Investing in a foreign market can be an attractive opportunity for many investors, especially new investors with low capital. Rani Jarkas at Cedrus Investments with over 20 years of financial experience is here to get you to know the pros and cons of investing in real estate abroad.
- Low Entry Rates
A country with foreign investor-friendly laws, a thriving middle-class, and political stability is ideal for investing in real estate because it has an easy entry point. Some countries offer various incentives for investors and have lenient eligibility criteria.
- Earn Rental Income
Investing in real estate abroad is an excellent way to earn a passive income. Real estate assets typically appreciate over time, and the rental returns are usually high. Additionally, investments in real estate tend to have a positive cash flow, which means that you’re likely to make a profit as an investor.
- Diversify Your Portfolio
As an investor, you can reduce your investment risk by diversifying your portfolio. You can increase your long-term returns and reduce the overall risk for your investment. Additionally, it’s an opportunity to build an international portfolio.
- Emerging Markets
Many emerging economies have the potential for growth, which you can leverage and grow your wealth. Additionally, if you invest strategically, you’re likely to get a high return on your investment.
- Resistance to Foreign Buyers
Some countries may have legislation that’s unfavorable to foreign investors. Moreover, you face barriers from accessing certain benefits like financing, may be required to make a sizeable down payment, face high-interest rates.
- Additional Costs
Suppose you’re not planning to travel abroad to check your investment frequently. In that case, you might hire a management or real estate company to manage your property, handle maintenance, cleaning, and rental payments of your property.
- Market Risk
Investing abroad has economic, political, and currency exchange risks. Often political instability in a country can affect the health of a country’s economy. This can also influence a change in laws that can make the market unfavorable to foreign investment. Therefore, it could potentially impact the returns on your real estate investments.