The Risks Of Investing In Overseas Real Estate
Is the grass really greener on the other side?
Is it better and smarter to invest in real estate outside Australia?
Well, according to the spruikers selling it, you can’t lose.
Some promoters of international property deals make big promises about high cashflow opportunities.
They often claim these deals deliver higher returns than investing in traditional Australian real estate.
But overseas ‘investments’ carry a lot of risk.
I’m not saying they won’t work out. They might. You just have to be prepared if it goes pear-shaped.
And since so many people have generated passive incomes investing in residential real estate in Australia, there’s no need to chase shiny objects overseas.
So before you go chasing these ‘fast profit’ deals overseas, here are some reasons to reconsider investing in foreign real estate:
Limited Control And Oversight
When your property is overseas you can’t just pop over for a quick look.
You can’t make sure the construction is high quality, and you have very little control over your tenants.
Who’s to say the photos you’re sent are even yours?
Less Transparency
It’s hard to put a finger on why this is, but it’s harder to verify data from overseas.
Maybe it’s just because you and I have a ‘feel’ for Australian real estate, and we know when the wool’s being pulled over our eyes.
We’re immersed in news stories about the Australian economy, so we’ve got a great handle on it.
But if you’re investing overseas, all you’ve got are glossy brochures and websites full of fancy pictures and numbers.
It can be hard to check the legitimacy of these developments, or whether they look like they do in the photos.
It’s amazing what AI can do.
You don’t even have an inbuilt radar on certain cities.
And you haven’t got any idea if you’re being lied to.
All you’ve got to do is remind yourself …
If An Opportunity Is Too Good To Be True, It Probably Is.
Different Legal And Tax Systems
A different country means different rules. And you’d be surprised what a difference it makes.
There are hidden costs like stamp duties or capital gains tax which can significantly affect your returns if you’re not all over them.
And it’s not like your accountant’s going to know about them. Their job is Australian tax, not knowing the complex rules of investing overseas.
So now you need an accountant overseas too.
And because foreign income reporting is a whole new level of complexity, this sucks up even more money.
But it gets scarier.
What if that accountant doesn’t know about tax treaties and rules between there and Australia?
One wrong move, tick the wrong box and you could end up paying double the tax. You might even have trouble getting the money out of there back to your Australian bank account.
And then, what happens if the tax laws in that country change? They change all the time here, so there’s no reason to assume they won’t change overseas too.
Suddenly you’re on the wrong end of new tax laws in a different country, and who’s going to tell you?
Finding people to deal with this is going to be expensive, and done wrong you could end up owing thousands more than you planned.
And then you face a whole new problem.
Currency Movements
If the Australian dollar goes up, your returns will decrease immediately.
Here’s a quick example.
Let’s say you have an investment in the USA and you want to bring back $1,000 Aussie dollars.
If the Aussie dollar is buying 60 US cents, you need to take $600USD from your US bank account to give you $1,000 Australian dollars.
BUT … if the Aussie dollar goes up to 80 US cents, you need to take $800USD from your US bank account to put $1,000 Australian dollars into your account back here.
Enough said.
It’s Harder (And More Expensive) To Get The Money
Australian banks love lending for Australian properties.
Overseas properties though?
Not so much.
And why would they when they make profit lending money to good old boring Australian houses?
This means if you invest overseas you either need to pay in full up front, and lose out on the benefits of leverage.
Or you’re forced to borrow money from an overseas bank. And they’re not in any hurry to deal with complex loans to foreigners. If they deal with you (and it’s a big IF) the paperwork will be a nightmare.
Can You Get Out Quickly?
We both know that real estate isn’t known for being highly liquid.
But at least in Australia you know you can hire an agent and list your house for sale in a few days if you need to.
Price it right, 30 day settlement and the money’s in the bank.
But when your money’s in a different country, it could be delayed because of tax reasons, foreign ownership restrictions or different laws.
You might even struggle to sell if it turns out you’ve been sold a bad property.
Investing In Australia Might Be Boring, But Stable And Safe
I’ve seen the promises of quick riches investing overseas.
But Australian residential real estate has proven it’s resilience, time and time again.
A stable government who supports investors, friendly and reliable laws and a banking system which is easy to navigate make it simple.
And with a massive shortage of housing, along with a population which keeps getting bigger and bigger, there’s no place in the world with better fundamentals to grow wealthy.
Add to this high rental yields and growing rents, throw in government and tax incentives and you’ve got the best real estate market in the world, right here at home.
No wonder we’re called The Lucky Country.
Let Me Prove It To You
If you’ve been tempted by the promise of higher returns overseas, let my team show you how much better off you’ll be investing in high growth Australian residential real estate.
You’re invited to spend some time on a video call with one of our Senior Property Wealth Planners to unpack this for you.
They’ll show you the opportunities available in the market.
They’ll help determine your ability to generate passive income by investing in real estate.
They’ll map out an overview of what you should do, and when.
Show you how many properties you could invest in right now if you choose to.
And of course answer any questions you have.
There’s no cost for this either.
We do it in the hopeful expectation that if you decide to invest, you’ll ask us how we can help you.
No obligation, no pressure.
First things first.
Enter your details below, and we’ll contact you to book in a time.