Overseas investing

5 Replies

My wife is a Romanian immigrant, and her brother (still in the old country) did well in Real Estate investing in Romania before the market crash in 2008.  As bad as the crash was here, it was worse there.  He's been trying to get back on his feet ever since.  He's convinced my wife that he's got some great investment opportunities, but needs capital. We'd like to participate, but want to avoid sending money in the form of a loan (our experience lending money to family hasn't been so great).

What I suggested was that if he has a specific property that looks promising, he should send us a proposal.  If it looks good we'll buy the property and pay him a commission.

Or, to create something more ongoing, set up a corporation in Romania where my wife and I are the owners and he'd be an officer of the corporation.  For that, we'd need a business plan from him showing how he could make it work and what the risks are.

So my questions to the group are:

  1. Does anyone have any advice on investing overseas (especially in Eastern Europe)?
  2. What's the best way to do business with family?
  3. Is there a way to arrange an overseas real estate investment so that we could write off travel expenses to inspect the property?

Hi Ken!!

I have bought/rented out and sold a place in Buenos Aires and also currently own some property in Cape Town, South Africa. I don't know anything about the Romanian market or Eastern Europe. From my experience investing oversees can be done if you have great team in place. The guy I worked with in Buenos Aires was awesome but it would have been a nightmare without him filing my taxes for me, keeping up with all the Argentine real estate laws, fixing things that broke down, etc. But that being said there's alot of things about investing oversees that can be a pain or certain quirks in the laws that you need to be sure to know. For example in South Africa the law requires that when you sell a property the money has to first be deposited in a South African bank. I can't have the buyer wire the money directly to me in the states. But the South African bank will not accept the money unless you show proof of where you first wired money into the country to buy the place. This law was not in place when I first bought there ......it changed... some kind of anit-money laundering law they enacted. Luckily I keep everything so wasn't a problem but if I had thrown away those receipts I would have been in trouble. Also when I get income from my rentals deposited to my South African bank account I have to send the bank the receipts to show where the money is coming from otherwise they reject the money. 

Another issue that can work for you or against you is the currency exchange so that needs to be factored in. Plus investing oversees I have not found good lending situations like what we have here in the states. In South Africa as a foreigner you can get up to a 50% loan and the interest rates are high....around 10%plus and the rates fluctuate. The interest rates in general are higher there cause you can still put money in a savings account and earn 5% unlike here. 

Also if you're married or in a partnership etc. the laws could be different over there in regards to that, that you may want to look into. When I signed the paperwork in South Africa the bank I was getting a mortgage with made me sign a piece of paper stating that I would let them know if I ever got married. I asked them why it mattered if I was married or not since I'm buying the property as a single person. They told me because the laws are that once I'm married the other person is entitled to what I have and that if my spouse for example had a gambling problem I'm responsible for that debt too unless I had in place in South Africa what is equal to a prenup over there. 

So my point is just learn everything you can about the laws as there can be quirks that you might not know about. But that being said some of these oversees markets are growing quickly and could have good appreciation. I've had friends that made alot of money investing oversees but just be careful. 

That's some good advice, Laura.  Thanks for sharing that experience!  Makes me want to check out the guy my daughter's dating to make sure he's not a gambler.

As far as making sure we can buy and sell property and collect rents, we've got a family member over there who knows the market and the laws.  And he'd be involved in each deal.  I just need to figure out how to structure a business entity that allows him to be involved, earn a profit, and have some sort of skin in the game.  

Good luck with everything @Ken Riedel  !! I would recommend if you could find a really great attorney/accountant over there that specializes in these sort of legal structures to get a consultation to find out what your best options are and to protect yourself and your investments. I don't know the economy over there but in some of these emerging markets the cost of services can be really cheap and wouldn't cost a lot of money for the top professional advice. Also you'll need a good point person to ask all your legal questions as they come up to in regards to taxes, evictions, etc. Even in a country like South Africa where English is the main language I still get really confused with legal notices as their legal wording can be really confusing as it's slightly different than ours. I've needed someone to ask whenever I wasn't sure about legal stuff. 

Hello @Ken Riedel  ,

I am original from Romania and I own some property there. I hope you are looking to buy some commercial property as the residential is not worth renting out. 

Depending on what city you are, and how large the property is, you can get in rents anywhere between $100-$400 a month, which is not making the residential properties worth renting. Also, the tenants expect that the units are fully furnished.

If you are buying a commercial property, than you will need a public notary, in Romania, they act as an attorney in the real estate purchases. If your purchase price is really high, then I will find an attorney that is familiar with both the laws of USA and Romania, and that's not going to be inexpensive. 

Good luck to you!

From what I see, offshore real estate investing is becoming increasingly popular and, in fact, I am on the opposite side of the equation to Laura in that I am a South African who has investigated opportunities in North Dakota and Atlanta. The thing is, companies are popping up all over to assist people in setting up offshore business entities, and perhaps you could find a consultant who can advise on all the particularities of your case. I'm guessing a partnership would be the most logical, but here in SA people often invest with trust structures. A family trust, for example, allows you to appoint trustees, keep track of whose money has been invested, and appoint beneficiaries. The advantage of a trust is also that it lives on after members die, thereby avoiding estate duty on assets.

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