Anyone investing outside of the US?

Question

Is anyone living in the US, but investing in other countries? What has been your experience? How do you learn about the other countries from a real estate perspective (locales, taxes, PMs)? Are they long-term rentals or vacation rentals?

I'm considering purchasing some vacation rentals potentially out of country, but also curious about long term. Thanks in advance!

André Rairan Zacchi Pereira · Answer

Hi @Steve K., I own a few properties in Italy, and I agree to your last paragraph; Where there are difficulties, a barrier to enter, there are also opportunities. I lived there for a while, understand the system, and have my family there managing my rentals now. So all the "unfair advantages" you mentioned =]

The other points are a bit exaggerated, but the idea is correct, finding profitable rentals is not easy.

@Alex Heidenreich I can't help you much with vacation rentals, my business is long-term rentals, so if I can help with that, just let me know.

André.

Steve K. · Answer

I'm always interested in the topic of international investing and have researched/visited a lot of areas around the world. I spent a few months in Italy and talked to a lot of Italians about real estate to get the lay of the land while I was there, so I can perhaps lend some insight into that market. Hopefully some Italians or people who have property there can chime in and confirm/correct my findings based on my limited time there. I should also say that I was there in the mid-2000's, so I'm sure things have changed a lot since then.

The first thing I will say is that Italians seem to have a different concept of real estate investing than us Americans do, in general anyway. My conversations with Italians usually began by having to define the process of buying property to rent out for profit. It simply doesn't seem to be as much of a thing there as it is in other places.

I think this is due to several factors, the primary one being that most Italians own their homes. This means not very many of them are renters, which means a much smaller market for rentals compared to somewhere like the states where 64% own their homes and 36% are renters. Outside of college areas like Florence, major cities like Rome and Milan, or tourist areas/places with lots of foreigners, there's simply no demand for rentals there. The second reason why I think real estate investing the way we practice it is less common there is that rents are generally low compared to expenses (mainly due to property taxes being so high), making it hard to find a place where the numbers work. Outside of the three cities mentioned above, and probably a handful of other big cities, market rent is typically too low to cover expenses. so the Italian market just doesn't seem to be geared towards investing.

Not only are there fewer local investors there, but there are far fewer foreign buyers there than other European countries as well, with the exception of some places like Venice, Capri, Amalfi Coast, Cinque Terre, Lake Como, Chianti etc. which are luxury vacation home markets more than what we would consider rental markets. The lack of foreign investment is due to the 2 reasons above combined with the fact that investing as a foreigner is extra tricky and time consuming. Like most things in Italy there is a lot of red tape/bureaucracy and the system is really only set up for domestic buying and selling, not international investing which makes the process difficult to navigate, especially if you don't speak the language. Buying property is a complex process even for Italians, and if anything goes wrong the legal system is one of the least efficient in the world.

The tax system there is also completely jacked up: the tax laws are constantly in flux and a tax advisor is needed just to determine how much and when taxes need to be paid in order to avoid fines and liens. There is also a lot of corruption and the system seems to lend itself to people ripping others off, especially foreigners, and taxes are very high on property.

All of these reasons I think combine to make investing in Italy pretty difficult. But perhaps that opens up opportunities to someone who understands the system, has some family/local boots on the ground to help, or has some other unfair advantage they can leverage.

Mike Lambert · Answer

@Alex Heidenreich

There is an international real estate forum here.

Europe and Latin America and the Caribbean is my playground as well. They pretty much cover the main places where it makes sense for North Americans to invest overseas.

Italy is one of the rare countries in the world where real estate prices have been going down for the last 15 years, even pre-Covid. This is in great part due to the fact, sadly, that the economy is in a deep hole and it's difficult to see how they're gonna get out of it. I'd never want to own any rentals in Italy. It seems to me like a lot of risks and a potential profit way too low to make up for that.

What Italy has for it is the beauty of the country and its popularity with tourists and that isn't going to change anytime soon. So one opportunity would be to invest in short-term rentals in cities like Venice' Florence or Rome. Mind you, these are probably pretty much the only places in Italy where properties are expensive so you'd need to find the right combination between location and price. It's most likely gonna be more of a cash flow play rather than a capital gain play.

Hendrik Marcel Borst · Answer

Hi Alex,

Italy has some beautiful spots, for sure. But it is so bureaucratic. You need to calculate with LtV 60% and about 7-10% closing costs (notary taxes). Realtor costs are around 3% commission.

UK you need to setup a company like a LTD. Otherwise you can’t buy. I’m not sure if you can deed in your own name when buying cash. Mortgages are at least LtV 75%. Closing costs I don’t know.

In the UK, Italy, Switzerland it is hard to find high yield properties, at least I have. In Germany you probably find them. You pay tax on exchanging and it differs in what state (Bundesland).

What is your strategy and reason to go outside?

I’m doing the opposite and I’m preparing to start investing in the US.

Brandon Goldsmith · Answer

I have been doing my research for property mostly located in Latin America. There seem to be some opportunities in Europe, but it all depends on your use of the property. Hoping to make a few more connections on the ground in some of the countries I am looking at before purchasing. @Alex Heidenreich

Alex Heidenreich · Answer

Considering Italy, but open to other countries in Europe and South America as well.

Hendrik Marcel Borst · Answer

Hi Alex,

what country are you considering?

Anyone investing outside of the US?

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