Pros and Cons of International Real Estate Investment
If you are considering getting involved in international real estate investment, it is beneficial to learn more about the pros and cons of what this type of investment has to offer. To help you determine if international real estate investment is right for you, here is a look at some of the pros and cons you should consider.
Pro #1: Diversification
One of the greatest pros to international real estate investment is that it helps to diversify your portfolio. Simply adding real estate to your portfolio is a good way to diversify your investments, but adding international real estate helps to further protect you against market fluctuations. In many cases, foreign investments help to offset declines experienced in the U.S. market, thereby giving you more opportunity for growth.
Con #1: Managing from Afar
While international real estate investment does help with diversification, it also means you will have to find ways to manage your investment from afar. Screening potential applicants, taking care of maintenance and upkeep, collecting rent and otherwise managing your property is difficult if you live in another country. Therefore, you may need to hire a property management company to handle the management of your international real estate investment.
Pro #2: Increase Your Professional Network
In addition to diversifying your portfolio, investing in international real estate also gives you the opportunity to expand your professional real estate network. This, in turn, helps to increase your overall level of knowledge in the field of real estate investment. By broadening your expertise, you gain a better understanding of the micro and macro real estate markets on both the local and international stage. As your confidence increases, you will have seemingly limitless investment opportunities available to you.
Con #2: Learning a New Market
Investing in international real estate means becoming familiar with an entirely new market that can be vastly different from what you are used to. Unstable governments, revolutions, severe weather events and other unforeseeable problems can have an impact on the country’s economy and housing market. Therefore, you need to become intimately familiar with the country’s economic and political situation before deciding to make an investment in another country.
Pro #3: Tech Makes it Easier Than Ever
Thanks to technological advances, investing in international properties and maintaining those properties is easier than it has ever been. Thanks to the Internet, you can easily research lucrative foreign markets and you can make your investments from remote locations. You can also use the technology to monitor your investments. Whether you choose to work directly with your tenants or hire a property management company to oversee the day-to-day operations of the property, all the information you need is at your fingertips
Con #3: Currency Exchange Risks
Changes in currency exchange rates can be unpredictable and can have an impact on your overall earnings. If the US dollar is weak and you invest in foreign properties, your gains will increase. On the other hand, if the dollar is strong, your gains will be smaller once they are converted to US dollars.