These 5 Mistakes Can Ruin Your Overseas Property Investment

28.05.2024 - 14:09 / forbes.com

Investing in property overseas might seem like a daunting idea. With a whole world of options, choosing where and what specifically to buy is that much harder.

It doesn’t matter if you are a seasoned investor looking to diversify your portfolio or a first-time buyer shopping for a part-time home or a place to settle abroad for retirement. It’s always good to step back and focus on the basics when deciding on a property to buy anywhere.

Here are five important things to remember when searching for your next overseas property purchase.

The foremost step when buying a property abroad is to decide the purpose of it. Ask yourself: Are you buying for investment, for personal use, or for both?

Are you interested in a retirement home? Are you buying solely for cash flow? Do you want a property you can stay in yourself but rent out when you’re not using it?

Choosing a property for personal use can be more straightforward. You only need to think about what you want in a home and where you want to live or spend time. You can decorate it as you please, and the location only needs to suit you.

When buying for investment, you need to consider what a potential renter or resale buyer will want. This decision, too, can be easy because your buying objectives are clear. You want to maximize your return on investment.

Your property search can be much more difficult when buying for profit and personal use. When this is the case, you need to determine a priority. The investment potential and the advantages for personal use can’t be equally important. That will make it almost impossible to decide what to buy.

You’ll have to make compromises. You could buy in a location that wouldn’t be your first choice for a home but that should earn you maximum cash flow when you’re not using it. Or you could buy in an off-the-beaten-path location because that’s where you’d prefer to live, accepting that your ROI will not be as high as it could be elsewhere.

You might be surprised how complicated this aspect of making a property purchase overseas can be, especially if you’re making the decision as a couple.

Regardless what kind of buyer you are—one shopping for personal use or one looking for straight-up profits—you should filter your purchase options based on a short list of key overriding factors.

First, ensure that the property purchase process is regulated and that the rights of foreign buyers are recognized in the country where you’re considering buying.

Wherever you buy, you’ll need to move money in and out of the country, so, second, confirm that the process for moving funds is reliable and that you will have the unrestricted right to expatriate your funds when you want to.

If you purchase a rental property in another country, I