“This country is much safer than you think” Strategy
Real Estate Consultant · Global · Member since 2025 · 25 posts · 3 votes
This discussing is about overseas investing but I couldn't find a category for it so I just chose the "out of state investing" category
Is the logic valid? Or does what matter is prevailing perception regardless of the actual reality?
Knowledge is always an unfair advantage. I know a guy who owns several thousand apartments in Morocco. Would not be my cup of tea, but yeah I am sure he has an advantage bringing American capital.
But "safe" is not the major concern. I would be more worried if the country is politically stable and its property laws hold up. Otherwise you may find out that the government annexed your real estate or someone bribed someone to change the ownership records - good luck if you are not a local
Knowledge is always an unfair advantage. I know a guy who owns several thousand apartments in Morocco. Would not be my cup of tea, but yeah I am sure he has an advantage bringing American capital.
But "safe" is not the major concern. I would be more worried if the country is politically stable and its property laws hold up. Otherwise you may find out that the government annexed your real estate or someone bribed someone to change the ownership records - good luck if you are not a local
right right @Marcus Auerbach... yeah, that's why partnerships with local real estate professionals might be the way to go...
It also has to be “better”. Can you get 30 year fixed debt under 7%? Is English the primary language? Do they respect the rule of law and property ownership? Do the foreign investors have any kind of chance against truly local investors who grew up there and know the laws, customs, neighborhoods, etc etc. Also, are the foreign investors seen a net positive for the community or are they hated for “driving up prices for the locals”? That happens to Americans by Amaericans, I doubt it’s much better when the investors are foreigners. I’m old enough to remember when Americans were supposed to hate Japanese investors, and now it’s the Chinese.
You can have a massive advantage over other Americans. But still get crushed by locals, or step over better local investments chasing the new shiny object.
It also has to be “better”. Can you get 30 year fixed debt under 7%? Is English the primary language? Do they respect the rule of law and property ownership? Do the foreign investors have any kind of chance against truly local investors who grew up there and know the laws, customs, neighborhoods, etc etc. Also, are the foreign investors seen a net positive for the community or are they hated for “driving up prices for the locals”? That happens to Americans by Amaericans, I doubt it’s much better when the investors are foreigners. I’m old enough to remember when Americans were supposed to hate Japanese investors, and now it’s the Chinese.
You can have a massive advantage over other Americans. But still get crushed by locals, or step over better local investments chasing the new shiny object.
In terms of competing against the local investors, what I had in mind is some sort of alliance with one of the local real estate developers there who would understand the market and the rules of the game there.
Can you elaborate a bit on the English language bit? What if it's not the primary language but widely spoken in business?
Primary business language is fine, probably. Assuming all contracts are in English. I was pointing to a reason Costa Rica has done so well with Americans and Canadians.
I don’t think a “trusted local developer” would work. How would they become trusted? Can you imagine as an American you send lets says $200k to a foreign country. You check on your investment and nobody answers the phone. So you check with the bank and they say you or your “agent” withdrew the money days or even weeks ago. What’s step 1 in getting that money back? You have the name you were given and a disconnected phone. Yes, that can happen in your own country. There just a lot more safeguards when you’re dealing in your home country.
I’m probably not your ideal client, I’m just trying to help you get in their head. For me to invest in a country I’m not going to visit often and maybe/probably plan to retire in. The returns would have to be so high that I wouldn’t believe them anyway. I try not to get “too far over my skis”. I’d love to invest in Costa Rica or the especially the USVI where I could do a 1031. But realistically. I’m better off investing in mainland America and just spending my profits vacationing there.
My brother is a licensed sailboat captain and they have deals where you buy the boat and they’ll rent it out for 5 years. You get to use it and they make all the payments. Unfortunately it’s still a better deal to not buy one and just pay rent as expensive as it is and as cool as it would be to own a giant sailboat in the Bahamas. MOST people who buy a four wheeler, boat, jetski, snowmobile would be financially better off renting whenever they wanted. That’s how I feel about investing out of the country. BUT. That’s just me.
Maybe you could go the other way around. Show people how great fixed rate debt on real estate is here and how people form other countries shoudl invest here. Though I’m not sure if we’re still handing out green cards to investors, that could be another incentive. I know plenty of other countries do. Good luck either way. Sorry to ramble on.
Primary business language is fine, probably. Assuming all contracts are in English. I was pointing to a reason Costa Rica has done so well with Americans and Canadians.
I don’t think a “trusted local developer” would work. How would they become trusted? Can you imagine as an American you send lets says $200k to a foreign country. You check on your investment and nobody answers the phone. So you check with the bank and they say you or your “agent” withdrew the money days or even weeks ago. What’s step 1 in getting that money back? You have the name you were given and a disconnected phone. Yes, that can happen in your own country. There just a lot more safeguards when you’re dealing in your home country.
I’m probably not your ideal client, I’m just trying to help you get in their head. For me to invest in a country I’m not going to visit often and maybe/probably plan to retire in. The returns would have to be so high that I wouldn’t believe them anyway. I try not to get “too far over my skis”. I’d love to invest in Costa Rica or the especially the USVI where I could do a 1031. But realistically. I’m better off investing in mainland America and just spending my profits vacationing there.
My brother is a licensed sailboat captain and they have deals where you buy the boat and they’ll rent it out for 5 years. You get to use it and they make all the payments. Unfortunately it’s still a better deal to not buy one and just pay rent as expensive as it is and as cool as it would be to own a giant sailboat in the Bahamas. MOST people who buy a four wheeler, boat, jetski, snowmobile would be financially better off renting whenever they wanted. That’s how I feel about investing out of the country. BUT. That’s just me.
Maybe you could go the other way around. Show people how great fixed rate debt on real estate is here and how people form other countries shoudl invest here. Though I’m not sure if we’re still handing out green cards to investors, that could be another incentive. I know plenty of other countries do. Good luck either way. Sorry to ramble on.
This is quite helpful. Thanks Bill. The whole point of the question is to get to those objections as I'm quite new to this arena. I do have connections with real estate companies in EMEA especially Egypt, Greece and UK who can take on the investors but the point is that I need to understand the basic logic and rational of the game so that I'd be able to connect with the right people before I connect them with the people here. So please, don't pull any punches:)
In terms of how do you demonstrate trust, my first thought is to get other American entities who have dealt with this real estate developer and can vouch for them. The country I'm most familiar with is Egypt. I don't know if there are many American investors but I know for sure that there are a lot of European hotel owners in the Red Sea such as in Gouna and Hurghada. I don't know how re-assuring that is to Americans though.
And yeah, I guess I can go the other way round as well, but I have stronger connections with developers here rather than investors and I would assume that investors already are aware of the strength of the American market.
@Bill B. as someone who has invested in Costa Rica, I would have to say that I get better returns in the US. So if you are looking for the highest return than I would say to stay in the US. However, if your goal is something besides just cash flow, then it may make sense to invest out of the country. We have 3 luxury properties in Costa Rica with partners and they all pay for themselves plus create a little cash flow for the owners (3-5%). But the amount of enjoyment I get out of those properties is way more than any of my properties in the states.
@Bill B. as someone who has invested in Costa Rica, I would have to say that I get better returns in the US. So if you are looking for the highest return than I would say to stay in the US. However, if your goal is something besides just cash flow, then it may make sense to invest out of the country. We have 3 luxury properties in Costa Rica with partners and they all pay for themselves plus create a little cash flow for the owners (3-5%). But the amount of enjoyment I get out of those properties is way more than any of my properties in the states.
@Shiloh Lundahl This is very interesting...Can you elaborate more on what is the enjoyment you get out of those properties. Like visiting them and vacationing there or the internaional business side of things?
Security or I should say the perception of security can play a role with certain investors but I don't think that's the main issue. I'm investing internationally and I've been to your country Egypt, where I didn't feel unsafe. It was a long time ago but I'd still go today and feel safe I think.
I'm investing internationally and would invest in any country where I can get a great risk-adjusted return. The problem is why would I ever invest in Egypt when I can get higher returns in countries which much less risk (political, currency, legal, ...). As @Bill B. mentioned, I'd need a huge premium/additional return to even consider it. And, yes there are international hotels there but that's totally different. These are big companies and their main business is hospitality, not real estate.
@Bill B., there's no need to be sorry for your rambling. Your points are actually very well articulated and I totally get the issues you see with foreign investing and it totally makes sense for you it seems. The thing is though there are other countries in Portugal in which you don't need extravagant returns to compensate for your perceived extra risk (I'd argue that it's actually less risky there but that's the story for another day). Indeed, you can borrow at like 2.5% for up to 40 years (instead of 7.5% for an investment property in the US), prices are lower and they're forecasted to appreciate much quicker than in the US in general. That's an extreme example but there are other countries.
Also, there's the aspect of diversification. You can actually decrease your adjusted risk-return by diversifying in terms of location and currency even if you get a lower rate of return from your additional investment (as I mentioned above, you could actually get a (much) higher return. If we have learned anything during Covid, it's that our freedoms can be curtailed if we have all our assets at the whim of a single government.
Of course, if you've done very well investing in the US and you expect to be able to continue doing so (even with much higher interest rate) and if you think the odds of losing everything in a lawsuit (frivolous or not) or by government confiscation is 0, I'm with you.
I once read the statistic that said that the overall majority of American high net worth individuals own properties overseas, which didn't surprise me given what I just wrote.
I love the way you ended your paragraph before last "That’s how I feel about investing out of the country. BUT. That’s just me." So, if you don't mind I'm going to borrow it by acknowledging that what I wrote is my opinion and there are other ones.
Security or I should say the perception of security can play a role with certain investors but I don't think that's the main issue. I'm investing internationally and I've been to your country Egypt, where I didn't feel unsafe. It was a long time ago but I'd still go today and feel safe I think.
I'm investing internationally and would invest in any country where I can get a great risk-adjusted return. The problem is why would I ever invest in Egypt when I can get higher returns in countries which much less risk (political, currency, legal, ...). As @Bill B. mentioned, I'd need a huge premium/additional return to even consider it. And, yes there are international hotels there but that's totally different. These are big companies and their main business is hospitality, not real estate.
@Bill B., there's no need to be sorry for your rambling. Your points are actually very well articulated and I totally get the issues you see with foreign investing and it totally makes sense for you it seems. The thing is though there are other countries in Portugal in which you don't need extravagant returns to compensate for your perceived extra risk (I'd argue that it's actually less risky there but that's the story for another day). Indeed, you can borrow at like 2.5% for up to 40 years (instead of 7.5% for an investment property in the US), prices are lower and they're forecasted to appreciate much quicker than in the US in general. That's an extreme example but there are other countries.
Also, there's the aspect of diversification. You can actually decrease your adjusted risk-return by diversifying in terms of location and currency even if you get a lower rate of return from your additional investment (as I mentioned above, you could actually get a (much) higher return. If we have learned anything during Covid, it's that our freedoms can be curtailed if we have all our assets at the whim of a single government.
Of course, if you've done very well investing in the US and you expect to be able to continue doing so (even with much higher interest rate) and if you think the odds of losing everything in a lawsuit (frivolous or not) or by government confiscation is 0, I'm with you.
I once read the statistic that said that the overall majority of American high net worth individuals own properties overseas, which didn't surprise me given what I just wrote.
I love the way you ended your paragraph before last "That’s how I feel about investing out of the country. BUT. That’s just me." So, if you don't mind I'm going to borrow it by acknowledging that what I wrote is my opinion and there are other ones.
Thanks so much for the detailed response. I'm getting into international investestement so I should be studying these points in detail to guide me through my journey!I meant small hotel owners, not just big ones, as well btw. Is that relevant?
In any case, my new business partner specializes in matching investors with developers internationally (Greece, UK,Egypt then UAE, Cyprus, Indonesia, Georgia then Portugal, Oman, Spain, Montenegro, Qatar and, Thailand Saudi Arabia).
So perhaps my next step would be to choose which one of those countries are most attractive to international investors. What would be your perference @Mike Lambert
OP for you to get past the hesitancy for investing overseas. You have to get past the following:
1. As mentioned already return.
2. Risk adjusted return, including currency exchange, taxes, ownership laws, liability etc.
3. Country laws and legal structure. For example. Egypt has Islam as the official religion and Sharia law as the legal structure. Just read the Quron last week. Next week Sharia law. Whether the following are true or not I have to get past them. Which means you have to get past them for me. A. No “interest” allowed., B. No non Islamic ownership, C. Death- if any partner or wives of the partner die you have to dissolve and settle up the estate. Ownership percentage doesn’t matter, D. I’m Christian, if a Moslem partner they are required to kill me, E. My wife can be taken by their “Right hand”., F. I don’t know, which is always a bad deal, not knowing what you don’t know.
My point with the above is I have to understand the situation. Which is more work. Example we invest in Belize. Their laws are based on English properties laws which are the similar to US laws. Their tax structure although different is structured the same - property, income, capital gain, all of these are very close to zero or are zero. For another country I have to learn.
Example Italy- a second home is taxed more. A two story house with stairs outside is taxed as two houses. Income tax is higher. Capital gain tax is ????, interest rates are great at say 3%, downpayment believe is higher around 30%, trespassers are hard to legally get out of your house, farm house is not a house, to take a loan must meet energy requirements, the thousand year road to the house is not yours and you don’t have legal access and a bank won’t loan to you, etc plus whatever I don’t know.
Now you have to risk adjust the return.
OP. Was preparing dinner so not totally focused on my response. Three other items to overcome.
1. Sharia courts very rarely accept “Documents” as evidence or give them weight.
2. Whoever can bring the most witnesses to the hearing normally wins. Which is normally the wealthier person.
3. Non Muslims rarely win legal cases.
The key is you have to address these types of country specific potential issues. This will also help narrow down your investor profile.
@Henry Clark hmmm... perhaps then it's better to target investors with some background to the country in question...
@Henry Clark hmmm... perhaps then it's better to target investors with some background to the country in question...