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Property Investment Outside the U.S.
Miami Real EstateSunny Miami Florida is without a doubt one of the hottest real estate markets in the world. Over the years, Miami has noticed a lot of changes in it's real estate market. Miami Florida has ... For many decades, the idea of investing in foreign property - whether it be an office building in London, a shopping center in Prague, or a pricey condo complex in Tokyo - was something that seemed off-limits to the average investor. Few foreign companies made their annual reports available to just anyone, and it was assumed by many financial advisors that the process would be just too complicated for the "average Joe" to understand.
Additionally, many of these foreign property investments required large initial investments figuring into the thousands, or even tens of thousands. This also put the idea of investing in foreign property well past arm's length for many.
The tide has turned, however. Investing in foreign property, even what's considered high-end, is no longer a game strictly for the rich and famous, or even the experienced investor.
Many foreign companies are posting their annual reports online and in English. Reading them is typically no more difficult than reading any stock offering, American or foreign. You can note revenue and income trends and tell if a foreign real estate company has a solid business.
Foreign property investments seem like a solid addition to any portfolio. In 2006, European real estate securities, measured in dollars, returned 61%, and Asian property stocks 32%. Add in the 36% return of U.S. real estate investment trusts and you have a global gain of 40%, as expressed in an index assembled by the National Association of REITs and Britain's Financial Times newspaper.
The declining dollar, while not the determining factor in a foreign developer's success, helps U.S.-based investors, because investments in euros, yen or pounds translate into more dollars when the greenback shrinks.
Their property booms should last.
Most financial advisors agree that property booms in Europe and Asia should far outpace any in America, which is already in the midst of a residential housing slump. However, with so many American companies outsourcing jobs to foreign companies, and the development of their economies that they're encouraging on their own, many countries are seeing a growing middle class sector like never before in their country's history.
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When investing in foreign real estate, you need to think of it as investing in real estate first, and investing in foreign real estate second. To shy away because these are "foreign" companies or properties is very short-sighted. Many of the same banks, retailers, restaurant chains and, of course, corporations operate in the U.S., Europe, Japan, elsewhere in Asia, and in Mexico and Brazil. Developers and property investors are also famously international, from the Japanese buying Rockefeller Center to Australians picking up U.S. airports. German investors abound in New York, some even involved in constant bidding wars with U.S. trust funds for the same commercial properties. Money is chasing returns and opportunities, wherever they may be.
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And of course the world is just going to continue to "shrink" as the years go by, so thinking that "foreign" equals "high risk" is again, short-sighted.
One consideration.
It is worth mentioning that foreign real estate companies do not necessarily have very high yields, such as you might expect with U.S.-listed real estate investment trusts (REITs). The REIT structure in the U.S. requires that companies pay out 90% of their earnings to shareholders. Some other countries are starting to implement similar requirements, but this isn't the general rule, at least not yet.
A faraway place provides a good investment.
Sometimes when a person thinks of investing in foreign real estate, they immediately think of Tokyo, London, Sydney, and other well-known destinations.
In March of 2007, however, CNN and Money Magazine reported on the investment hotspot in, of all places, Uruguay.
Uruguay is a small South American nation between Brazil and Argentina which is becoming an increasingly popular destination spot for celebrities like Ralph Lauren and Naomi Campbell, who head to the beaches of Punta del Este to get some sun and luxury away from the prying eyes of American paparazzi.
As Money Magazine reported, "Punta developers are cranking out luxury condos and oceanfront villas that range in price from less than $200,000 to as much as $5 million. You can still buy a four-bedroom house two blocks from the beach for $160,000. Go farther up the coast and you can snag 360 acres of ranch land - with lagoon - for $5.8 million.
To be near the heart of Uruguay's culture and commerce, head to Montevideo. With its cafes, galleries, and Old World opera house, the city offers the colonial charm of Buenos Aires without the high prices. The Ciudad Vieja neighborhood is considered the place with the greatest headroom for real estate appreciation in the coming years. Bargains abound: A three-bedroom house for less than $50,000 is not uncommon. Or, for the price of a Subaru, you can get a two-bedroom apartment with its own courtyard three blocks from Montevideo's waterfront market.
Buying Uruguayan real estate is fairly straightforward because foreigners have the same property rights as locals. The first step is to put down a 10 percent deposit. A lawyer handles the title search and other paperwork. Expect the process to take more than a month. With local mortgage rates topping 10 percent, cash is the way to go."
Of course, Uruguay is only one of many small, relatively unheard of foreign countries that continues to attract investors, foreign and domestic, left and right. As the worldwide economy continues to affect everyone, with stronger manufacturing sectors in so many area and international travel and flights becoming easier to manage and maintain, it is only logical that many out-of-the-way countries will continue to follow in the footsteps of nations like India, China, and yes, even Uruguay, in growing their own local economy and providing a stronger financial base for investors.
With a stronger economy comes stronger property values and stronger currencies with which to trade against the dollar.
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So there is no need to fear investing in foreign real estate. Do your homework, read the annual reports and other financials, and speak with your advisor, but remember, real estate is real estate, and foreign investors have been buying up chunks of America for decades - so why not invest in their countries as well?
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