8 Reasons to Buy Overseas Real Estate Right Now

8 Reasons to Buy Overseas Real Estate

Luigi Wewege

President, Caye International Bank

  • There was an upturn of 3.2% in the GDP figures in the third quarter of 2022, but the change is unremarkable.
  • Despite indications of growth in some economic activities, most economists suggest the economy will continue to slow for at least the next few months.
  • Financial markets and other investments in the US, including property markets, remain unpredictable, creating a demand for more tangible assets and the diversification provided by overseas real estate.

The Bureau of Economic Analysis readings for the third quarter showed a +3.2% change in the US GDP in the third quarter, compared to -0.6% in the second quarter. Despite growth in some economic activities like industrial production, retail sales, and job growth, many economists still fear the possibility of a lurking recession.
Investors tend to turn to hard assets at times like these, and since the US property market faces a price slump, they look for overseas property opportunities.
“There are many reasons why investors turn to overseas real estate,” says Luigi Wewege from Caye International Bank, “but one of the major reasons is seeking a haven from the type of economic volatility we currently face.”

 

Here are eight reasons to buy overseas real estate right now

1. Discounts Due to Currency Advantages

When buying with USD or another strong currency, you can buy much more property in a market abroad with a weaker currency. Currently, the USD is at historic highs, meaning enhanced spending power.

The current surge in the value of the US dollar is producing unexpected opportunities for property investors holding the currency in many overseas real estate markets. It’s at historic highs against the euro, the pound, and other key currencies.

 

2. Currency Diversification

Buying a house overseas allows you to gain the benefits of diversifying into another currency. Currency diversification through property enables you to gain the benefits of earning an income or equity gain of the property in that country’s money.

Buying with the current strong conversion rate for the USD can also mean that even if the property value does not increase in local currency, you will have appreciation if the exchange rates return to historical averages.

 

3. Cheaper Properties

Besides the advantage of currency savings, properties in many overseas countries are highly affordable compared to properties in many US beach towns. “Caye International Bank facilitates real estate loans in five currencies and low-interest rates, with negotiable amortizations and terms,” says Wewege.

 

4. Earn an Income

Whether you buy a second home or have your eye on investing some money, overseas real estate can generate an income that can help pay for the property running costs and create a nest egg in the local currency. Even if you plan to holiday at your overseas property, you can rent it out short term to others.
Remember that most European countries have lower rental net yields for long-term rentals, but these increase with short-term rentals, especially in the coastal areas of the Mediterranean.

 

5. Privacy And Tax Advantages

Americans don’t have to report their personal or rental overseas property to the IRS. Therefore, your foreign property remains out of reach to lawsuits, your ex, and the US taxman.
There are also some US tax advantages when you rent out the property. For example, the interest paid on your mortgage is deductible from your taxable US income, as is the cost of trips to check on your asset.

 

6. Diversify Your Portfolio

Investing some money on overseas real estate diversifies your investment risk because it’s in another market. But, as we said earlier, you also diversify your exchange rate risk and avoid liability risks.

 

7. Brings Residency Perks

If you want to fast-track residency to countries like Greece, Spain, and Portugal to access the Schengen Area, you can purchase a property as part of their Golden Visa Programs. In addition, some countries like Northern Cyprus and Montenegro don’t have a price limit on how much you can spend to receive residency.

 

8. Low-Cost Vacations

Besides investing your money wisely, buying overseas real estate means you can choose a place to holiday without adding expensive hotel stays. As a result, you can enjoy the benefits of holidaying (or even retiring) somewhere with a lower cost of living, and you can escape the cold winters of the US.

 

Final Take

As you can see, buying overseas real estate makes perfect sense right now, especially if you want to diversify your investments and create an income in another country. In addition, your investment can provide you with a dream holiday destination and a financially secure retirement. For more information on investing offshore and in Belize real estate contact RE/MAX Belize!

 

By Luigi Wewege

5 Mistakes People Make When Investing Offshore & How to Avoid Them

Investing Offshore Mistakes to Avoid

There are a number of mistakes people can make when investing offshore or purchasing a vacation home in a market outside the US or Canada. Belize Real Estate has become increasingly popular for investors and people looking to relocate to a warm tropical climate. There are far more than 5 mistakes people make when investing offshore, but we are going to touch on 5 of the most common. Here are the 5 Mistakes people make when investing offshore & how to avoid making them yourself.

 

5 Mistakes People Make When Investing Offshore

  1. Buying Real Estate Without Using an IBC.
  2. Buying or Selling Property Without Taking Advantage of “Owner-Carry Financing”
  3. Buying for Personal Use & Investment without a Strategy.
  4. Buying Property in an Overly Saturated Market.
  5. Buying Without a Reliable Ownership Structure

 

1. Buying Without Using an IBC (International Business Corporation)

Owning property in an IBC (an entity structure separate from yourself) will protect your personal assets and give you numerous advantages. Setting up an IBC takes less than 96 hours.

Advantages of using an IBC

  1. Protection from Lawsuits
  2. Save Thousands of Dollars
  3. Privacy
  4. Higher Return on Investment
  5. Tax Minimization
  6. Simplicity of Ownership
  7. Asset Protection

 

TIP: Look for properties already in an IBC!

 

2. Not Planning an Exit Strategy

Selling Your Offshore Investment

Many offshore markets have expensive bank financing, giving you the opportunity to maximize your profitable return by offering your buyers owner carrier financing, at terms you set.

For example, you purchase a lot for $200,000 & now it’s worth $300,000.

You add a traditional cash sale:

Cost: $200,000

Resale: $300,000

$300,000 (sale price) – $200,000 (cost of property) = $100,000 ROI (Return on Investment).

You offer the buyer financing with 20% down, 10% interest, and a 5-year term

Cost: $200,000

Resale: $300,000

= $100,000 profit

+ $82,000 in interest.

= $182,000 ROI (Return on Investment)

As you can see, this structure adds significant percentage points to your ROI. When you offer to owner finance a property you not only improve your ROI, but you also improve the liquidity as you greatly increase your prospective buyer pool. The larger the buyer pool, the easier and faster you sell a property. It is difficult for foreigners to obtain financing in most offshore markets. If you offer seller financing on your property you maximize your return. It is also important to consider your “exit strategy” on any investment property.

 

 

3. Buying for Personal Use & Investment

What to look for in a personal use property

  1. Personal style
  2. Specific colors/landscaping
  3. Close to Downtown
  4. Who are the neighbors
  5. Is the area quiet
  6. Is the land fully developed

What to look for in an investment property

  1. Is it the path of progress
  2. Is there a potential upside
  3. Where are the value adds
  4. What can be improved
  5. What is the ROI
  6. How long do I want to hold
  7. What financing terms can I obtain

Look deeper and identify what type of property is going to meet your needs.

 

 

4. Buying Real Estate in a Saturated Market

Infancy Markets Competitive Advantages

Buying within an infancy market isn’t always a great investment opportunity. With that said, properties within an infancy market have the most potential upside in the future. The key: finding something within an infancy market that lies in the path of progress. Examples would be Ambergris Caye Real Estate & Belize Real Estate.

Reasons to Invest in Belize

Investing in Ambergris Caye Real Estate

 

Buying in a Saturated Market

We’ve all heard the age-old saying, buy low sell high. The vast majority of properties within a saturated market are already overpriced and thus in these conditions, it is much harder to find good, let alone great investment opportunities.

 

5. Buying in a Market with Poor Ownership Structure

When you are buying real estate offshore you want to make sure that you are buying in a country/market that offers full foreign ownership and fee simple title, You also want to buy and invest in a market where the government is in favor of foreign investment. An example of this would be, Belize.

Belize is a member of the British Common Wealth and practices British Common Law, as such its systems are nearly the same as Canada, Great Britain, and the United States. The fee simple title owner has the right to possess, use the land and dispose of the land as the owner wishes-sell it. In Belize, you own your property outright and can give it away, trade it for other things, lease it to others, sell it, or pass it to others upon death.

In countries like Mexico, Panama, Costa Rica, and Honduras, owning property as a foreigner is far more difficult and there are restrictions in place. Mexico does not directly allow for foreign property ownership and forces investors to jump through hoops to “own” their property. You must incorporate through a Mexican corporation with a Mexican Director and sift through the confusion and grey areas to do so. When buying or investing in Mexico, it is hard to tell if you ever truly own anything.

It is also important to note that most offshore markets have squatting rights. This is not the case in Belize. Belize does not recognize squatters and squatting rights are not a concern.

Advice: Before you invest in an offshore market, invest in your education.

 

When making an offshore investment take the time to attend webinars, read investment guides, talk to the right people, and research everything you need to know before pulling the trigger.

 

Investing in Belize Real Estate

Belize is like foreign investing on training wheels; everything is in English, we have full foreign ownership, practice British Common law, fee-simple land title, etc.