Overseas Real Estate Investing… For Real?
Go big or go home, right? I’ll tell you, my first investment purchase ever was two beachfront properties in Nicaragua. Crazy, huh? I’ve always been known to do everything backwards- hardest to easiest. Despite what I do, however, I don’t necessarily encourage everyone to go big or go home the first time around, or even the third, but don’t forget-
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Real estate does exist outside of the US!
Agh! I mean, seriously, have you ever thought about putting your money somewhere other than in the States? Maybe you’ve heard of people doing it in the past but never thought of it as a realistic possibility. It tends to be one of those things that only happens in worlds completely separate from my own type of mentalities. Well guess what, it’s real.
Why You Should Consider Investing Overseas
- Diversity/Security. I’m sorry, but I don’t have as much faith in our government as most, especially when it comes to my money. People will argue all day long about the security of our government and economy and who knows what, but to each their own and I’m not that trusting. I put plenty of my money into the States, couldn’t hurt to keep some out of it.
- High Returns. There is potential for some seriously high returns in overseas investing, especially if you invest in emerging countries. The risk is much higher, but the higher the risk the higher the potential return and you can definitely make some bank investing overseas.
- It’s Really Freakin’ Fun. One thing I love the most about everyone I meet who has either invested overseas or is pondering investing overseas is that they inevitably have some sense of adventure. Overseas investing is not for the timid. It is scary! Scary doesn’t always mean bad either though, don’t confuse the two. Aside from the rush just from owning overseas property, it can also be incredibly fun to travel to check up on your investment, or just to have an excuse to visit it.
How to Know What Country to Buy In
Above all, I highly recommend if you are considering investing overseas to connect with other investors who are doing it. Networking in REI in general is a great practice, but especially when it comes to overseas investing, try to find people who have either done it already or are doing it and try to learn as much as you can from their experiences because you will likely learn things you wouldn’t have even thought to consider. For example, I never would have known there was a difference in countries who let foreign nationals own property freehold and those who won’t. I didn’t even know what that meant before. Since this is probably one of the most critical parts of overseas investing, let me expand on it.
You need to know if foreign nationals are legally allowed to own 100% deeded freehold property in that country.
Ever heard the famous opposition of buying in other countries which is, “I would never buy there, the government could just come in one day and take my property.” If you are not the 100% owner of a property, yes the government can come in and take your property. Make sure you are investing in a country that allows foreign nationals to own 100% deeded freehold property. I’d say the majority of countries will not let you own it outright as a foreign national. If you cannot, you better be real up on exactly what that means and what the potential consequences are. Don’t just settle for being surprised later on that one.
Since I’m on this topic anyway, I’ll use it as a segue to touch on some of the risks you need to be aware of if considering investing overseas.
Some Basics to Watch Out for If Buying Overseas
This is not an all-inclusive list, and I encourage you to do research on your own so you have a good working knowledge of every crevice risk may lie. I just want to point out a couple of the most basic risks.
1. Not being able to fully own a deeded freehold property. I expanded on this one already, but it still deserves to be number one on the list.
2. Lack of recourse if something goes wrong. There’s good news and bad news about this one. The bad news is that depending on the country, yes, there may be a serious lack in how much you can fight (or get back) if something goes wrong. Some governments are more corrupt which could make it very hard to find recourse. The good news is, although it’s really up to your perception because it’s kind of bad news too, is that recourse in the US can be just as difficult as recourse overseas. I know of investors who bought into developments in very well-known US cities and something happened and the owner basically threw his middle finger up at the investors and walked. The lawsuits started of course, but years later a lot of them aren’t even halfway completed. And that’s US recourse, so anyone who tells me other countries are the only ones you can lose money in needs to wake up. With any investment, always consider the worst-case scenario, which is you lose everything you invested. If that thought is unbearable, don’t do it. US or overseas, the same goes.
3. Not having oversight. This is the same as if you invest just out of your local area or out-of-state (which you know I’m a huge advocate of). If you don’t have trustworthy teams on the ground, your investment can be driven into the ground without you even knowing it. Be extremely cognizant of who has their eyes on your property, and in the case of overseas this can be more difficult because of everything from language barriers to time zone differences creating a game of phone tag you could never imagine to skeezy property managers who know the owner lives out of the country so they can take advantage of them with little recourse because the investor just doesn’t know otherwise and aren’t there to see it.
As with any investment risk, however, there are always mitigations to each risk. None of them are guarantees of course, because if they were they wouldn’t be called investments! There are ways to lower your risk and smartly choosing the country you invest in is the best place to start.
A Case in Point: Nicaragua
As I mentioned initially, my first investment properties ever were beachfront properties in Nicaragua. I’ll admit, when I first heard the name Nicaragua I thought it was a country in Africa. Geography was never my stronger suite and I’m pretty sure I was thinking of Nigeria because I remember assuming the opportunity must be a scam. Since that investment two years ago, I am still actively involved in Nicaragua investing, I go down there multiple times a year, and I actually planned on moving there at one point before other things came up and distracted me. I love that country! More important than my love for it however is the reality of investing there. I only talk about Nicaragua to give you an example of a country that investors are flocking to and why they are so you can understand what makes a country a good candidate for investment.
When I first said Nicaragua originally you probably got a little wide-eyed and thought I had lost my mind. You just proved my first point. Perception of Nicaragua has not caught up to reality. Nicaragua had a lot of problems 20-30 years ago which are over now. I have been down there numerous times, and even wandered around off the beaten path quite a bit, and never once have I ever felt unsafe. I have felt much less safe in LA and even in Atlanta than ever in Nicaragua. Down there, more than here, I stand out like a sore thumb too because I’m blonde and quite frankly lacking a tan. Blonde white chick, pretty small, not overly intimidating looking, and not once has anyone ever messed with me. The people in Nicaragua are amazing, the worst crime down there is robbery (one perk to a 3rd world country), and I’ve never knowingly run into a Sandinista. Not only is the country totally safe, #1 safest country in Central America to be exact, it’s gorgeous! The beaches are amazing, the cities are full of culture, and it has amazing mountains and volcanos if you aren’t as much a beach person. The advantage to most of the world not realizing all of this yet is it contributes to Nicaragua still being in the infancy stage for growth. Prices are still affordable and tourists haven’t overrun it… yet.
If you research current statistics on Nicaragua, you will be amazed. It’s been deemed one of the #1 retirement havens in the world, it’s being promoted by several big-name magazines and news stations across the world, significant mining opportunities are driving attention there, the economics are outstanding, they are top in the world for notable exports, globally branded hotel chains are moving in, and the list goes on. HouseHunters International has filmed there several times already, Survivor has filmed two seasons there, and Nicaragua has some of the top surf breaks in the world. These things are important because they suggest massive growth coming over the next decade. For investors, the statistics on the impending hotel room deficit in only the next couple years suggests an insanely high occupancy rate if you own rental property there, especially the beachfront resorts. All the while, prices are comparable to what Costa Rica’s prices were 20 and 30 years ago. Ever heard someone say, “Man, I wish I had invested in Costa Rica 20 years ago!” I’ve heard it my whole life. People say that for good reason; the prices there absolutely soared uncontrollably at one point. Risky, yes, but for those who took on the risk, they returns have been unquestionable.
Most importantly, Nicaragua has no restrictions on foreign ownership of property, and in fact, the Nicaraguan President is supporting it!
Related: The Vacation Rental Hypothesis
Regardless if Nicaragua is for you, that should at least give you an idea as to what qualities a country with high investment potential may offer. Low prices, huge growth potential, known interest, and support of foreigners owning there.
Go big or go home! What fun is it if you don’t?
Photo Credit: larepuvlica_eurasia