From portfolio diversity through to a fixed income stream, stability and inflation hedging – investing in overseas property attracts the private investor, and with good reason.
Unlike stocks, your real estate investment is backed by bricks and mortar which present characteristically low volatility. But, before you commit to your stunning new location abroad, check out the pros and cons, reduce the risks and make sure your investment is a sound one.
Reduce Your Risk
Investing in property overseas routinely offers competitive risk-adjusted returns with less principal-agent conflict and higher income streams compared to its UK counterpart. Investors welcome its ability to reduce the volatility of their portfolio through diversification and provide a higher return per unit of risk. A potential reduction in liquidity can be understandably worrying, however, there are ways to gain exposure to real estate and protect cash flows and (in some cases) even bring it on par with that of traditional asset classes.
- Be aware of exchange rates
Exchange rates can shift at a moment’s notice and be the difference between a pleasant profit or a heavy loss. The overseas property market is no different and the process can be lengthy, meaning an exchange rate that was previously favourable is no longer the case further down the line as negotiations unfold. Protect your investment and reduce your risk by consulting with a foreign currency specialist.
- Choose your location wisely
The temptation to invest in an upcoming destination can be strong. There can be bargains to be had or countries that have dramatically dipped in price. However, a note of caution. An established market is a safer long-term investment and mortgage lenders are more favourable with properties in areas with a proven rental market.
- Review local rental laws
Many investors plan to secure a fixed revenue stream from rental income but local and overseas property laws differ significantly. Obtain all information pertaining to the country and local property laws and clarify the situation fully before you commit. Are you allowed to legally rent the property out?
- Factor in taxation
Again, countries have different tax rules that need to be upheld. You could be liable to pay stamp duty on your property, or VAT, or both. Rental income needs to be declared to HMRC and your overseas investment could affect your estate and portfolio.
- Make good use of local knowledge
From finding and vetting tenants, through to managing the property – make use of local knowledge. Local nuances, language, laws – they can all differ significantly. An estate agent can assist you with maintenance and help you to avoid lengthy periods without a paying guest.
- Transfer money overseas securely via a payment specialist
Secure and fast transactions are imperative when investing overseas and we recommend consulting with an international payment specialist. This provides the security of funds, expert guidance with paperwork, live FX rates and the best rate for your currency and country. An FX specialist will also be conveniently on top of the various different in-country laws and regulations, protecting your interests.
Central FX is a leading foreign exchange service protecting investors FX exposure and ensuring competive rates since 2008. We protect your investments and interests with:
- Instant access to our secure trading portal
- Secure transactions via Tier 1 Financial Institutions
- Live, competitive rates of exchange (both now or at a future date)
- A dedicated specialist with expert knowledge of the countries and currencies you trade in
Our friendly, expert approach can protect your capital and allow you to reap the rewards of overseas property investment.
To speak with one of our team today to find out how we can protect & improve your payments on all your overseas investments, please get in touch.
Central FX is authorised by the Financial Conduct Authority (FCA) under the payment services regulation 2017. Our FCA registration number is 565847.