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Should
You Become an Absentee Landlord?
Pros and Cons of Being an Absentee Owner
Before
buying rental properties overseas, it's crucial to find out if becoming
an absentee landlord is right for you. Learn what are the advantages
and disadvantages of being an absentee property owner and decide for
yourself if foreign rental properties are the right way to
go.
As suggested by the name, an absentee landlord / absentee owner is
a property
investor who does not live
in the same area as his rental properties. If you invest in investment
or rental properties abroad, that will make you an absentee owner.
What
are the Benefits You Can Enjoy as an Absentee Landlord?
To
begin with, investing in rental property overseas is a smart way of
spreading out your risks across different property markets. This is
what investors call diversification and is a well recognised method for
lowering your investment risks.
By investing in rental proprieties abroad, you will be shielding
yourself from the whims of your local
property market. If there is a local real state crash or mortgage rates suddenly
skyrocket, your losses
will be partially offset by the profits from your foreign property
investments.
Another advantage of absentee property owners are the generous tax
benefits that they can get to enjoy when they
buy rental properties in tax havens. Profits that you earn from
rental property investing should fatten your own wallet before going
into your government's pockets.
Some
landlords have the misconception that the only countries
with low tax rates are developing nations.
There are highly developed countries which are tax havens as well - For
example do you know that real estate investors in Hong Kong, New
Zealand and Singapore do not have to pay any taxes for capital gains
on rental property?
Investing
in rental properties abroad also comes with an unique benefit
that
no other types of investments can offer you. Your overseas rental
property can also double as a vacation home for you to escape those
cold winter months. Then it makes sense to have tenants to pay for your
mortgage loan during the vacant periods.
What
are the Risks that You May Face as an Absentee Landlord?
Remember the diversification
that we talked about earlier? Diversification is like a double
edged sword - While diversification can lower your investment risks,
you may end up with less returns if you spread out your real estate
investments over a few countries.
For
example
while your local property investments may be rewarding you with a
rental yield of 12%, your overall profits will take a serious blow if
your overseas
investments are stuck with a measly rental yield of 4%. For more
details on rental yields, Click here
for our complete guide to rental property investment analysis.
Is
the grass always greener on the other side? Even experienced property
investors and absentee property owners can get burnt when it comes to
buying rental
properties abroad. You may be a successful landlord when it comes to
local real estate but becoming a absentee owner is a whole new
game.
While a booming real estate market overseas can
be exciting and highly profitable, you will have to consider other
risks as such political turmoil, social unrest or even natural
disasters. What will you do if the foreign government decides to impose
a painfully low rent ceiling on your property one day?
Being an
absentee property owner is no easy task especially if you are
new
to
rental
property investing. Even if you hire a manager property or a friend to
handle your tenants, collect the rent and maintain the rental property,
you will still have to fork out the time to make sure everything is
running smoothly.
Now
that you know what it takes to become an absentee
landlord, it's time for you to learn how to manage tenants and
rental properties abroad:
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