Many investors from around the world follow this route either to obtain a home to live in or to gain some income. One of the key reasons for this is that brick and mortar, as a physical asset, will always have value.
Whether you receive residency or citizenship from your investment depends on the residency-by-investment or citizenship-by-investment program you choose. And, of course, foreign investors and expats can also purchase property abroad without participating in one of these programs.
With the increasing popularity of investing in international real estate, it’s crucial to consider the different aspects to eliminate potential risks.
In this article, we have some crucial points to assist you with your international real estate planning so that you’re up-to-speed and aware of all the intricacies you’ll need to know, whether it’s for buying in established or emerging markets.
Benefits of International Real Estate Investments
Investing in international real estate offers a variety of benefits that can enhance both your financial portfolio and lifestyle. Here are some key advantages:
Diversification of Investment Portfolio
International real estate allows investors to diversify their portfolios geographically, reducing the risk associated with investing in a single country. This diversification can help mitigate the impact of local economic downturns, political instability, or market volatility.
Potential for High Returns
Certain international markets offer high rental yields and significant appreciation potential. Emerging markets, in particular, can provide substantial returns due to their growing economies, increasing foreign investments, and rising property values.
Hedge Against Inflation
Real estate often serves as a hedge against inflation. Property values and rental incomes tend to rise with inflation, preserving the real value of your investment. Investing in countries with high inflation rates can amplify this effect, providing better returns compared to domestic investments.
Currency Diversification
Investing in properties denominated in different currencies can provide a hedge against currency depreciation. If your home currency weakens, the value of your international investments may increase when converted back to your home currency.
Residency and Citizenship Opportunities
Many countries offer residency or citizenship programs in exchange for real estate investments. These programs can provide valuable benefits such as visa-free travel, tax advantages, and the ability to live in a new country. Popular programs include the Golden Visa in Portugal, the Investor Visa in Spain, and the Citizenship by Investment programs in the Caribbean.
Things to Know Before Buying Property Abroad
Property Taxes
Tax obligations and foreign real estate investment tax are unavoidable when it comes to buying real estate. It’s standard procedure to pay a tax for the international property you are buying. There are also some other annual taxes that you will need to pay. We recommend checking all the tax requirements in the country where you are buying before making your big purchase.
Property taxes will be calculated in most countries based on the property’s value.
To provide you with an example, in Portugal, taxes on rural and urban properties will be different, and the taxes that you’ll need to pay will also depend on the purpose of buying – are you looking to reside in the property as your primary residence, or is it a second or holiday home?
This will impact the taxes that you’ll be required to pay. The bottom line is to ensure that you leave no stone unturned and get sound advice from experts in the field.
Inheritance Laws
When purchasing real estate, you should ensure you understand the inheritance regulations in place in the country. In many countries, it is recommended to make a will when you buy property in the country.
For example, if you own a property in Spain and are a Spanish resident, your assets will automatically be passed on to your children. If you want another beneficiary to receive your inheritance, then you will need to make a Spanish will.
Personal Tax Liability
If you are buying real estate with the intention to live in the property on a permanent basis, then you’ll be a tax resident in the country. Depending on the regulations in place, you may have to pay double taxes. Make sure you understand the taxation treaty between the country in which you’ve purchased property in and your country of origin.
Limitations
Residency-by-investment and citizenship-by-investment programs provide you with residency or citizenship in the country, depending on which one you choose.
Until late 2023, it was possible to become eligible for the Portugal Golden Visa through property investment and secure the right to live, work, and study in Portugal, and enjoy visa-free travel across the Schengen Area. The option has since been removed from the Golden Visa. In Turkey, however, you receive citizenship in around four months, but you cannot travel across Europe without a visa.
You will want to make sure you understand what you want from your investment before committing to a certain program and buying property abroad. It is also a good idea to be aware of currency exchange rates, as purchasing in a foreign currency can be costly. In addition to this, it is important to understand the current interest rates when buying.
In the next sections, we’ll delve into some of the best countries for investing in international real estate. Note that this is not an exhaustive list, and there are many other countries that also have attractive real estate markets.
Property Investment in Portugal
First on the list of best places to invest in international real estate is Portugal, which has experienced a booming real estate market in recent years. Many expats have moved to Portugal and have come to call this wonderful Mediterranean country home. The beautiful coastline, welcoming locals, excellent climate, and top-quality health care and education services are just a few of the reasons for the county’s appeal.
Another perk is that real estate prices, particularly in the interior areas of the country, are very reasonably priced, particularly when compared with other Western European countries. If you have experience in the property market, Portugal is a top country for foreign investment and to expand your real estate portfolio.
Lisbon, Porto, and the Algarve have long been favorites, but you’ll also find spacious properties along the Silver Coast. The north of the country is also very affordable and could be the perfect place to find a lovely home in the depths of the Portuguese countryside.
When it comes to buying property in Portugal, there were no restrictions until 2023. Foreigners who bought a property in Portugal could qualify for the Portugal Golden Visa, an attractive program that allows investors and their families to live, work, and study in Portugal and travel freely through the Schengen Area.
Golden Visa programs are now commonplace, and the Portugal Golden Visa has become one of the most popular of its kind in the past decade since it was launched in 2012 to attract foreign investors to the country.
However, the Golden Visa went through some significant changes, and investors can no longer purchase real estate to qualify for the program. While real estate investment no longer qualifies for the Golden Visa, buying property in Portugal is still possible and it’s a great investment. Portugal’s real estate market offers a variety of good investment opportunities, presenting attractive returns.
Real Estate Investment in Greece
The market in Greece is strong, and one of the biggest attractions to buying property here is the country’s Golden Visa program. Foreigners who invest a minimum of €400,000 in overseas real estate in Greece can secure a residency permit in the country.
The primary applicant and their immediate family members can live and work in the country with the Greek Golden Visa. With this said, you do not have to live in the country, and you can opt to rent out your newly purchased property, should you so desire.
Greece is one of the best countries to invest in real estate in Europe. You can read more about the Greek Golden Visa in our article: Golden Visa Greece: The Ultimate Guide by Experts.
Buying Property in Turkey
Turkey is perhaps slightly overlooked when it comes to foreigners looking into citizenship-by-investment programs.
However, the country has an attractive real estate market where you can secure a strong return on your investment.
For example, in Istanbul, the city is experiencing new suburban real estate development and penthouses in some of the most popular areas are up for grabs. With an incredible culture like no other, a rich history, and unique culture, Turkey is an excellent place to consider.
You can read more about the citizenship-by-investment in Turkey in our article: Turkey Investment Citizenship 2022: The Ultimate Guide by Experts.
Buying Property in Spain
A vibrant culture, exceptional cuisine, and a whole array of stunning locations to purchase foreign property – yes, Spain is a firm favorite with foreign buyers.
Foreigners looking to secure a property in Spain are not subject to any specific criteria, so you should have no problems purchasing property in the country.
Spain also has its own Golden Visa program. This residency-by-investment program allows you to live in Spain in exchange for an investment in real estate. The minimum investment is €500,000. After five years, you can apply for permanent residency; after ten years, you can apply for Spanish citizenship.
However, in early 2024, Spain announced that it plans to end the Golden Visa program for foreigners who invest in real estate in the country. The decision to investigate the feasibility of the Golden Visa was made due to concerns that the program contributes to rising real estate prices and money laundering in the country.
Prime Minister Pedro Sánchez said the decision was made to make affordable housing “a right instead of a speculative business.” He added, “Today, 94 out of every 100 such visas are linked to real estate investment…in major cities facing a highly stressed market and where it’s almost impossible to find decent housing for those who already live, work, and pay their taxes there.”
Buying a property in Spain is one of the best international real estate investments that you can make, as the country boasts a diverse property market. As with buying any property, we recommend seeking out international real estate investment companies to help you with the purchase. A good real estate agent or buyers agent is vital in your property purchase.
As with Portugal, a foreigner can still purchase property in Spain—just not as part of the Golden Visa requirements when the new law is enacted.
How Can Global Citizen Solutions Help You?
Global Citizen Solutions is a boutique migration consultancy firm with years of experience delivering bespoke residence and citizenship by investment solutions for international families. With offices worldwide and an experienced, hands-on team, we have helped hundreds of clients worldwide acquire citizenship, residence visas, or homes while diversifying their portfolios with robust investments.
We guide you from start to finish, taking you beyond your citizenship or residency by investment application.
Frequently Asked Questions about International Real Estate Investment
Is it a good idea to invest in real estate overseas?
Yes, investing in real estate overseas is a good option. Property owners will either have a lovely property to live in overseas – whether permanently or as a vacation home – or be able to rent the property out to get a nice return on their investment.
Renting property is an excellent way to secure passive income. You can also purchase commercial property, should you so desire.
When buying property outside your home country, we recommend, for most people, to seek expert assistance.
The process of buying property, the legal framework, taxes, your property rights, and a potential language barrier can all hinder the process when buying abroad.
Is international real estate profitable?
Yes, investing in a second residence abroad can be extremely profitable. However, if you buy real estate overseas, the profit you generate will also depend on the place you choose for your international property investment.
What is the 2 percent rule in real estate investing?
The 2 percent rule is a general rule of thumb that is used to determine a base level of rental income a property should generate.
Following this rule, an investor can expect to gain gross rental yields if the monthly rent is at least 2 percent of the purchase price of the property. Renting property is an excellent way to secure passive income.
What is the 1 percent rule in real estate investing?
The 1 percent rule of investing in real estate takes into account the price of the investment property against the gross income that the property will generate.
For a potential investment to pass the 1 percent rule, the rent needs to be equal to or more than 1 percent of the purchase price.
Does the stock market impact property investments?
Real estate is generally less influenced by market fluctuations than other investment options.
Consequently, it demonstrates greater resilience during periods of market volatility. Global real estate investment exhibits even weaker correlations, particularly when not directly impacted by trends in the US market.
Are there advatanges of international real estate investing?
Overseas real estate investment offers the potential for high returns, diversification across different markets, access to emerging economies, and protection against currency fluctuations.
This kind of investment can significantly impact personal finance by providing income generation and wealth accumulation opportunities, but it also carries inherent risks that require careful consideration and financial planning.
What are considerations for making a foreign property investment?
Key factors to consider for foreign property investment include market research, legal and regulatory framework, financing options, tax implications, and potential risks.
It’s important to pay attention to local laws in the country you are buying in because there are differing requirements.
For example, some countries, such as Vietnam, require foreign buyers to purchase life insurance as a condition of owning property.
Is Playa del Carmen a popular investment place?
Playa del Carmen, nestled on Mexico’s Riviera Maya, is a popular investment property destination.
This is due to its thriving tourism industry, stunning beaches, vibrant culture, and growing economy, making it an attractive option for rental income and potential capital appreciation.
