Chicago-based investor David Askar talks international real estate investment.
With costs skyrocketing in the U.S. real estate markets, it can be quite daunting to get your property investments started. However, overseas real estate investments can be a great way to get the ball rolling on cash flow and setting up a sizeable nest egg. Depending on the foreign market you’re considering to get involved with, you can even see significant returns on your investment property value in as little as a few years.
An advantage of real estate investment is that it’s viewed as a tangible, real asset, which can be helpful in establishing a reputable worth for building up your portfolio for future business ventures. The following regions are currently ripe for the picking when it comes to foreign real estate investments:
Despite some tumultuous economic and political landscapes, the various European real estate markets are swiftly recovering. While major cities are still on the forefront of investors minds, secondary European locations are gaining traction as being fertile grounds for urban development.
London, England — As one of the lead cities for investment opportunities, international investors have flooded the London market. From a five-year period between 2010 and 2015, prime properties priced above £1,000 a square foot have risen 46.3% in East London. In the same time frame, properties in Central London also increased 30.7% — making for conditions that will offer huge returns.
Marbella, Spain — With gorgeous weather year-round and the enviable laid-back Spanish lifestyle, Marbella is a highly visited destination. Investment rental properties in this coastal city are sure to provide a massive return as the city invests in long-term economic and urban development plans. The typical return on a rental property between €200,000 and €700,000 averages roughly 3.5% annually.
Krakow, Poland — Low-interest rates in Poland and the push for updated urban infrastructure makes the city a prime location for real estate investment. Studios and one-to-two-bedroom apartments are most desired, with about 10% to 20% of the properties being turned into rentals. Since mid-2008, house prices in Krakow are down by 15.2% and overall have been fuelled by an inflow of investment due to the country’s accession to the EU, record low-interest rates, and mortgage financing development.
The oil economy is booming and with many corporate headquarters located within the Middle East, the region is seeing a spike in tourism and relocation.
Amman, Jordan — In recent years, instability throughout surrounding countries like Syria, Egypt, Iraq, and Lebanon have prompted many real estate investors to view Jordan as a safe haven for property growth potential. Land values have soared due to a shortage in housing with the incoming migrant populations. The quality of life, financial benefits, and various other strategic economic benefits make Amman a unique investment opportunity.
Dubai, United Arab Emirates (UAE) — Considered the Las Vegas of the greater Persian Gulf region, the great real estate investment potential stems from government-provided subsidies and incentives for individuals and/or companies, which has prompted relocation efforts by many affluent business and professionals. With a rapidly-expanding economy, Dubai’s GDP is projected at $107.1 billion with a growth rate of 6.1% in 2014. Despite being the 22nd most expensive city in the world, prices for high-end real estate in Dubai are up only 6%, while they’re up 18% in New York and 8% in London.
This region is certainly having its moment in the sun with newly reformed tourism incentives and laws. While some countries are going through political instability, others are experiencing rapidly booming economies. The following cities are sure to wow even the most seasoned of investors.
Panama City, Panama — While it is still a developing nation, Panama has a growing stable economy thanks to retirees, plentiful opportunities with vacation rentals, and economic instability in nearby Venezuela to fuel the housing market. A brand new, full-amenity condo on the coast is likely to cost less than $300,000 and resale properties commonly cost less than $250,000.
Granada, Nicaragua — The colonial city of Granada is located in one of the safest Central American countries, and Nicaragua’s tourism incentive laws ensure that real estate developers and investors don’t need to pay taxes on properties for up to 10 years. Investing in Nicaragua is safe and almost entirely hassle-free with very few restrictions.
Alajuela, Costa Rica — In this tropical buyer’s market, most investors are looking for gated communities, low-rise condominium towers, and mixed-zone residential and commercial areas. The Costa Rican culture and sights, along with its thriving economy, make for an impressive investment when it comes to vacation rental properties. Closed-end real estate funds in Costa Rica have reported average annual returns between 7% and 8% since 2007 and have been attributed to occupancy rates, price indexation clauses, and the strategic value of various key properties.
Factor in Affordability and Taxes
When you’re spending so much time and effort to find that perfect real estate investment location, affordability factors in considerably. Financially speaking, the tax benefits of purchasing real estate in the U.S. also applies to foreign investments — you can write off the costs of maintenance for foreign property holdings, along with any travel associated with scouting for, purchasing, and managing rentals. Not to mention that potential tax benefits can extend to the foreign country as well. Many countries impose very low property taxes (including France, Ecuador, Uruguay, and Colombia), have no property taxes at all (Croatia and New Zealand), or don’t even impose capital gains taxes on real estate sale earnings (Argentina, Belize, Nicaragua, Croatia, and New Zealand).
Whether you’re buying raw land, investing in a planned urban development, or launching a business abroad, there are certainly gains to be had when diversifying your investment portfolio by taking up property abroad. Developing countries make for many opportunities related to business ventures or creating a relationship with a foreign government for retirement benefit purposes. The extra cherry on top of investing overseas is that in many countries, owning local real estate can also be grounds to qualify you for a residency visa, should the need ever arise.
Read more from David Askar, a Chicago-based real estate expert.