Are you buying overseas?

Question

Is anyone here seeing value in overseas markets? Which are currently most undervalued in your opinion? How hard is it to invest as an inetrnational investor/ non resident?

Sebastien Hitier · Answer

Hi @Alexander Hunter,

many developing countries have property rights and corruption issues, You just can't invest where population growth really will be (Nigeria, Egypt, Indonesia).

Most developed countries have very low yield and affordability except Japan. So Japan is probably the best with a yield of around 5%. Appreciation is limited as it is imploding demographically.

Countries like Canada, Australia, NZ are well positioned for long term demographic and economic growth, but they are not as affordable as growing US cities like Charlotte, Atlanta, and Indianapolis at the moment. So it does not make as much sense to invest at these prices

Fatimah Rashad · Answer

The UAE, specifically Dubai, has a number of freehold properties where residents and non-residents can purchase. I imagine if you leverage the location of your property correctly, you can see excellent cashflow from rentals or AirBnB.

I have lived in the UAE nearly 6 years as a renter. I'm considering investment in this market, but still learning. Here's what I understand so far:

- Nonresidents withing certain income limits can get bank financing here with at least 25% down on a 15-year loan.

- White goods are usually a tenant's responsibility

- Most repairs are a tenant's responsibility with major structural issues being the owner's responsibility. Some buildings offer maintenance packages for all repairs that can be paid by tenant or owner.

- Many buildings in high rent areas are less than 10 years old (the country is only 47 years old)

- Property taxes as Americans know them do not exist here... yet

- Income taxes do not exist here... yet

- There is a 5% VAT which may be relevant for service fees associated with purchasing and maintaining the property

- A municipality fee, which equals 5% of the rental price, is paid by the tenant

- Traditionally, rents were paid by the tenant upfront for the year. This is changing and some landlords/property managers are accepting anywhere from 4 payments to a month-to-month with a small convenience fee added.

- There is a service fee for building maintenance. This is usually a set amount per sqft. You can look up a building's service fees on the Dubai Land Department's (DLD) website.

-There is also a generous rent cap monitored by DLD. You can also look this up on their website.

Given my understanding, I've run the numbers as a resident availing of a 25-year traditional mortgage on a few studio apartments priced around $82,000. In the best scenarios, a conservative ROI is around 7% with approximately $150 monthly cashflow if unfurnished (13% and $360/mo if furnished). Admittedly, I have a lot more to learn, but I hope this helps answer your question.

David Nolan · Answer

@Alexander Hunter

The market in Australia is not worth the effort on a value/risk reward basis. The costs of transacting are too high, the rental yields are ridiculously low, the capital growth is being stymied by the governments recent actions and the affordability issue for locals is causing even more issues for investors.

Investing in any property market requires the fundamentals to be in place to make it viable. One of the key fundamentals in any market is the ability to add value at the outset. If you buy retail and are not able to add value the only way you can enjoy a gain is through market movements. You will be reliant on the market going up. The challenge for investors with this approach is that they/we, as individual investors, have no control over the market. Get the timing wrong and you are looking at a downturn and loss of capital, at least on paper.

Adding value is key to giving yourself the best possible opportunity of your investment making you money. In Australia, at present the cost of vacant land is too high, the cost of labour to build is too high and the foreign investor market, which has driven our market for decades, is now under threat from government policy changes. All this means is the ability to add value is being diminished.

The market in the USA is so huge that with a bit of effort and a deep understanding of where the profits are in deals there should be no need for anyone to invest outside of the market, especially if you are a local!

As an investor in the USA market I know from personal experience, that even with the distance issue, it is a better market than the one where I live.

Hope this helps with your thought process.

David Nolan · Answer

Local knowledge is of great value. Be sure to thoroughly research whatever market you want to invest in, be it local or otherwise.

Nikolas Tzathas · Answer

Here in Australia, I'm based in Brisbane.

Out of the top 3 cities Melbourne,Sydney, Brisbane.

We are going through a slow down for the first time in 27 years.

1 royal commission on the banks.

2 tighter in lending policy caused by regulators. People are not able to get lending.

3 sentiment fuelling itself

4 gov limiting forgien investment.( Particular China.

That's has caused a current drop in prices 7 - 10%

The thing is amazing as it's very controlled to watch.

Our inflation is lower than target rate of 3% now hovering at 2.5%.

Our cash rate is historically low at 1.5% .

The RBA trying to stimulate growth.

Unemployment rate at 5ish %.

Population growth is ridiculous.

We are going through a slowdown in the housing market at the moment.

The economic fundamentals interesting to watch.

Plus the audience dollar is good hedge to the global situation.

Culture of Australia is that everyone what's to own there own home.

The culture is obsessed with realestate. Ridiculously obsessed with realestate. You are weird if you don't buy or want to buy a home.

The government is now talking with the big builders to role out an exclusive incentives to tackle housing affordability as the prices for rent and purchase is getting very unaffordable for many.

They are basing it of the multi family model in the USA.

It's only for big high-rise bulders with the intention to build and hold. If the have rent caps.

With all this I do see opportunity in certain pockets that could not have been able to get a year ago.

In saying that people that have cash and can get lending could clean up soon.

My personal opinion tho.

Jai Reddy · Answer

@Josh Oaten We visited Australia a year ago. Still cannot get Sydney Harbor and Great Ocean Road (around Melbourne), off my mind.

We dream of owning property overlooking Great Ocean Road and the ocean. Someday....

Morgan Nilsen · Answer

Im a full time investor with Property in 5 countries currently. The best country by far is USA. The tax Benefits are huge, as well as the flexibility you get as everything is privatized. Investing outside of USA makes no sense to me. Btw, I’m Norwegian and live in Dubai. My wife is Chinese/Indonesian and grew up in Australia.

Dean Letfus · Answer

@Sebastien Hitier, I do agree with you however the value of the markets does not always preclude it from benefit. I invest heavily in the USA and New Zealand.

Whilst NZ is expensive, and auckland where I am is every expensive, investing long terms till makes sense often.

You can bank on 99% occupancy year after year. We literally have had zero vacancy on most of our property in years.

Maintenance is typically $1000 a year on a 1 million dollar property and our values double every 10 years, actually every 7.8 years but let's call it ten.

So if you can afford to get in you will create more wealth over time than say a city like Memphis where I invest in the USA

Matthew McNeil · Answer

I bought an apartment (6-door) in the Philippines for $225k in 2008 using a 2-year owner-carry purchase contract.  Today its worth $500k.

Currently the sky's the limit.  Literally. There are high rise condos being built in the major cities that range from $50k up to $800k. People are buying the units before the buildings are constructed.  In fact, the builders are smart by using that money to pay for the construction which minimizes the need for bank funding.

Foreigners are legally allowed to buy condos, but not houses.  Best revenue is Airbnb and if done correctly they can earn a good return.  However, what I’ve witnessed across the board regarding investing in the Philippines is this; a Filipino can be very successful and a foreigner can be left standing on the corner.  The reason is due to the cultural complexities that are difficult to navigate.  But it can be done.  Rough numbers on a reasonable condo: $50k purchase with $900/month rent using Airbnb.

Dean Letfus · Answer

Assuming you are in America, many overseas markets are attractive. New Zealand, where I am from, is sadly off the table now as the govt just banned overseas ownership of existing dwellings.

Are you buying overseas?

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