When most people contemplate investing in real estate, they focus primarily on their home country. This, after all, seems to be the best choice; you know the market, you can understand the legislation, and you can take a trip to visit your properties as and when you please.
However, while domestic investments can be lucrative, it may well be worth expanding your thoughts beyond your own borders and looking to overseas markets. This is true for all real estate investments; from offices to domestic property, overseas markets can be incredibly lucrative, and even help to bolster and secure your portfolio for the future. Below, we’ve put together the key reasons that overseas real estate investments are worth considering.
#1: Portfolio Diversification
The most persuasive reason to invest in overseas real estate is a simple matter of diversification.
Let’s say that you are heavily invested in the US real estate market… and the US real estate market crashes – as it does fairly frequently. Even if you were to manage the initial crash with relatively little impact on your finances, the aftermath could be catastrophic; if you struggle to sell due to a flat market, you could find yourself in a scenario where you are asset-rich but cash poor.
However, if you had invested 50% in the US and 50% in the UK, then only half of your investments would be struggling in a flat post-market crash in such a scenario. Better yet, if you’d invested 25% in the US, 25% in the UK, 25% in Holland, and 25% in Germany, you’re further protected still – three of these markets could also crash simultaneously (which is highly unlikely as it is) and you’d still have a quarter of your investments well protected.
#2: Value for Money
Admittedly, this point is a little more subject to the whims of the currency markets, but it’s still worth considering: at this point in time, the US dollar is strong – in fact, surprisingly strong – which means you can achieve excellent value for money when buying overseas.
This point is particularly worth considering if you have previously looked at the higher-price real estate investment areas – such as commercial or office properties – but have found yourself struggling to stretch to high US purchase prices. With a strong dollar behind you, these high-yield types of investments could be more viable overseas. Such a choice would actually double down on the benefits of diversification; not only would you protect your portfolio against geographic market crashes, but also sector crashes in individual areas too.
#3: Ample Opportunities
Any real estate investor knows that there are two ways a market should be judged: how profitable it is at present, and how profitable the same market will be in future. While the US real estate market easily meets the threshold for a viable investment in the present, it may not do so in future – in fact, many experts have predicted US real estate market as a whole is due a “correction” in the near future.
Some overseas markets, on the other hand, are free from such concerns – in fact, they are growing, with demand coming close to outstripping existing supply. This is especially true if you invest in commercial or office real estate; Europe’s emerging submarkets in the office sector show great promise for investors, and the Asian commercial powerhouses, such as Singapore, continue to flourish. This means that these overseas markets could be considered more dynamic than the domestic market, with a greater potential for further growth, and few concerns regarding the possibility of a “correction”.
#4: The Opportunity to Travel
While this point is not specifically related to your investments, it is nevertheless a worthwhile consideration – especially if you already have a strong sense of wanderlust.
When investing in overseas markets, it’s essential to visit the country you are considering investing in – ideally, on multiple occasions – in order to understand the market, view properties, and essentially get a feel of the area you’re considering as an important element of your financial future. If you’re a fan of traveling, these research trips will be doubly beneficial, giving you the option to explore and immerse yourself in another country and build your investment portfolio at the same time.
While domestic real estate investments are always a good choice, the above four points illustrate the wealth of possibilities that can be achieved through foreign investments. While investing overseas is undeniably more complicated than investing in the domestic market, it’s also undoubtedly worth it, offering a number of opportunities that can improve your life both now and in the future.