A Second Property May Be An Investment, But Watch Out For The Pitfalls

Around 97% of real estate investors say that they will increase capital commitments to property investments in 2019. If you’re planning to buy a property abroad to diversify your investment portfolio, there are several things you must consider before making the move. Property ownership in another country is different, and may even be complicated. Being well prepared legally and financially ensures that you’re not making a mistake that could cost you a lot of money.

Know The Local Rules

This has been the case in the Philippines when “The Condominium Act” was implemented that allows foreign nationals to invest in a condominium in the Philippines . Malaysia allows expats to own property.

Specific laws and regulations govern property ownership in different countries. Some countries such as Bulgaria or the Philippines don’t allow you to own land at all, but you may buy a building, condominium or flat. Malaysia allows expats to own property, except those that are valued at less that RM1 million and low-medium cost residential housing. Therefore, it is helpful to get insider tips on local real estate to make sure that you’re not going to lose money. Hire a local lawyer who can guide you on the laws and financial aspects of the purchasing process. It not only protects your investment, but also confirms that you are not in breach of any law ensuring that your purchase is legal and binding.

Financing A Property Purchase

Finding the money to buy property may be a tough hurdle. Fortunately, you have some options such as borrowing from a home equity of an existing property, bank financing, tapping your retirement fund, seller or developer financing. Be aware, though, that your money may be subject to foreign currency fluctuations. Also, even though you might be able to get a local loan if you’re a resident, interest rates are likely prohibitive.

Renting Out The Property And Managing It From A Distance

If you’re not going to live in your property, you might decide to rent it out for the entire year or a good part of it. Again, you must be well informed of local tax laws including filing tax declarations. In the absence of property managers, you might need to find someone who can manage and maintain your home. It’s also possible that there will be limits placed on rentals by governments to avoid creating competition with local hotels and hostels. Plus, the security of your property may also be dependent on the political situation in the country, hence, the stability of the place is vital to protect your investment.

Buying real estate abroad may become a good investment strategy, but should be done with extra care. Make sure you know the local laws, ownership restrictions, and the risks associated with your purchase such as currency fluctuations and even the political climate.