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10 Things to Consider When Investing in Overseas Property

10 Things to Consider When Investing in Overseas Property

While the global real estate market may have enjoyed months of uninterrupted growth, large-scale investors have recently begun to sell luxury properties amid fears that surging prices are creating a bubble. Although this may represent the higher end of the property market, it is a worrying development at a time when the global economy is finally beginning to emerge from the shadow of long-term decline.

This is just one aspect of the real estate market, however, which continues to evolve and create new challenges for investors and vendors alike. Just recently, British real estate firm Property Rescue collaborated with the national ombudsman to launch a new National Association of Property Buyers (NAPB), which will operate in the controversial “Quick House Sale” sector and provide self-regulation that protects both investors and home-owners alike.

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Luxury Real Estate

    The Key Considerations When Investing in Overseas Property

    Whether buying a home domestically or overseas, there are clearly a high volume of challenges that need to be overcome if you are to safeguard your investment. These issues are amplified when buying property abroad, especially if you are expanding your portfolio into new and relatively uncharted territories. With this in mind, consider the following factors before finalizing your international real estate investment.

    1. What is your reason for buying overseas property?

    This is arguably your single most important consideration when buying a property overseas, as it will have a direct influence on everything from your budget to the type of insurance that you invest in. If you are buying a property for the purpose of investment, for example, you will need to execute all financial decisions in line with your estimated return. If you are purchasing a home with a view for relocating, however, you will need to focus on standard considerations such as the surrounding area, local amenities, and school catchment regions.

    2. The need for finance and funding.

    With a clear understanding of your motivation, selecting viable properties to suit your needs is a relatively straightforward process. Securing finance is a far more challenging exercise, however, especially when you consider the fact that it will be subject to international laws and usually discussed in local currency terms. As a starting point, be sure to obtain an “Agreement in Principle” before confirming the purchase as this will safeguard you in the event that you are not extended a loan and enable you to reclaim your initial deposit.

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    3. Consider your tax liability as an investor.

    Everyone’s tax circumstances are different, and this is especially true in the diverse and changeable real estate market. Each nation will have its own unique body of tax laws and legislation, which may require you to repay costs such as stamp duty, title transfer tax or even inheritance tax at the point of purchase. Beyond this, some countries also require home-owners to pay land tax as a condition of their mortgage, and this is usually an annual cost that can eat into your capital. These potential costs must also be factored into your budget, as otherwise you may face significant legal penalties.

    4. Understand the value of local money and exchange rates.

    On a similar note, it is also worth understanding the value of local currency and any associated exchange rates. If you intend to bring money from your own country overseas at different junctures, you may also need to obtain a Certificate of Importation and open a local bank account. This makes it far easier to repay affiliated tax debts and legal fees on time, as you can quickly establish a series of standing orders to suit your requirements. If you are going to execute a smooth and trouble-free transaction, this should be considered a crucial part of your preparation.

    5. Obtain an independent valuation.

    If you were purchasing a home in the UK, you would not think twice about requesting a structural survey and an independent valuation. Many investors fail to do this when purchasing an international property, however, due to the cost and logistical challenges of organizing these tasks from a remote location. Obtaining an independent valuation and guaranteeing the integrity of the property is a fundamental part of any real estate transaction, however, and it is important to remember that any costs are a small price to pay to protect a larger investment.

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    6. Overcome the language barrier.

    Even if you do not intend to relocate permanently, you will still need to engage directly with international vendors and agents when purchasing property overseas. This may pose an issue with regard to any language barriers, which can easily create miscommunication and either delay completion of a deal or have a negative impact on cost. While you can overcome this by taking time to learn the relevant language, it is often far more tome-effective to employ the services of a legal professional with a knowledge of conveyancing.

    7. The need to confirm title and ownership.

    Given the remote nature of international real estate investment, it can be difficult to develop trust with vendors and agents. This means that you must be extremely cautious when discussing issues such as title and ownership, especially as any debt that exists on a property may be passed onto you once the transaction has been completed. If a developer has previously borrowed money to complete the work and not repaid this, for example, you may be liable for the repayment and any affiliated charges as the new owner.

    8. Research the location and local amenities.

    Even if you are comfortable with the financial and tax aspects of purchasing a property abroad, you must still conduct research into the location, its transport links, and local amenities. This is especially true if you intend to live there, although investors must also have knowledge of the region if they are to successfully let their property and generate a consistent return. When buying a holiday home for rental purposes, you must also be sure to research off-peak travel times as you may well experience a fall in demand and income during this period.

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    9. How will your safeguard your property when you are absent?

    If you are buying a holiday home or investing in real estate in order to make a profit, then there is no need to relocate permanently. This means that your property may well be empty for a significant portion of the calendar year, so you must be proactive and prepared to organize security year-round. One of the best ways to achieve this is to employ a local property management firm, who will make regular visits to check on the residence and organize any necessary cleaning or maintenance tasks. Although this will require additional investment, it can help to save you money and safeguard your assets.

    10. Do you have an exit strategy?

    Whether you intend to relocate internationally or develop a global real estate investment portfolio, it is important to remember that even the best laid plans occasionally go awry. You will therefore need a suitable contingency plan and exit strategy, as this will minimize any inconvenience caused and the potential for financial loss. For those hoping to relocate, it is therefore important to retain strong ties in your country of origin and ideally retain an existing property for a predetermined period of time. Investors will also need to keep a keen eye on the global real estate market and prevailing economic trends, as these factors may dictate the need to sell or change strategy.

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    Published on May 7, 2019

    How to Invest for Retirement (The Smart and Stress-Free Way)

    How to Invest for Retirement (The Smart and Stress-Free Way)

    When it comes to stocks, I bet you feel like you have no idea what you’re doing.

    Everyone who’s not a financial expert has been there. I’ve been there. But, time is passing and you need to be crystal clear with how you’re investing for your retirement.

    Otherwise, it’s back to work until you can afford not to. So, how can you invest for retirement when you’re not a financial expert?

    You take the time to learn the fundamentals well. If you do, you can grow your wealth and retire happy. The best part is that you don’t need to be a financial expert to make smart investment decisions.

    Here’s how to invest for retirement the smart and stress-free way:

    1. Know Clearly Why You Invest

    Odds are you already know why should invest for retirement.

    But, maybe you know the wrong reasons. It’s time you get clear on why you’d like to retire. Here are some questions to help you get started:

    • Will you spend more time with your family?
    • What does retirement mean to you?
    • Are you looking to launch that business you’ve been holding off for years?

    Everyone wants to retire but not for the same reasons. Once you’re clear for why retirement is important for you, you’ll focus on making it happen.

    Investing in the stock market allows you to take advantage of compound interest.[1] All this means is that your money earns money on top of its interest. A reason why investment in the stock market is one of the best ways to plan for retirement.

    2. Figure out When to Invest

    “The best time to plant a tree was 20 years ago. The second best time is now.”– Chinese Proverb

    It’s true if you’d had started investing when you were 10 years old, you’d have a lot more money than you do today.

    The reality is that most people don’t start investing until it’s too late. So, if you’re currently waiting for the perfect time to start an investment, it would be today. Open your calendar and block out 2 to 3 hours to choose how you’ll invest for retirement.

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    A quick way to get a snapshot of where you stand is to use Personal Capital. Input all your personal information and spend some time setting your retirement goals. Once completed, you’ll know where you stand with your retirement.

    Having a savings account for retirement isn’t planning for retirement. Why? Your money loses value when you factor in US inflation.[2]

    3. Evaluate Your Risk Tolerance to Create the Perfect Portfolio

    Investing your money well depends on your emotions.

    Why?

    Because when the market drops most people panic and withdraw their money. On average, the US stock market yields an annual 6% to 7% ROI (return on your investment.) But, this won’t happen if you’re worried about short-term loses.

    Before you invest your next dollar, know your risk tolerance.[3] Your risk tolerance determines the number of risky and safe investments you’d have.

    Regardless of your investing style, you need to view investing for retirement as a long term game. Know that some years you’ll lose money but recoup this in the long-term.

    Avoid watching market-related new. Also, create a double authentication to log in your investment account. This way you’re less likely to withdraw your money.

    4. Open a Reliable Retirement Account

    Depending on your circumstance, you may need to open a new brokerage account. This is the account is where you’ll invest your money.

    If you’re currently working for a company, odds are that they offer a 410K investing account. If so, here’s where you’ll invest most of your money. The only problem with this is that you’re limited to the stock options that are available.

    You do have the option to open a separate IRA (individual retirement account.) Here are some of the best brokers:

    1. Vanguard
    2. TD Ameritrade
    3. Charles Schwab

    5. Challenge Yourself to Invest Consistently

    Committing to invest for retirement is hard, but continuing to do so is harder.

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    Once you’ve started investment for your retirement, you run at risk from stopping. Often you’ll want to contribute less, so you’d have more money in your pocket.

    That’s why it’s important that you create a budget that allows you to invest each month. If you’re working for a company, you can set a percentage for the amount you’d like to contribute each month. Most people by default contribute 1% but aim to contribute 10% to 15%.

    Be the judge for how much you can afford to contribute after covering important expenses. To stay motivated, use Personal Capital to view your net worth.

    A benefit to contributing money to your retirement account is not taxed. For example, if you earn $100 and invest 10%, you’d contribute $10, then get taxed on the remaining $90. As of 2019, the most you’re able to contribute towards your 401K is 19K but this can change.

    6. Consider Where to Invest Your Money

    The most common way to invest your money is in stocks, but it’s not the only way. Here are other ways to invest:

    Robo Advisors

    Robo-advisors[4] are fancy algorithms that’ll choose the best investments for you. Sites like Wealthfront make it easy for first-time investors to invest their money. You’d input information about yourself and set your risk tolerance.

    Then, set your monthly contribution amount and your robo-advisor would do the rest. Robo-advisors charge a fee to manage your money, but less than regular advisors.

    Bonds

    Think of bonds as “IOUs” to whomever you buy them from.

    Essentially, you’re lending money and charging interest. Like stocks, not all bonds are equal. Some will be riskier than others depending on their rating.

    Here are the different types of bond categories:[5]

    1. Treasury bonds
    2. Government bonds
    3. Corporate bonds
    4. Foreign bonds
    5. Mortgage-backed bonds
    6. Municipal bonds

    Mutual Funds

    Picture a group of people dumping all their money in a jar that’s managed by a professional. This is how mutual funds work. The fund manager manages the money looking to earn capital gains (interest.)

    One of the best types of mutual funds is index funds. Since these funds don’t try to beat the market and instead follow it, they need less research. Because of this they often charge the lowest fees and yield the best long-term results.

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    Real Estate

    Yes, buying a home is an investment when done correctly.

    Imagine buying a home and using it as a rental property. After repairing it, you receive a monthly surplus check of $100 to $200.

    This may not sound like a lot, but repeat this process enough times and you’d earn a large amount of passive income. That’s why real estate is one of the best investments to not only retire but become wealthy.

    But, it requires a lot of money to start and you should expect losing money along the way as you learn the process.

    Savings Accounts

    Your money can still grow in a savings account. Nowadays most online banks offer a 2% annual return. Although the average inflation is higher your money will be available when you need it.

    7. Master Disincline to Dodge Short Success

    Investing for retirement is a long-term strategy. That’s why you need to master delayed gratification. All this means is delaying short-term pleasure for something bigger in the future. Research shows that those who have delayed gratification are more successful.[6]

    So how can you master delayed gratification?

    By building your discipline.

    Think back to what retirement means to you. A clear purpose will help you avoid withdrawing your money during a market downturn. It’ll help you contribute more towards retirement when you’d want to waste it instead.

    Your journey towards retirement will be long, so reward yourself along the way. Choose a reward that’s relevant and meaningful, so that you reinforce positive behavior. For example, after contributing more towards retirement, treat yourself to dinner.

    8. Aggressively Invest on This One Investment

    I’ve mentioned several types of investments but haven’t covered the most important one.

    It sounds cliche but here’s why you’re your best investment towards retirement. The more you know, the more money you’ll be able to make. The more good habits you adopt, the more secure your retirement will be.

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    More importantly, investing in yourself is an investment that no one can take away. There’s no market downturn nor tragic circumstance that’ll wipe your knowledge and experience.

    But, how can you invest yourself?

    Reading books, blogs, and anything that’ll help you learn new topics daily. Listen to podcasts and audiobooks on your commute to/from work.

    Save money to buy courses and hire coaches. I used to believe hiring coaches was a waste of money when I could learn the subject alone.

    But, coaches see your blind spots and hold you accountable. Hiring the right coach will help you achieve your goals faster than you would’ve alone.

    Retire Happy with Excess Money

    The key to a secure financial future doesn’t only belong to financial experts.

    It’s possible for you and I. What if you were able to retire earlier than most people and weren’t a financial planner? What if you were able to focus on what you enjoy doing the most while your money was working hard for you?

    I know this sounds impossible now, but the truth is you’re capable of taking charge of your retirement. I’m not a financial expert but I’ve learned how to invest my money by reading books and learning from others.

    Investing your money is scary. So start small and invest a small amount of your money with a robo-advisor. Feel your money drop and rise for a month or two. Then, invest more and keep this up until you’re aggressively saving for retirement.

    One day, you’ll wake up with a net worth you’re proud of – confident about your retirement. You now know a few strategies you can use to invest in your retirement. Will you take action to retire happy?

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    Featured photo credit: Matthew Bennett via unsplash.com

    Reference

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