Buy and hold abroad using new era technology

24 Replies

Hi BP,

Being Italian but working in Dubai I can't really say that at the moment I have a precise market where to focus on. Having a 10-12 years investment plan to build up a portfolio to sustain my retirement I consider Dubai RE market too volatile and I don't feel safe for my strategy, unless a future drop of prices will make me change my mind.

On the other side, the town I live in Italy, north of Rome, is still economically very weak, still overpriced and not offering interesting ROI.

So, the idea is to look for opportunities in Europe (my niche is students rental), searching for areas with a good growth potential and ROI. I understand the importance of knowing specific areas well, as this would make my life easier, but I also think that with the technology we have nowadays (maps, street view, market analysis, etc), some research and a rigorous approach, this is something that could produce very interesting results.

I'd like to know your thoughts, investors!

Luca

Well, if you have cash or an oportunity to leverage via rome or dubai its a possible venue to take. However, there are many other things to consider when taking money into a new country.

I personally have considered most of the bigger cities in europe and have found that the main thing to consider is the currency of the target area versus where you are.

As an example, norways economy is largely driven by oil and with todays oilprices the currency here is very weak. The currency has lost 20% of its value to the dollar and euro this year. That means if you look to take money out of norway you have to consider this hit you take and therefore its very likely a bad idea. Taking dollars and euros and buying in norway however is very good at this point. Everything is at a big discount. 20% off you might say. Assuming this sudden fall in the currency value is a temporary situation of course.

That said, i personally believe that you will get high ROI if you buy in areas that have high potential for growth. And in my analysis of big cities in europe, Budapest is the one that i believe will grow the most in the next few years. Especially district 5,6,7,8 ,9 and 13. if hungary finally accept the euro as its currency i belive that the market will be much more interesting to foreign investors and that will srive prices up signifficantly. And i believe this will happen in the next 10 years.

Dubai is another very interesting market i think. The big fluctuations means big opportunity. I havent had a chance to go in depth in the market value yet, but it seems me by my quick look at the market that its currently underperforming, that the prices will fall more until chinas econony settles and the oil prices will increase. With expo 2020 coming in dubai its probably likely that the interest in the region will increase and that should push the prices up soon too. So the time to buy in dubai might be now or soon...

What are your own thoughts on this Luca

I generally agree with your analysis Morgan. I think it much depends on what are your short and long term perspectives.

Let's see if I can put up a reasonable answer, and I also take it as an exercise for myself to clear up my ideas.

If you invest for retirement and the goal is (as for much of us) having a passive income and maybe retire earlier, I think that the hardcore of our investments should be made in the same currency of the country we want to retire. I guess it's quite obvious that otherwise it would be like playing with FOREX. And this is not what we want...

I recently found a studio in Liverpool. It's a reconverted church that will be ready in May 2016. It's at walking distance from the University and a brand new hospital that will also serve to educate the new doctors. If I run my math now, I have to say that the figures are not that exciting, but I strongly believe in the area and think that in the coming years values and rents will appreciate. But should I repeat it for other properties in UK? Well, I might if I found something similar, but I don't really want to rely on currency fluctuations once I'm retired!

Same applies for me to Dubai. I have to say that I don't know Dubai RE market very well but I agree with you, prices went down recently and might go down more in the future. And yes, the EXPO is a good opportunity to see prices rise again, at least until 2020.

I've met many different people involved in RE in Dubai and I can divide then into two types: those who bought in early 2000 who saw values double in less than one year and those who tried to follow the first ones and lost a huge amount of money. Some of them bought on paper apartments that were never built because of the economic downturn in 2008. And guess what...

Now they are trying to implement rules to reduce the speculation but just be aware the number of vacant apartments in Dubai is very high so, again, it is very important to know the market very well and choose the right spot where to buy.

Where would I buy in Dubai if I found a very good deal? In Marina, because I would primarily buy a location (more than the apartment itself) where the demand will be always high in the future.

Ah...and beware of the construction quality in Dubai, it may vary a lot on the contractor and you might find yourself in paying a lot of money for maintenance.

Bottom line, I prefer to target the Euro market to build up my portfolio, not denying that good opportunities might arise from other cities (again, Dubai? maybe..).

I hope my answer made sense but, again, this is just my 2 cents.

Luca

The goal i sit with is to maximize leverage abillity for me, and having already maxed out with conventional financing in norway, i now seek employment abroad. This will soon allow me to get leverage possibillities in Dubai also.

Are you getting bank financing to pay for your liverpool investment? I have sought to get loans in one country to purchase in another but it is very difficult to get aproval for such projects without security in the country of the loan.

Any thoughts on leverage regarding investing in multiple countries?

Leveraging in Dubai might be a good strategy, considering the highs and lows. For the studio in Liverpool I went cash but I'm looking to buy a new property in 2016 and leveraging is one possibilities I'm considering to buy a duplex or triplex to rent to students.

I had a chat with my financial advisor recently here in Dubai about mortgages and he told me that I can easily get one here but I don't know in UK.

if you have a fully paid flat in liverpool you might be able to get a home equity line of credit on it. So you might be able to release some capital there to keep investing.

Usually banks limit their loans to the same country unless they have securities in something in their own country.

Investing in Dubai and Liverpool might be a viable option for you if you are employed in Dubai. You should be able to invest in Lazio also if that is something you desire.

Being in multiple markets at the same time will allow you to play the currency game as well. I am very excited for you to have so many options and i look forward to meeting you in person. Maybe we can assist each other in figuring out the Dubai market too.

Brw, who do you fly for?

In fact it's something I'm considering and the idea of buying my first property cash was to have a good starting point.

Give me a call when you arrive in Dubai, it will be my pleasure to meet you! I work for Emirates.

Nice! I have another friend who flies for Emirates too. Fazal Shah. Really interesting guy!

Starting with a fully paid off flat was how my wife and I started too. Then once we decided to get into real estate more seriously we got the HELOC and used that as downpayment for the next flat.

We wanted to use it to get a 3rd one but the bank said no, so I will let my two flats collect some more equity while i gain more experience and I will try the bank later once I have a longer history with them and they trust me more.

In the mean time Im now learning about fundraising and moving to Dubai will mean I get to get more leverage there in some time. Im super excited about it too!

-M

Wow, looks like you are growing fast Morgan, I'm definitely not at your level! :-)) Those are all things I know exist but I have to study.

BTW I don't know the guy

hehe, i figured as much. There must be thousands of pilots with your company. 

Im happy to share what i know, and maybe you can use the information to your advantage. In return i hope to learn more about your perspective on real estate. We will have a chance to talk more when i see you in Dubai!

Great Morgan, I'm sure I have to learn a lot from you and will be nice to meet you! See you in Dubai.

@Morgan, this might interest you

http://www.propertywire.com/news/middle-east/dubai-property-prices-sales-2015090110931.html

Hey @Luca Dal Molin & @Morgan Nilsen

I don't actually know much about the European market or Dubai. 

But I'm currently living in Korea (a US Expat). I'm an entrepreneur out here - started an English education business with some partners 15 years ago. 

I bought in the US market since I'm from the US. But I bought in a place I'd never visited - Jacksonville, Florida. For me, the US market has been great because as you say, Luca, there are tons of resources for finding out information about properties and technology makes it much easier to find people to work with, etc.

I help organize a meetup out here in Korea - the Seoul Real Estate Investing Meetup. Although our members are mostly focused on Korea investments and the USA, the basic premise for us is pretty what you stated at in the OP - that technology makes it easier to invest anywhere. We can now do business anywhere or live anywhere, so why not invest anywhere as well? Our members help each other learn about other markets and we also have professionals visit (many from BP) to come and talk about what opportunities that exist.

Anyways, we have one member who's invested in Europe - she bought a property in Ireland. And at one of our recent meetups, I met a student from Ukraine who was telling me about the opportunity in farmlands.

For now, I'll stay focused on the US - I'm looking to get into Mobile Home Parks and I've been able to connect with partners through BP. 

But I wanted to jump into the conversation to say I definitely agree that it's possible to invest anywhere. I'm a huge fan of technology. Best of luck with everything and if you ever turn your sites on the US, let me know. The market is fairly transparent and ton of resources for due diligence, but I do know that foreigners do have tax issues to be wary of - need to structure entities the right way.

I'd like to propose a counter-point to some of the arguments here. I'm a US expat as well, living in London, investing in the US. I'd agree that technology makes some due diligence much more easy - but nothing beats local knowledge.

@Luca Dal Molin , it doesn't seem as though you will get that local knowledge given your location and desire not to invest there, so I'd suggest a partner. I invest with partners, people I've met and know that are actually in the market themselves.

With a local partner you'll get better return. You'll understand the risks you are taking and the risks of the area that you are investing in - as well as the trends. Nothing beats knowing the local rumors as to which manufacturing plant is opening or closing - or whether schools are expanding or contracting. As well as having a local trusted property manager.

No one size fits all to investing - but my suggestion would be to build relationships and then invest with or through them.

Good luck with your decisions and investments!

@Carl Ghiselli

Yep.. I think it definitely helps to find partners. 

My first investment in Jacksonville was part of a joint venture.

In fact, I planned two really long post for my meetup members - one on how to do due diligence from abroad. And the second? How to find partners / colleagues / workers

Both are necessary components for investing abroad. 

Knowing enough about the area to ask questions and knowing people you can trust to help you manage your property.

i don't agree with the generalization that if you get a local partner your returns will be higher. If you get a local partner, your going to trust that persons judgement. But that persons knowledge might not be solid. 

Local knowledge can be really powerful, but everyone has to assume from time to time, so a local can also put limitations on you as well.

@Carl Ghiselli What do you mean exactly when you say partner? Might seem a stupid question but I'm not an expert on the topic

Hi @Luca Dal Molin

Great forum post you´ve started! 

I´m based in Madrid Spain and have invested in UK student property (Liverpool, Nottingham, Manchester) and US residential property (Tampa Florida and Charlotte North Carolina). I was in a similar boat to yourself a few years ago in that the returns in my local markets were too low and prices too high. The key, as I´m sure you know, is to have great local partners.

Happy to discuss further if you want to schedule a call sometime. 

Originally posted by @Luca Dal Molin :

@Carl Ghiselli What do you mean exactly when you say partner? Might seem a stupid question but I'm not an expert on the topic

@Luca Dal Molin There isn't a one-size fits all definition for partner. I will depend on your situation and goals for your involvement in the properties your purchase.

For example, you might consider a direct investment in a syndicated deal a partnership - with those you are investing with. You might get a partner with which you split all the work with, including boots on the ground, etc.

What seems to have worked for me in the past is developing a relationship with a local person, who can give you good background on the area and the housing trends. They will want you because you bring money, or expertise of some type - something so that the both of you benefit from the relationship. 

For me - the key is a trustworthy person on the ground to help buy and manage the properties. I would think a large risk would be buying a property sight unseen, hiring a property manager sight unseen, and then expecting it to cash flow the way you want it to. From my experience, things go wrong, and having a partner to assist you will be very beneficial.

Hi @Carl Ghiselli and @Daniel Ryu

Sorry for being late in responding but I was very busy these days.

Yes, I understand your point and I mostly agree with you. I think that having a partner you trust in a particular area can dramatically improve your performance, especially if you are not living there or don't even have the chance to see the area.

I also think that it is very important before you find a partner to experience real estate on your own, so that you have a good knowledge of what investing means. I truly believe that most of the people here have a positive and honest attitude but, as the word cooperation mean "sharing work", it is absolutely important that both parts have a good grasp of what real estate is, so that this cooperation has equal satisfaction on both sides and maybe a continuation in the future.

I'm lucky because I always travel around the world and I can easily rent a car and see with my eyes areas I might be interested in. That said, it's also important to concentrate your research in not too many countries as the rules about real estate might change thus affecting what you think might be a very good investment.

Luca

@Luca Dal Molin

I did most of my research on my own before I found partners. I wrote a long article for BiggerPockets about my process, if you're interested. ^^

https://www.biggerpockets.com/blogs/6526-silk-pockets-us-investing-from-asia/blog_posts/46335-out-of-state-investing-heres-how-to-get-started-w-pictures

@Luca Dal Molin

*^^* High praise indeed!

Thanks and reach out any time if you want to compare notes on International Real Estate Investing and due diligence!

Hi @Luca Dal Molin , Im also in Dubai and I work on the other side of the radio, air traffic control.

Ive been looking at the Dubai RE and I dont thin its a good idea to invest here right now, however IMO this is going to change in the next year or so,  due to oil price and possibly weakening of the USD which will make house prices more affordable for Russian, Pakistani and Indian investors. 

Also I dont think that the Expo 2020 will drive prices higher, like people will come for the expo and buy a house?

And I agree with you in the Marina, thats de only area i would buy here, first the lack of empty there (few more buildings can be built) and second thats where everyone wants to live.

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