@Magnus Wikström, I appreciate your response and advice, but allow me to elaborate on my points of view.
Regarding your comment on currency risk, my investments will not be denominated in the local currency, but rather the real property itself. I do acknowledge that a nation's currency value (and wider economic state as a whole) can certainly affect property value, but my understanding is that real estate tends to appreciate with inflation, which should somewhat insulate me against local currency shocks. Regardless, one of the top countries I am interested in is El Salvador, the national currencies of which are Bitcoin and the US Dollar. As for you, the majority of your real estate investments are in the US, so you are disproportionately more exposed to $USD currency risk. Investing in foreign real estate could diversify your currency exposure amongst various markets controlled / influenced by various different currencies.
You are right in your statement that in investing in foreign real estate, I would be assuming political risk - but that is also precisely what you are doing by investing in the US. Based on your comment, I presume you have the majority of your real estate investments in the US. Perhaps you have invested in various states of the US, but you have concentrated your real estate investments in one single country; you have put all your eggs in the "US basket." I have already invested in US RE and am open to further investment in the US, but I also intend to invest in real estate in various other countries to diversify my geopolitical exposure.
With the mindset that you will only invest in the US, you are literally turning away from a whole world of opportunity. The US certainly has a lot of good investment opportunities, but so does the rest of the world. As for IRR, there are very high returns to be found in other parts of the world, especially so in developing and frontier markets. Now, financial logic would say that these opportunities come with higher risk - and many of them actually do carry more legitimate risk. I have a feeling that high returns on foreign real estate are somewhat related to investors' high perceived risk, which I think is inflated to the actual risk. It seems that for many people, if something is located outside of the US or a Western country, it automatically becomes a more "dangerous / risky" investment in their mind; there's a risk premium when perhaps there should not be. Relative to investing in many US markets, I don't see there being much more risk than investing in El Salvador or the Yucatán Peninsula in Mexico. Of course, I am not supporting this argument with numbers, but the point is that although some foreign real estate investments certainly do come with more legitimate risk, many foreign real estate investments can be highly profitable and not as risky as largely perceived.
Beyond IRR, though, I am looking to invest in foreign RE markets for other purposes. I am very interested in global citizenship, geo-arbitrage, international asset protection, etc., and these are all closely related to foreign RE investment. I would like to have a global portfolio of properties and residencies / citizenships through which I can travel the world and remain geopolitically independent.
I am going the path less-followed in my pursuit of non-US-based real estate. There are certainly less Westerners trying to invest in Mexico than in Florida. As you noted, this means that there is a lot less competition. It may be an uphill battle for me, but that is part of the challenge to accessing less popular markets - and one I am willing to take. Investing in foreign nations also seems like more of an adventure to me, too. I like the idea of seeking opportunity where others do not, going to the less-frequented and more overlooked corners of the world. Perhaps with my investment, I could also help build economic prosperity in these overlooked areas where there may not be much effort or capital being put to use to do so.
Ultimately, what I want to do is not reinventing the wheel, though. Many people and companies have invested abroad throughout history - and made a lot of money doing so - and many individuals and companies continue to do so today. I intend to do the same and am in the process of making connections to facilitate this.
I do encourage you to consider investing in assets not based in / dependent on the US, too, though. I am not one to be a fear monger, but there is an argument to be had that the US is not in the best situation; we could potentially see its financial and even its geopolitical dominance decrease in this century. The US has quite a large and quickly growing national debt, a fractured and dissatisfied society, an evolving technocratic authoritarian government, etc. The US Dollar could even lose its status as the world's reserve currency. If that happens, I am not sure what would happen to the US RE market. I imagine we'd see a lot of general economic inflation as the $USD loses value, but would RE prices proportionally inflate? What would the corresponding supply and demand shocks to US RE markets be, and how would they affect prices? Regardless, some argue that the US is in a RE bubble now. Who knows?
I know this was a long response, but I wrote it to give you and any others who may read this an explanation as to my motivations and reasoning behind wanting to invest in foreign RE. This was also a good exercise in collecting my own thoughts on this subject. I actually just started an
entrepreneurial diary called the Existential Entrepreneur through which I will be sharing my journey and discussing relevant lessons and life insights. I welcome you to follow along if you're interested. In closing, I have no doubt that there is plenty of RE success to be had in both the US and the world as a whole; the universe is abundant in opportunity, and I wish you the best in your investment markets.
God Bless,
Brennan
