for The Q wealth Report
It’s ironic that while residential and commercial real estate investors must take much of the blame for the current crisis, some of the best offshore investment and asset protection opportunities right now involve international real estate.
International or offshore real estate should be part of any savvy investor’s portfolio. Why? Because it’s a great hedge of value, a way to protect the real underlying value of your assets during difficult times.
With Quantitative Easing in the USA and Irish banks the latest in a long line of European bailouts, it doesn’t take a genius to work out that the dollar and the euro are both going to lose value over both short and long term.
With the dollar and euro collapsing, those seeking a safe haven have turned to investing in gold. I believe gold will still go much higher, or the dollar will go lower – whichever way you look at it. But I also believe it would be irresponsible to put your entire net worth into any one thing… gold included.
Real estate, when purchased at its real value as opposed to an inflated, easy-money value, is an excellent hedge. People will always need somewhere to live, and – even more to the point – people will always need food. Food requires agricultural land. As farm subsidies in major economies, like Europe and the USA, are necessarily pruned back, more agricultural production will move to emerging economies. South America, for example, is very well positioned to capitalize on this. Myself and a few clients are putting funds right now into a Hong Kong-based private fund investing in agricultural land in the Southern Cone of South America: Uruguay, Paraguay, Brazil and Argentina in particular.
There are also great bargains to be had investing in international residential real estate at the moment. Some prime properties in Europe, for example, are going at ten percent of their former asking prices. Even assuming they were wildly overvalued before, this now represents a fantastic buying opportunity. Rather than watching the value of your dollars being eroded daily, you can hold real estate that is virtually guaranteed to increase in value over the long term. Smart real estate investors know they can also flip these properties quickly if they have bought well.
The key to international real estate investing, in my view, is common sense. Buy something that has intrinsic value. Residential property in the downtown areas of most major cities, for example, will always be in demand. Buy in cities where you can see growth.
Farmland also has an intrinsic value. With more and more mouths to feed in the world, I think buying cheap agricultural land is a great investment at the moment. If you are not yet ready to buy a ranch, there are ways you can get in to such opportunities via reputable third party investment managers, private offshore hedge funds and the like.
There is, however, a big mistake that many novice international real estate investors make. I would strongly caution against is buying into new developments in ‘exotic’ countries, especially buying off plan or touristic/retirement style developments. Buying intrinsic value means buying what can you see right now – not what a developer tells you will be there five years from now.
Too many retirees end up paying through the noose for lots that have barely been marked out on the ground and have very little infrastructure. They make the mistake of trusting a developer who speaks their language, or who has been recommended by nominally independent third parties or internet promoters who are in reality getting large kickbacks. They don’t talk to locals and see how much a lot the same size a few hundred meters down the road would cost – if they did, they might be in for a shock!
When buying in a planned retirement or touristic community, you must also consider that you will realistically be unable to resell before the developer has sold off the entire project – something that could take years in the current environment. The safest investment deals in international real estate right now are undoubtedly in existing properties – those that have already been built and are in established, popular locations.
The smartest real estate investors, when going into a market they don’t know, will actually rent a home and spend time there on the ground before they even consider buying. It may takes weeks or months and the patience to listen to all kinds of conflicting opinions, but gradually they will build up an intricate ‘insider’ knowledge of how the chosen market functions. Remember: this ‘on the ground’ form of due diligence is best.
One final word of advice: the best deals are not on the internet. The best international real estate deals always go before they are even advertised. Unlike stock markets, with real estate insider trading is the norm not the exception. The only way to find these best international real estate deals is by getting to know the right people in the right places and asking around.
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