Anyone investing in Europe?

Question

I have been looking into investing in Europe; specifically Italy or Spain. The goal is to buy something now that we can STR and in about 10-12 years live there for 3-6 months a year.

Normally, I would state the research I have done, what I have learned and ask very specific questions for the community. I am deciding not to do that now in an effort to prevent steering/narrowing the conversation and see what comes.

If you have looked into or have invested in Europe, would you please share what you have learned?

Erwin Groenendijk · Answer

@Phil Falcini We are active in Spain. Barcelona, Valencia, and the surrounding of these two cities. Multiple flips of apartments and we are now flipping an apartment building. Some of them are on my profile portfolio. Any questions regarding sharing tips/tricks/contacts/projects/etc. happy to help.

@Jon Latorre, where specifically are you investing in Spain? Curious to hear your story.

André Rairan Zacchi Pereira · Answer

Ciao @Simone Chesi, I an also an Italian citizen and own a few rentals in Italy, in Udine and Lecco province. In Lecco, I manage them my own through my family there. Starting yet, but with some process in place already, so far so good.

Do you live in Italy or abroad? I saw some lower interest rates for Italian residents.

If you need any help, just let me know.

André.

Michelle S. · Answer

@Mike Lambert@Matt Bucklaew@André Rairan Zacchi Pereira Thank you for insights! Learning a lot here.

Mike Lambert · Answer

@Matt Bucklaew

The situation you mentioned is actually quite common and it works like this. You have 100% of the purchase price in cash in China. You place your cash with HSBC China. HSBC China takes that cash as collateral and issue a bank guarantee in favor of HSBC US against that collateral. Using that bank guarantee as collateral, HSBC US will give you a loan against the US property plus the cash collateral. You’re basically using your own cash and paying for the privilege while having no leverage, which is the main purpose of taking a mortgage. And you have to pay interest and for the bank guarantee as well! The banks love that business because they make money without taking any risk and so their return is infinite.

You’re right in that she could use a hard money lender in the US if she used US properties as collateral. However, as you probably know, hard money lenders normally rent short term against a flip or a bank refinancing. So it won’t work if @Qin S. wants to buy and hold, which she most likely wants to do. Even if the private lender would agree to do long term financing, the rate would be so high that the European property would end up costing her an arm and a leg.

If she owns unsecured property in the US, she needn’t go to a hard money lender. She just can get a cheap mortgage for a US bank against that collateral. However, as with the private lender option, this won’t be a mortgage on the European property but rather a refinancing of her US property. The bank doesn’t care what she does with the money. She might as well use it for personal expenses rather than buying a property in Europe. They can’t care less. She’d be basically borrowing from her US bank and buy the European property 100% in cash.

This totally defies the purpose of the mortgage, which is getting leverage by borrowing against the very asset you’re buying with the proceeds of the loan.

Matt B. · Answer

It would be difficult to find a bank to provide this kind of financing, I did hear about a guy from Hong Kong who inquired with a friend at the local HSBC, they then reached out to a US based HSBC that provided him with the financing for his US based investment (even though he had no other assets or collateral with in the US) but this sort of situation is far and few between. Try speaking with a private or hard money lender. If you have US based assets or collateral they could just put a lien on that instead of your oversea investment. This also requires some searching for the right lender.

Mike Lambert · Answer

@Qin S.

Banks in one country will never lend you to buy property in another country. They never have and they never will, as they won’t take collateral outside of their country.

André Rairan Zacchi Pereira · Answer

Hi Qin,

I don't know much about US financing, but I suspect it would be difficult (if not impossible) to get a mortgage overseas. The collateral of the mortgage would involve international law. I don't see why a bank would enter in this kind of trouble. But I might be wrong. =]

What you could do is to take other kinds of credits (like consumer, HELOC, credit line) but having a higher interest rate for sure.

André.

Michelle S. · Answer

Can you invest in Europe and get finance in US? What types of finance?

Erwin Groenendijk · Answer

On it!

Anyone investing in Europe?

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