Thinking about investing some of your hard-earned cash in a nice piece of real estate?
With the property market picking up in many countries around the world, expats are once again looking at real estate as a possible investment choice.
The darkest days of the global property crash seem to be quickly fading into a distant memory, but those of us contemplating a property purchase would be wise to proceed with caution.
The fact is that many people – expats or not – jump into the property market without much thought or preparation.
They see a hot property market and want to get in on the action before it’s too late.
Unfortunately, more often than not this ends in complete disaster. Like any investment, real estate is a long-term commitment of your money that should be made only after undertaking careful research and surveying the potential risks.
A Good Investment
Despite the warning above, we here at HealthyWealthyExpat do believe that real estate can be an excellent addition to your overall investment portfolio.
As expats, the world is our oyster when it comes to property investment, but our situation also means that the process of choosing, buying, and managing the investment is usually more complicated.
There is much to consider before you slap down your precious cash on a piece of real estate. With this in mind, we are starting this series on expat property investing to help us all be better informed property investors.
We encourage you, our community, to share your collective wisdom to make us all better property investors. Ask questions, share your experiences (good or bad!), and offer your advice.
The more knowledge we have, the higher the probability that we will all make successful real estate investments.
But first, a question.
The Big Question
What’s the biggest purchase that most people make in their lifetime?
And the answer (quite obviously….)
A home, a house, real estate, a humble abode, property, new digs, a piece of dirt, a place to call our own…
So why do so many of us do more research into buying a new mobile phone than into buying property?
I’m not 100% sure about the answer to this, but I think it has something to do with our deeply primal notion of the inherent value of shelter, of having a place to hang our hats, of having a refuge to retreat to in times of uncertainty or upheaval.
We actually believe, deep down to an almost genetic level, that having ANY property is good for us.
But of course, it’s not.
Property values can go up or down, structures can be poorly built, tenants can be your worst nightmare, or an act of nature can destroy your investment in seconds.
There are ways to mitigate these risks to your property investment, which we will discuss throughout this series. But let’s not be too hasty to jump into things. First things first, as they say.
Any successful property investment begins with you defining the reason WHY you are investing in property in the first place.
Define the Reason Why You Are Investing In Property
Just as it is important to define your reasons to save money, it is imperative that you clarify exactly WHY you want to invest in real estate. (Hint: The answer isn’t “Because my friend told me it’s a good investment.” 😕 )
This is because the reason that you want to invest in real estate is the determining factor in how you analyze your potential investment and the impact it will have on your overall financial plan.
Knowing WHY you are investing in real estate will allow you to determine HOW you will make the decision on WHAT and WHERE you are going to buy.
Why Would I Invest in Real Estate?
Following are the most common reasons why one might want to invest in real estate, accompanied by the types of decisions that are required during the purchase process. Also included are some benefits and drawbacks of each type of investment for expat property investors.
|Reason||Type of Decision||Benefits||Drawbacks|
|Investment||purely a business decision (you analyze the property for its income generation and potential capital appreciation)||
|Home||mostly an emotional decision (you buy your home because you love it, love the area, want to be near family, etc.)||
|Second/Holiday Home||mostly an emotional decision, but also a business decision if you plan on renting it out||
|Residency/2nd Passport||mostly a practical decision (Which country will give me residency?), but also an emotional decision if you plan on living in it or a business decision if you plan on renting it out||
Which one is you?
Around 8 years ago, when we were new to real estate investing and were contemplating our first property investment, we originally thought we would buy a holiday home in southern Europe. It would be a great base for our expat family in a part of the world that we love, would be a good long-term investment, and would perhaps provide some income each year. However, after much thought, careful review of our long-term goals, and a lot of research into the economy and rental market in the area, we decided to make a pure investment in rental property in Canada.
In short that’s our story. After making the decision, we spent the next 6 months devouring all the literature we could on the subject and taking a course on real estate investing in Canada.
We also joined a real estate investing group that offered us the support and education we needed to make the right investment decisions. That summer we bought our first property, and in the following years we went on to buy two more, all of which we hold to this day.
So, if you are thinking about investing in property in the near future, begin by spending some time thinking about the purpose of your investment.
There is a lot to learn, but our hope is to discuss the key fundamentals of property investing that we (and our community) have learned in digestible chunks in future posts.
These fundamentals apply no matter where in the world you are thinking about investing.
Except maybe Antarctica. 😀
How about you? Do you have some real estate investing experiences or advice to share? Or maybe you have a question that our community can answer. Give us a shout in the comments section below.