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4 Things to Know About Investing in International Real Estate

Real estate is a tricky game – you must become very knowledgeable about your target markets and your competitors in order to become successful. That’s true in North America, as well as anywhere else in the world.

But when you start to branch outside of the U.S. real estate market, that’s when things can really start to get complicated. The rules are different, and mistakes can be costly.

Here are a few things you need to know if you’re considering investing in international real estate.

You Need To Know What Stage Your Market Is In

There are roughly five stages to every emerging market. If you don’t know what stage that market is in, you could get taken to the cleaners. The first stage is usually reserved for locals only. This means that locals are using the land for their own purpose, like agriculture and business.

An outside party can bring that land to the second stage, which means that large swatches of land are bought for the purpose of developing them at a later date (or hanging onto them indefinitely).

These large swatches are eventually broken up into smaller parcels, becoming further developed and moving into stage three of the real estate market stages. These parcels can become small enough that homebuyers can actually come in and purchase, as well as speculators.

The land switches to a mainstream homebuyer market in stage four when restaurants, hotels, and other consumer-driven developments arrive. This then becomes a full-fledged city at stage five, with all the infrastructure and civil services that come with it.

Each stage has its own advantages and challenges. For the risk-averse, the early stages are the most risky – but do provide the highest beta. This means that with a higher risk, comes a higher reward.

You Must Have A Plan

Without a plan, you’ll never have a clear vision of what to do with your new investment. Knowing if you are planning on renting the house, living in it, or just holding onto the property until property values rise are important questions to ask yourself before diving into real estate.

You Won’t Get Rich Quick

Real estate investing is a long-term investment. There’s no way around that – while people in distinct markets may have sped up this timeline, the fact of the matter is that real estate is hard work, and may not pay off in the end if you don’t do your research beforehand.

You Must Study Up

Becoming a successful international real estate investor means knowing everything you possibly can about the situation you are putting yourself in: the local market, the neighborhood, and even the property itself. If you don’t know what your cash flows will be, like how long it usually takes to rent a property in your market, you may have too much overhead to cover each month. Know before you buy!

Final Tips

As a final word of wisdom, becoming a real estate tycoon is hard work, and isn’t for everyone. If you take on something that is a little too far over your head, you run the risk of damaging your livelihood, your family, and your future. Know yourself before buying any property, and understand the risks and time commitment involved.