Diversifying my portfolio, when to invest overseas?

Question

With the crescent volatility in prime markets such as Canada and USA, more people are putting their eyes onto other opportunities, places such as Southern Europe, Southeast Asia, Mexico, Colombia among others, seem to be gaining notoriety. But is it safe to invest there? And if so, when would be a good time to do so?

Mike Lambert · Answer

@Bryce Jamison Thanks for mentioning that. Just listened to it. What's mentioned is very basic and potentially a tad misleading in that investing in Mexico/internationally is very different than in the US. I've been investing internationally and in Mexico (the topic) and shared my experience by responding to hundreds of posts on the topic so interested investors might find what they're looking for here.

The great thing about the podcast is that I have been vilified several times for suggesting that investing in Mexico is a good idea so, now that it's in the podcast, I guess it's not so crazy anymore. So it's great that they did it, even if it's only for a few minutes.

Like they suggested, people should know what they're doing though. While prices are often cheap compared to the US, they've gone up a lot over the last few years and I see hordes of Johnny come latelys who are overpaying.

Personally, Mazatlan isn't my favorite place in Mexico (it's cheap for a reason). Roma in Mexico City is an awesome area for lifestyle but there's but STRs are going to be regulated there and possibly banned and LTRs are not a profitable alternative. Again, investors should know what they're doing, as mentioned in the podcast.

Bryce Jamison · Answer

Check out the most recent Bigger Pockets Podcast #957 that came out yesterday. David Greene talks about investing abroad.

This is literally the first sentence from the description...

Have you ever thought about buying rental properties abroad? It might surprise you, but investing overseas could bring in much more cash flow and appreciation than you thought possiblehttps://www.youtube.com/watch?v=6k7RbXO1mYo

Mike Lambert · Answer

@Mateo Monsalve

I'm not sure what you mean by "Is it safe?" There are risks involved, as in the US and Canada and as with any other investment. It'll depend on your objectives. Also, not diversifying overseas and having all your assets and income at the mercy of a single government is utterly (financially irresponsible). Haven't we learned anything with the measures taken during the pandemic? The high net worth individuals (aka the smart money) have and are investing overseas en masse. However, you need to know what you're doing or work with people who do. If you don't, the risks could be (significantly) higher.

I've been investing overseas with investors since 2017 before it was as fashionble as it is today and shared my experience in the forums by replying to hundreds of posts on the topic so feel free to check those out. I've never had any issues or concerns about security but I know what I'm doing.

As to the timing, like with most investments, yesterday is generally the best moment and today the second best. In this case, the advantage of investing in the US or Canada was the ability to leverage through borrowing at artificially low interest rates. This is gone, likely forever so that advantage is gone too.

@Chris Seveney If you invest certain countries like in Mexico, the properties you'll invest in will most likely be will be traded in USD so no currency risk there. As to some other countries, diversifying by investing in other currencies reduces your risk and many currency has lost value against the USD, as interest rates rose. If they were to reverse, the USD could tank and you could end up with a nice currency gain, on top of your real estate income and appreciation.

So, getting back to the timing, the USD has rarely given you that much buying power to buy overseas. Not sure how long that's going to last.

Kevin S. · Answer

@Mateo Monsalve

Plus the political climate of that foreign country, squatter issues, local laws, tenant rights, etc.

Chris Seveney · Answer

Lots of discussion about investing overseas on BP, when is any ones guess. Just remember not only do you have to deal with real estate pricing in those countries but their currency against the dollar. Real estate can appreciate overseas but you could still lose money based on currency exchange rates and strength.