What about buying real estate overseas?

 

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What about buying real estate overseas is a question many mum and dad investors are asking now that investing in Australia is less lucrative. Buying property is often an excellent investment, however, when transacting overseas there are many new things to consider.

 

 

Finding the property 

 

Clearly, you may not be able to visit the properties you are interested in as easily as you can in Australia. Therefore, your first place to start is to check online various portals that offer listings to consider.

 

As we purchase goods globally daily we are getting better at navigating larger transactions. You can discuss properties with international real estate agents as easily as you do at home.  Like our agents, they can advise you on where to look for properties and they can often help with other real estate-related issues.

 

Getting a mortgage

 

Generally, local banks cannot use overseas property as collateral. Therefore, you need to communicate with overseas lenders. Real estate agents in the country you choose can help you with these processes. Foreign mortgage requirements differ from country to country so it is important to know what the local lending criterion is. Just one example may include the percentage of the initial deposit for a purchase.

 

Independent advice 

 

Clearly, you must employ an independent legal advisor that specialises in the nominated country’s conveyancing laws. Different countries and regions have different laws regarding foreigners acquiring property.

 

Most English-speaking countries such as the USA, Canada, Britain, and Australia follow common law. This means that if you buy a property in these places, you will have the title of ownership, among other pertinent documents. Other countries have other types of ownership that you need to understand.

 

It is also important to obtain independent advice regarding your tax obligations. In Australia, we generally seek the advice of accountants but in countries like the US you may also need a tax attorney.

 

Exchange rates

 

Exchange rates matter when you transact internationally. A fluctuation in the exchange rate may cause you to pay more or less than you expected in real terms. Exchange rates affect a mortgage sought in a foreign country and fluctuations may impact your mortgage payments.

 

Alternatively, there are some safety nets that you can choose, such as a forward contract. It allows you to use a fixed exchange rate for international transfers for a sustained period regardless of fluctuations.

 

It helps you to secure the property at a favourable exchange rate. Another option is a market order which is slightly different in that you get to convert your money only when a particular exchange rate is reached. A broker can arrange this all for you.

 

Costs 

 

There are many costs involved when purchasing abroad. There are mortgage fees, chartered surveyor fees, bank transfer fees, service fees, income taxes, translation fees, and consultancy fees, among many other probable costs.

 

Arguably, the most important cost to consider will be property or income taxes. As an international investor, you will need a tax expert in an overseas country to help you get your finances right as well as in Australia. The income you receive from foreign investment is added to your tax obligation in Australia. Further, if the exchange rate is unfavourable your tax obligation may be prohibitive.

 

There are also costs for international transfers so there is considerable effort required in engaging brokers with better international transfer fees than local banks.

 

Language barriers

 

Clearly, language can be a barrier however, language has cultural ramifications too. It would be prudent to employ independent advisors and real estate agents who know how to converse in English and can explain the cultural nuances as well.

 

To conclude

 

Foreign investment is lucrative – evident from the people that come and buy in Australia. You can see many people have either family or business contacts in Australia that help navigate the processes. If you can establish your own international network foreign investment may be for you.