Last week, we talked about why renting property in the states was more cost effective than buying.
However, there’s an exception. Sometimes, buying a property is the best move.
But like everything else in real estate, it’s all about location, location, location.
And buying property in another country can be a great strategy for diversifying your portfolio and opening up doors in the process to internationalize yourself.
Even if it costs a little more to buy than rent a seaside villa in Belgium, there are other important benefits international property ownership offers.
Owning foreign real estate is one of the very few ways that Americans can legally keep some of their wealth abroad while retaining their financial privacy.
If the foreign real estate is held directly in your name (i.e., not in a trust, LLC, real estate fund, partnership, etc.) it is not reportable (although any rental income must be reported).
As always, be sure to consult your tax professional.
2. Asset protection.
Having assets offshore makes them harder to get to.
A deliveryman who trips on your sidewalk can probably get his hands on your bank accounts if he sues, but it’ll be much more difficult for him to lay claim to your condo on the beach in Panama.
3. Lower cost of living.
If you’re in the market for a vacation or second home, taking your search overseas can mean spending $150,000 for a house on the beach in Brazil rather than $800,000 for a home on the beach in New Jersey.
For many, buying abroad is what makes it possible to afford a second home at all.
As a retiree with a home of your own in the overseas retirement locale of your choosing, you can often take advantage of a lower cost of living — some places as little as $1,000 per month.
4. Enjoy a new culture.
Owning a home of your own overseas makes you truly a local, meaning a richer cultural experience.
Don’t eat McDonald’s and travel like a tourist.
I recently took a trip to Cabo San Jose, Mexico.
It was 70 degrees and sunny all week… in February. I wouldn’t mind spending a few months a year in that little slice of paradise.
5. Portfolio diversification.
If you have a “diverse” portfolio that’s all invested in U.S. markets, then your eggs are, in fact, still in one basket.
International real estate gives you exposure both outside of your country and the equity market as a whole.
Many global investors are proponents of being currency neutral, or at least currency diverse.
Some investors may find comfort in not being at the mercy of the U.S. dollar or any single currency for that matter.
6. Income stream.
Renting your foreign property can generate an income stream that’s independent of your U.S. holdings.
If you plan to eventually retire there, this can offset the expense until you are ready to make the move.
7. Deduct travel costs from your taxes.
The cost of every trip you take to visit and manage your investment properties overseas can be tax deductible. You can toast the IRS on the plane ride home from Barbados.
8. Security of a hard asset.
Hard assets are almost always a sensible investment class for safeguarding wealth.
As real estate investors are fond of saying, the value of your property can’t go to zero, unlike your stock in Pan Am, Enron or Worldcom.
9. Access to international banks.
In most cases, owning foreign real estate in a country provides a valid justification for you to open a financial account in that foreign country.
FATCA has made it much more difficult for Americans to open accounts across the globe, so owning local property can open some doors.
10. Open the door to foreign residency.
Owning property overseas can give you a “foot in the door” to the country where the property is located.
In many countries, owning real estate locally qualifies you for a residency visa. It can also serve as an emergency “bolt-hole” that you could, in an instant, always escape to in case of trouble in your home country (hey… I don’t know what you’re into).
Of course, there are downsides to investing in foreign real estate, including extra paperwork, illiquidity, carrying costs, and country-specific risks.
Investors should carefully weigh the negatives against the potential benefits of being an international property owner.
But it’s definitely something to think about.
If you’re still building up your nest egg for that overseas move, you should check out my PVA service.
By leveraging the market’s most powerful indicator, I help my members consistently lock in triple-digit gains.
Just last week, I sent out a buy alert to my members on a company that got them a nearly 20% gain overnight!
And I’m currently working on new picks. There’s never been a better time to get into the market, because those sandy beaches offshore are looking better by the day.