Buying a piece of property in another country is a good strategy for diversifying your investment portfolio, but it's much more than that, too.
This isn't like investing in a stock. You don't buy a beachfront lot or a rental condo overseas and then set it on a shelf to wait for its value to increase. An investment in foreign real estate requires active and ongoing management and administration, including visits to the property and establishing an infrastructure of support on the ground in the place where the property is located.
The result is that, while you're diversifying your portfolio and potentially increasing your net worth, you're also reinventing your life. I'd say this is the real upside to foreign real estate as an investment class.
Specifically, here are 12 benefits of owning property overseas:
1. Own a second home in the sun. If you're in the market for a vacation or second home, taking your search overseas can mean spending $80,000 for a house on the beach in Brazil rather than $500,000 for a home on the beach in New Jersey. For many, buying abroad is what makes it possible to afford a second home at all.
2. Retire abroad for pennies on the dollar. As a retiree with a home of your own in the overseas retirement locale of your choosing, you can take advantage of a super low cost of living, as little as $1,000 per month or less.
3. Enjoy a rich cultural experience. Owning a home of your own overseas makes you truly a local, meaning a richer cultural experience.
4. Achieve true investment diversity. If you have a "diverse" portfolio that's all invested in U.S. markets, then your eggs are, in fact, still in one basket.
5. Benefit from currency diversity. Just as having all of your money in U.S. markets means you're at the mercy of a single economy, having 100 percent of your investments in U.S. dollars means your investment future is fully dependent on the fate of the U.S. dollar.
6. Earn an income abroad. A rental investment in another country can generate an income stream that's independent of the U.S. economy and often denominated in another currency, as well. For example, the cost of buying in Medellin, Colombia is low, and returns can surpass 10 percent annually. Further, the currency of Colombia is the Colombian peso, making this a non-U.S. and non-U.S.-dollar income stream.
7. Deduct travel costs from your taxes. The cost of every trip you take to visit and manage your investment properties overseas can be tax deductible.
8. Enjoy the security of a hard asset. In the current climate, hard assets are a sensible investment class for securely storing value. As real estate investors are fond of saying, the value of your property can't go to zero, unlike your stock in Pan Am, Enron or eToys.com.
9. Profit from the world's agriculture boom. Some of the most solid investments over the past few years have been agricultural. The world's population is exploding, while the amount of available farmland is shrinking. Expanding demand and limited supply add up to a smart play that's only going to get smarter.
10. Store your wealth privately. Real estate overseas is a tax-efficient investment, meaning this is an opportunity for you to store and grow wealth privately.
11. Take advantage of international asset protection. Having assets offshore makes them harder to get to. A deliveryman who trips on your sidewalk can probably get his hands on your bank accounts if he sues, but it'll be much more difficult for him to lay claim to your condo on the beach in Panama.
12. Open the door to foreign residency. Owning property overseas can give you a "foot in the door" to the country where the property is located. It's another place where you can hang your hat. And in many countries, owning real estate locally qualifies you for a residency visa.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 28 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring and investing overseas in her free e-letter. Her newest book, "How To Buy Real Estate Overseas", published by Wiley & Sons, is the culmination of decades of personal experience living and investing around the world.
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