Investing in international property can add significant value to your investment strategy and portfolio. However, as with all investments across asset classes, it’s important to enlist specialist advice to ensure you’re growing your wealth safely and securely.
Diversifying one’s portfolio lowers exposure to investment risk by spreading it across different asset classes, and in different jurisdictions, currencies and industries. These asset classes tend to perform differently from each other under different market conditions or in different jurisdictions. “By externalising wealth creation through property purchases in carefully selected international jurisdictions, Carrick clients are achieving peace of mind as regards the safety and the future health of their investments,” says Bradd Bendall, Group Sales Director.
Property unlocks significant opportunities in terms of investment benefits, risk exposure, returns and reliability because it’s often less impacted by prevailing economic forces and political conditions. “Offshore property is outperforming other products on the market and producing really good returns,” adds Bendall.
Depending on your goal with investing in international property – for personal use or purely for investment returns – it can be utilised for generating income and capital growth, tax planning, education funding and retirement planning.
However, having fixed property as part of your investment portfolio is a big decision, and while buying property offshore might be rewarding, it comes with its own set of risks. Here is some food for thought:
- First and foremost, you should be able to comfortably afford the property.
- The key to investment is diversification and it’s important to have liquidity in one’s investment portfolio. A property, whether local or offshore or locally, should only make up a percentage of your portfolio. It adds a fixed – and therefore less liquid – element to your funds.
- If you’re planning to live in the property but are not too familiar with the offshore property market, it may be worth holding off on purchasing until you’ve already emigrated to give you time to scope out different areas. Also, as a permanent resident, you will no longer be bound by the regulations placed on foreign nationals.
- If you plan to rent, it would be sensible to have a rental management company oversee the day-to-day aspects involved in managing the property for peace of mind. If you do handle the rental yourself, you will need to undertake all the duties relating to the property which can be stressful and time-consuming.
- “If you are purchasing such property with a view to letting it as an income generator, its location should be attractive to potential tenants so investing in property in cities with strong local economic performance is advisable,” says Anthony Palmer, Group Commercial Director at Carrick Wealth. It should be close to good public transport and infrastructure, commercial hubs, amenities, schools and colleges, shops and recreation facilities.
- “If the focus is on returns, it should be viewed as a long-term investment. In this case consider capital appreciation, the property’s market potential, rental income, maintenances costs and management fees,” says Palmer.
- Be aware of the legal and tax implications as well as estate planning when purchasing an offshore property. It’s crucial to consult with a specialist who has intimate knowledge of the tax laws of the country in which you plan to invest. You should draft an offshore will to deal with your foreign assets and will also need to familiarise yourself with situs tax (tax-related to where the asset is located) and estate duties in some countries, even if you’re not a resident of that country. South Africa has double tax agreements with some countries that make allowance for estate duties so that you don’t have to pay tax twice.
- Purchasing, financing and managing an international property portfolio can be full of pitfalls, red tape and stress – investors should always seek the services of a professional advisory firm when buying international property to ensure that the best investment decisions are made that will help you grow your wealth safely and securely. A specialist adviser will help you to identify and access the best property investment opportunities around the world, from sourcing to purchasing, management and beyond. The extensive experience and services offered by international property investment advisers goes far above and beyond the traditional functions of a broker or real estate agent.
Whichever route a purchaser decides to follow, the process takes approximately 30 days from date of application to date of exchange, with the final finishing date 18 to 24 months after execution. It’s an expertly-managed process with Carrick Property and its internationally-based partners, providing end-to-end international property investment services and doing all they can to make it as seamless and stress-free as possible.