Q: I’ve been dabbling a little in property investment in Australia, not a lot but I have three investment properties; two units in Sydney and a house in South Brisbane. With prices soaring in many areas I’m starting to wonder about overseas property investment but I don’t know where to start. What should I know before considering overseas property investment further?
A: It sounds like you’ve got yourself a good property portfolio already. I am personally a fan of property investment providing you make smart decisions.
Diversifying your property investment portfolio by investing in overseas markets can minimise, or spread, your investment risk. For example, if the Australian property market crashes, only local investments may be impacted not the whole lot!
Investing in property overseas certainly won’t be for everyone though, and there are some important things to be aware of before taking the plunge. But if you’re up for a challenge, have time to invest in research and can recognise a good (or bad!) deal when you see it, it could be for you.
Here are some things to be aware of when investing in property overseas.
Buying property in your country of residence is generally easier because you are more familiar with different regions and suburbs, what the market is like, and laws and regulations. Being unfamiliar can make the whole process a lot more challenging, time consuming and more risky because you are less likely to know about things that can impact your investment or whether a certain suburb is a sensible investment or popular with renters.
When the Aussie dollar was at its peak you might have been able to leverage that to get more for your money overseas. It has since dropped down, so it’s important to keep in mind currency exchange rates in the country you’re considering investing in. Foreign exchange will impact both the purchase cost and proceeds of the sale of foreign property, as well as affordability of ongoing management, maintenance costs and your rental income.
Just as there are tax implications with property investment in Australia, you might be surprised to know that overseas property investment is also implicated. This is because of the general rule that any income an ‘Australian resident for taxation purposes’ receives is subject to tax in Australia. It’s important to get advice from a tax accountant who specialises in overseas investment.
The country you buy in will likely have its own laws and restrictions around buying and selling property, obligations of landlords, investor restrictions and more. You need to do your research and get advice from a registered legal practitioner so you know what laws will apply to you in the country you choose.
Beware of super cheap investment offers and deals from shady operators. If the deal sounds too good to be true, then it probably is! Make sure you research buyer’s agents, development companies or other businesses who offer to help before signing up.
Maintaining your property, finding a good property manager or tenants, and even making periodic inspections can be a lot harder, or almost impossible, if you buy on the other side of the world. This doesn’t rule out overseas investment altogether, but might make New Zealand more logical than Spain.
Securing finance for an international property may also be different to what you have experienced with your local investments and may require more research and expert advice. For example, some Australian lenders may not offer finance when the property used for security is overseas.
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