more expensively, but it is objects with higher liquidity.
To what countries it is necessary to pay attention? The geopolitical situation in the world at the moment does not promote long-term forecasts. Traditionally, Western Europe, the progressive cities, such as Berlin, Vienna, Munich, London, Paris is interesting to investors from Russia. But rates from leasing in the Old World are actually not so tempting as the Russian buyers draw to themselves in imagination. The average annual earnings are from 3 to 6% after payment of taxes.
Other buyers look at stability of the country, choosing the real estate in Britain, the USA, Canada or Germany. Purchase in these countries can be more expensive, but the steady economy acts as a factor of reliability of investment though profits after purchase should be expected only in the long term.
Some buyers prefer the resort real estate though similar purchases cost much enough, especially when choosing the elite real estate. But it is necessary to consider seasonality of income acquisition from similar purchases as the main demand begins since the end of April and until the end of October.
And only the few investors decide to address the new markets in developing countries, such as countries of Latin America, Sri Lanka or Malaysia. Similar purchases can turn back quite good profit as the real estate in the countries with the rising economy costs rather not much, and the attention of buyers and tourists grows that provides the increasing demand.
Thus, it is possible to draw a conclusion that the real estate abroad can become one of profitable tools of an investment portfolio, despite a set of the nuances connected with additional expenses, change of the legislation or economy of other state. The main thing to choose the qualified specialist who will help to define the most profitable directions and decisions for each case. Experts of the AWAY REALTY company are ready to help at each stage of questions of an investment of money, acting as personal family office. Just call +7 495 258 88 66!
