Before buying rental properties overseas, find out if being an absentee landlord is the right move for you. If you own rental properties overseas, that makes you an absentee owner by default.
Investing in rental properties overseas is a smart way of spreading out your risks across different property markets. Diversification is a well-recognized method for lowering your investment risks.
By investing in foreign rental properties, you can shield yourself from the whims of your local property market. If the local real estate market crashes or mortgage rates go haywire, your losses will be partially offset by profits from your foreign property investments.
Investing overseas also allows you to tap into countries with highly favorable property tax laws. As long as you meet certain conditions, you won't have to pay any capital gains tax on rental property in Hong Kong, Singapore and New Zealand.
Profits that you earn from rental property investing should fatten your own wallet before going into your government's pockets.
Owning foreign rental properties also grants you unique benefits that no other type of investment can offer you. For example, your overseas rental property can also double up as a vacation home for you during holidays.
Remember the diversification that we talked about earlier? Diversification is a double-edged sword - While it can lower your investment risks, you may ultimately end up with lower returns if you spread out your real estate over a few countries.
Let's say your local property investments are rewarding you with a rental yield of 12% while your overseas investments are only yielding 4% returns. The net result is lower profits for you vs someone who is purely investing in local estate. For more details on rental yields, Click here for our rental property investment analysis guide.
Is the grass always greener on the other side? Even experienced absentee property owners can get burnt when it comes to buying rental properties abroad. You may be a successful local landlord but being an absentee owner is a whole new ball game.
While a booming real estate market overseas can be exciting and highly profitable, you will have to factor in other risks as such political turmoil, social unrest and natural disasters.
Being an absentee property owner is no simple task especially for new property investors. Even if you hire a manager property to correct rent, handle tenants and maintain the rental property, you will still have to fork out time and effort to supervise them.