Why Invest in International Real Estate?
One of the biggest draws to buying international real estate is the diversification. According to Modern Portfolio Theory, diversification is one of the cornerstones of a successful portfolio. In fact, diverse portfolios outperform a concentrated one. By owning a large number of investments in more than one sector or asset class, investors can protect themselves from unsystematic risk, the risk that one encounters when investing in one particular asset.
Another factor that attracts investors to foreign real estate is the opportunity to expand international options. Many real estate investments can lead to residency and, in some cases, a quicker road to citizenship. In rare cases, immediate citizenship is offered after a high enough investment in real estate. This is especially attractive for those looking to expatriate or those who want to earn a second passport in order to extend the amount of visa-free travel that is possible. This can play a key role in offshore retirement or years of stress-free travel.
There are also a lot of tax benefits that come with investing in real estate offshore. In fact, it is one of the few ways that an American can legally keep some of their money offshore privately. When real estate is held directly in an investor’s name, as opposed to in a trust or LLC, the investment is not reportable.
One of the most important (if not THE most important) reasons investors choose to buy real estate internationally is to save their wealth abroad. By owning foreign real estate, an investor can keep their money outside of the reach of their local government. There are also greater returns in the real estate markets of other countries.
Where to Invest in International Real Estate
Being an incredibly small but wealthy nation, Switzerland is an optimal place to purchase real estate. The small size of the country puts a higher premium on real estate than would exist in a more sprawling nation. In addition, the relatively high wealth of the citizenry means that it will not be hard to find clients to rent out one’s Swiss real estate.
For most hopeful buyers, the Swiss housing prices are simply out of reach, even with current low interest rates. With the combination of high prices and strict mortgage requirements, the low interest rates mean nothing.
Foreign buyers come from all over to take advantage of Swiss real estate, from such places as other European Union countries or the United States, Canada, and Russia. Though there are many buyers from outside countries, 85% of home buyers are Swiss.
There are no restrictions for EU citizens to buy property, but a non-EU citizen must obtain a permanent residence status permit to real estate, with some exceptions.
Portugal has proven to be a top destination for expats looking to relocate, whether it’s for work or to retire. Lisbon, the capital and largest city in the country, has over half a million residents. The popular metropolitan area saw a 4.9% price increase, and urban area Amadora saw a 12.88% increase in 2017. For those looking to make high returns from the property, apartment owners are seeing a yield ranging from 4.5% to 6.7% in the Lisbon District.
Investing in real estate in Portugal is a great investment right now. After the market bottomed out in 2012, with prices dropping 11% between 2011 and 2012, it has recovered well and prices began to stabilize in 2013.
As a non-citizen of Portugal, there are no special requirements or paperwork to buy property, making it very easy. Your property purchase may even grant you Portugal’s “golden visa”, earning you five-year residency after buying a property for over 500,000 euro.
With a warm climate and an increased effort by the government, encouraging foreign tourism and residency, buying property in Spain has become quite popular. In fact, Spain receives more foreign income from tourism than any other European country.
After the world economic crisis, the property market of Spain continued to fall until 2013 when the decline slowed. Today, Spanish real estate is viewed as a strong investment, especially because of its popularity among foreign investors. This interest has many predicting steady price growth over the years.
It’s easy for foreigners to buy property in Spain. There are no special requirements or paperwork that need to be met or completed. Non-citizens buying property is actually encouraged by the government.
Germany was almost unaffected by the housing crash that hit most of Europe in the 2000s, making an investment in property a stable investment idea. A recent interest in people buying property has caused an increase in prices with a 5.8% increase in 2015 and 8% increase in 2016. The market is mostly affected by local forces like availability of housing stock and changing demographics.
Like many European countries, there are no special requirements or restrictions for foreigners interested in buying property in Germany.
There are numerous destinations in the United Kingdom, including London. Overseas buyers make a large impact on the real estate market of the country. Foreigners won’t face restrictions buying property in the UK and are eligible for investment loans. Non-citizens must pay up to a 40% deposit.
France does not lack the European splendor that many non-Europeans are seeking when looking for offshore property. Paris, Marseilles, Lyon, and many more French destinations offer wonderful real estate options for investors or those looking to live in the country.
The French market has experienced a slight incline over the past couple years after major dips in 2009 and 2013. Overall, the market is strong and country prides itself in a pool of desirable property options.
There are no restrictions or special requirements for non-citizens looking to buy property, although the process can prove to be more difficult as a foreigner. Working with a real estate agent can ease these difficulties.
Your wealth is important. If you are serious about your life goals, financial planning and investments are probably important to you. Financial planning can involve many steps from tax optimization to asset protection. Different investments have different rules with different returns.
With the help of financial planning, you will be able to predict where you will be in the years to come by evaluating where you are currently, what sources of income you plan to have in the future, investments you plan to make, and your retirement plans.
Alpen Partners Wealth Management International AG, the sister company of Alpen Partners Wealth Management AG, is now a registered investment advisor with the U.S. Securities and Exchange Commission (SEC). Together with our partner Swiss private banks, our company can now offer the full Swiss private banking experience to American clients, both resident and non-resident.