Things to Keep in Mind While Zeroing on Your Next Overseas Property Investment

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Global Real Estate is expecting to recover in the second half of the year. Vaccination drives across different countries are helping few on the path to recovery while others are yet gripping with the crisis.

Pent-up demand starting to filter through the economy is poised to spur growth in the second half of the year. 

Global office markets are yet to show any signs of recovery, witnessing a dip of 31% in leasing volume in Q1 2021 as against Q1 2020. The outlook is improving with an uptick in leasing volume in some countries, like China.

The Purpose & Means

The reason to purchase a house is the chief consideration criterion while shortlisting and selecting a property overseas. 

If you are planning to buy the property for investment, you will need to carry out all the financial decisions, keeping in mind the estimated returns. 

Selecting a viable property is relatively easy, but securing finance is where the actual challenge lies. The step is especially more challenging as it is subject to international laws and consideration of a local currency through international foreign currency transfers.

You can start by obtaining an ‘Agreement in Principle’ as the first step before confirmation of purchase. It will help safeguard you to get back your money in the event of any change. A foreign currency transfer fee will be applicable in case a situation for repatriation of funds from abroad arises.

You need to know the exchange rates for international wire transfers and the value of the foreign currency. A ‘Certificate of Importation’ and a local bank account are a must if you plan to opt for foreign currency transfers to transfer money overseas from your own country at different intervals.

It makes the repayment of legal fees and affiliated tax debts on time through a series of standing orders as per need. You can execute trouble-free and smooth transfers and transactions if you include the foreign currency transfer aspect in your preparation.

The Tax & Valuation

The tax laws and legislation are unique in every country. So, everyone’s payable tax amounts are different. Laws may need you to repay costs such as:

  • Inheritance tax
  • Title transfer tax
  • Land tax (an annual cost, charged by few countries as a condition of the mortgage)
  • Stamp duty

You should factor in all these costs into your budget, as they will eat into your capital. Failing to pay these can attract consequential legal penalties. When the repatriation of funds from abroad happens for this sale, it will incur a foreign currency transfer fee. Make sure to include this as well.

When you plan to sell your overseas property at a profit, it will lead to a tax liability in the country where the property is situated. Also, many countries charge sales tax as well. The tax rates will be based on the tax laws and legislation of the foreign country.  You can get the proceeds from the sale post via international foreign currency transfers after paying the necessary taxes.  

When you purchase any property in your country, you unhesitantly request for independent valuation and a structural survey. But often during investment on a property overseas, people miss out on this crucial aspect. The reason for the same can be the logistical nightmares of a remote operation and costs. 

An independent valuation will guarantee the integrity of the property. It is an expense that will help protect your larger investment. 

Title, Location, & Security 

In an international real estate investment, you need to be extremely cautious. The remote nature of the transaction makes it difficult to trust the agents and vendors. Try and find out information on ownership and title. The developer may have withdrawn money to complete the property. He must write off the debt before the transfer of title happens. 

This step is crucial or you will be liable to pay any borrowed money attached to the property. 

The knowledge of the location can help you generate consistent returns. You must do proper research to understand the various conditions and local amenities. An investment in a property that will be in use as a holiday home rental needs the knowledge of seasonal peak and fall times for you to plan returns.

If you are not moving to the new location where you have bought a new property, chances are it will be empty for most of the year. So you must arrange year-round security or employ a local security management company to take care of the property.

The company can take responsibility for the maintenance and cleanliness of the property. Though this is an extra cost, it is a necessary one to protect the total investment from getting wasted.

Exit Strategy

A suitable contingency and exit plan is key to such an investment. The prevailing economic conditions and global real estate market will determine the need to hold or sell. Hence an investment in overseas property should include due diligence. Knowledge of the location, currency, conversion rates, and tax laws and legislation is crucial.

Getting an idea of the foreign currency transfer rates during the repatriation of funds from abroad will help you plan better. Also, the investment should have validation from authorized agencies for valuation and projected return on investment.

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