How to invest 300k euros cash

Question

Hi I am new and just thought I' d jump right in.  Background, we own one flat in France where we have 100% equity and a great tenant in place.  We have our niche, the town in France where we already have one property and know the market like the back of our hand, hence to simplify life want to continue purchasing there.

We are interested in owning several properties and not complicating our lives too much with many loans, flips, or renovations.  We buy quality flats and my rule is- would I want to live there myself?

So we have saved a bunch of money and wondering what to do.  Immediately I think buy another 1 bedroom flat.  Te market is low in France now, so I can buy a nice flat for 100k and immediately rent for 500 per month.  Not the best return, but solid and can only go up.

Then say in 2 years time we want to buy our principle residence, say a private home....

I have started to think about leveraging since we have equity, but how should this be done?  Should I buy the second flat cash and do leveraging later for subsequent purchases ? Or leverage now our first flat?  Money s doing almost nothing in the bank, so I am thinking buy cash now.

Also in France to leverage requires a lawyer and documents for the bank which cost around 3 k so not completely free...

Also I don't like headaches and don't want to deal with buildings or many tenants....simple, even if it means less money.  Merci!

Thierry Van Roy · Answer

When your local market is in an impossible market cycle, hence the amount of French, Canadians and others going to Florida. The developers and whatnot there have been pushing their market internationally at that.

Also, international markets can offer much greater appreciation when you look at the world from a bird's eye. When Vietnam is appreciating 20% per year and your little corner of the earth only knows single digits, well... (caveat: gotta marry a Vietnamese in order to buy property there).

Cash flow investors are less interested in international markets, especially if they're hands on. You would really have to be at a point at which you're looking for market diversification. Other than that, you're essentially speculating.

Thierry Van Roy · Answer

Take the 6000 EUR per annum. Now let's see...

1 month vacancy = 500 EUR (if you're lucky)

Provisions for tenant change = 400 EUR

Repairs = 500 EUR

Insurance = 110 EUR (Really? Is that all?)

Taxe foncière = 700 EUR (don't really know for France, don't forget local taxes)

Prélèvements sociaux = 775 EUR (after taxe foncière, 15,5%)

And then there's still the income tax in which you rise in your tranche. I'm already at around 3.000 EUR. You can get it down to about 1.000-1.500 EUR if there's no tenant change and whatnot, but then I can only wish you good luck, literally.

Just saying...

But in any case, you are right to say it would be better to put it in real estate than in the bank. If you're happy with this revenue, then I would at least recommend you to look for a multiplex (3-7 units) if at all possible. The 300.000 EUR would allow you to get one in a certain price range for which there is a lot less competition (in The Netherlands and Liège, between 400.000 EUR and 1.000.000 EUR). Sellers are getting desperate there. A bank will give you a mortgage for an income property like that, they'll only look at the numbers and what you propose to do with it.

I don't like sharing buildings with other investors/owners, the multiplex offers benefits of scale, the mortgage gets paid off at a historically good rate and that will get you some tax benefits as well.

Andy Luick · Answer

The US is definitely attracting a ton of foreign investors.  We get quite a few in our turn-key rented properties producing a net 10% or more.  Many acquire properties here and use the income generated here to buy more.  If I had $300k in euros, I'd be looking at a deal or two as a front-end investor in places like Atlanta, Austin, Orlando...places with growth and varied employment.  I'd try something on the smaller end in those markets...though Atlanta will probably be the cheapest to get into.  As Joel noted, we see investors from every part of the globe these days, many which much deeper pockets than I am comfortable dealing with.  Whoever you partner with, go with someone who will only do one deal with you initially...see how that performs....than re-evaluate.  Happy Investing!  I would love to have a friend in Paris so want to see it someday.

Sarah M. · Answer

Ok thank you!  I've had a look around.  So far nothing jumps out, but it is also the winter...

Thierry Van Roy · Answer

Let us know if you need a deal analyzed or whatever. :-)

Seloger is best, PaP might also work (what the Americans call FSBO-deals). Oh, and then there's the Notariat to keep your eye on.

Though you might want to seek out the local broker who specializes in investment properties. Try to contact him, tell him what you're looking for and hope he's a nice guy (you'd be surprised...)

I look at website listings daily, only 5% is worth examining closer... and that's if I'm lucky. France has a lot of vacant property by the way, though that requires a lot of effort to weed through.

And Germany was a great investment 5 years ago. It's past its growth peak now, flooded with investors. Investing there is still high quality because the sector is very professional (especially through participation funds), but it's just not the same as self-managing in your back yard.

Sarah M. · Answer

I've seen ads for investing in the US or Berlin, promising 10% for the first few years (afterwards maybe 7%).  I'm a US citizen as well so can easily do this, but I am hesitant not to be in control and let someone else manage my affairs from far away...and then again, where do I start?  Perhaps if I had a close friend with first hand knowledge of where to buy/how to manage I might consider this, but since I don't I find it too risky.

Sarah M. · Answer

Many thanks for this.  I might look into this.  Nice to find someone here who understands the French market.  I don't think there are any quick get rich schemes in real estate, but I always considered it more solid than anything else.  I might hit you up for more specific questions.  Is seloger still the best place to look for property including multiplex?  Merci!

Roy N. · Answer

Joel,

It's true that prices are higher here in Canada than the U.S.A.  Particularly in residential (SFH and multies).  Purchasing in certain areas of the U.S.A. is attractive as I can obtain the same returns on 50-70% of the initial input (even after considering the recent shift in the relationship of our currencies).

That said, I would not classify real estate markets in the U.S.A. as being more stable than those in Canada (or Australia, or parts of Western Europe) ... it was actually due to its relative instability ~5yrs ago, that the opportunities attracting we foreign investors exist.    Given enough time, tables will turn {again} and real estate elsewhere - perhaps even in Canada - will provide more opportunity than the U.S.A.

Joel Owens · Answer

International markets in some areas might have more yield but they also have more risk due to stability in those countries with government and economic cycles. There can also be a bunch of red tape and restrictions to buying and exiting your investment.

I have investors from other countries as clients buying commercial here in the U.S

Japan, Australia, Canada, UAE are some of my clients. The foreign investor looks at what loan they can get in the U.S and currency conversation rates to the U.S dollar.

What I am being told is prices are sky high in their countries. Some think getting here a 7 cap or 8 cap is a grand slam versus where they live. Some locals want more yield. This also applies to states in the U.S where they are seeing 4 caps and can get 8 caps to 9 caps elsewhere for yield in other states. I have many California clients.

Dawn Anastasi · Answer

Question (sort of related to this thread, sort of not).  I read sometimes on Bigger Pockets about how people from outside the US invest in US real estate as it provides better returns than in their home country.

a) At what point would someone consider investing in the US if they are outside the country?  What type of returns would make sense?

b) How much risk tolerance would someone need in order to invest in another country?

I think the same could be said about those from the US who invest in other countries.

How to invest 300k euros cash

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