The following article is from Canadian Real Estate Wealth Magazine.
A strong Canadian dollar, falling property prices in many overseas destinations, and government incentives to stimulate foreign investment are just a few of the reasons many Canadians are looking to buy international real estate.
Expanding your portfolio to include properties in foreign countries can provide a buffer against downturns in local markets. And with some research and due diligence, investors may even find opportunities to earn higher rental yields and long term capital growth.
Here is a step-by-step guide to help you along your international property investment journey.
1) Think strategy
As with any real estate investment you would make in Canada, deciding your strategy should be your first course of action. If you’re looking for a second vacation home that you can rent out when you’re not using it, then your buying decision will reflect that. Not only will you need a property that is attractive to you, but it must also be in a location and offer amenities that will appeal to other vacationers. By way of example, investing in vacation property on an English-speaking Caribbean island might have wider appeal to your target renter.
If you’re looking for a property as a long-term rental then you might consider something that is more appropriate for local residents, which means considerations such as distance to the airport are less important and off-street parking is higher on the list.
If your game is renovations, then you really need to consider the variation in price of materials, labour and time it takes to complete a project. For instance, Kirk Sharpley, vice president of international sales for Hibiscus International, a company that helps Canadians buy properties in the Caribbean, says all the major islands in the Caribbean have similar services and supplies to Canada, but everything is a little more expensive as it has to be shipped by boat. “You also have to be prepared to deal with the island mentality and things might take a little longer. So if you’re going to do it plan to spend some time and be there, or you want to make sure you hire someone local who you know you can trust who is going to look after it in your best interests.”
2) Research the location
“In the Caribbean a lot of people go down there stay in an all-inclusive resort and after two weeks think wouldn’t this be great to live here and some people make the decision to buy. Well, living on the islands on a full-time basis or even two or three months a year is entirely different than going to a resort,” Sharpley says.
It’s just as important to do your due diligence when buying overseas as it is buying properties in Canada. The only difference is there are so many more factors to consider.
In addition to looking to housing market information, key economic drivers, government and private spending, transportation, amenities, population and demographics, you also need to determine is the country politically and economically stable. International investors also should research what, if any natural disasters the area might be prone to, for example, is there potential for hurricanes, flooding, or earthquakes?
If the property is serving double-duty as a vacation home/rental, then you need to determine if you can see yourself returning year after year for several weeks at a time.
“You want to make sure that the destination provides you with the activities that are going to keep you entertained. And you want to make sure it’s something you’ll enjoy for several years,” Sharpley says. Maybe you’re happy with a crime novel and a cocktail, but consider amenities that other holiday makers would enjoy – golf courses, cultural attractions, eco-tourism activities are all great draws.
And lastly, consider the effect of annual events – such as the running of the bulls, or Carnival, on your ability to earn great returns. Keep an eye out for irregular world events as well – the Olympics, the World Cup and Commonwealth Games are all good examples.
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