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Key Factors To Ponder When Buying Into Unfamiliar Foreign Land
If we put together all the advertisements in the newspapers on Saturday that are marketing foreign properties, we can have enough pages to make up a small newspaper as well. There must be a reason why promoters are willing to take up full page mass market advertisements to market their properties. The logical reason that can be concluded is that we are buying overseas properties. What else can it be for promoters to release an avalanche of advertisements in an effort to catch more eyeballs?
If you are already tempted to throw in your cheque book at a property in London based on an impressive Powerpoint presentation, you are probably the shrewdest investor around or the role model of a client that promoters dreamt about during their nap in business class on the flight over. Hold your horses! If you have reached this article in time, here are the key factors to think about before investing in a foreign land unfamiliar to you.
Currency exchange rates. The Singapore dollar is a strong currency and many international investors see it as a safe haven form exchange risks. Here is the problem in – IT FLUCTUATES! This means even if you find your investment cheap due to the strong dollar, you could actually make little to no money by the time you cash out and convert the foreign currency back to Singapore dollars.
Looking into exchange rate trends is the single most important factor you have to go over the moment you seriously consider investing overseas. Your focus must not be diverted from fluctuations to the strong dollar. People will tell you that you can easily afford an overseas property with the strong dollar. That is the only easy part. Nobody tells you that it will be a huge challenge to profit if the Singapore dollar keeps appreciating against that particular foreign currency.
If we take for example ABC currency is now at $1.10 against the dollar and goes to $1.20 in 1 year. It is depreciating. Your ABC$ million dollar property will be making a loss at the end of one year if you sell at ABC$1.1m even though it had appreciated. This is when we factor in the exchange rates. In fact, you will be making a bigger loss when we include the closing costs. You could opportunistically also say that you can double your gains when exchange rates go your way. Bear in mind that because of the strong Singapore dollar, smart international money is flowing into Singapore rather than out to protect wealth. And you are considering taking your money overseas? Think hard.
Foreign ownership. While foreign property ownership in Singapore has been a hot topic in recent years, don’t forget that you are now going to be a foreign buyer when you venture overseas. There are going to be restrictions on you. We have additional buyers stamp duties, so do other countries. Different countries will have different policies when it comes to foreign ownership. You have to absolutely check out how you are going to be affected if you indeed go ahead with your foreign investment. We have the luxury of law being enforced quickly and firmly on agent misbehavior in Singapore. This does not necessarily mean that law is vigorously enforced as well in another country. What are you going to do if you realise you are not eligible to buy after paying? There might be laws that protects you. But are they being enforced? Can you even find the liar?
Your promoter must inform you of everything because you are making your decision based on the information they provide. On top of that, you have to conduct your own due diligence as you are ultimately responsible for your own money. When things go bad blaming everyone but yourself is not going to help anyone.
Tax matters. We are pampered with no capital gain tax in Singapore. This does not mean that it is the same way in another country. It is best that you check with a property accountant for the country you are investing in on your tax matters. There are a hundred and one things to go over when it comes to taxes. The last thing you want is to have an issue with the IRS in a foreign land. By the time you finally pay off your fines, you may need a good few years to financially recover.
Financing your property. This is the main thing that can be advantageous when it comes to investing in real estate overseas. There are countless creative financing options that can be exercised overseas. Seller financing and second mortgages are some of the things you can look forward to. In many places, you can even be able to legitimately obtain 100% financing with no money down. Although this means that you have more options and flexibility to maneuver, remember that it also carries more risks. You are open to more vultures waiting to pounce as well. There are also some avenues in Singapore where you can take up a mortgage here to buy a property overseas.
Remember that when you go overseas, you should throw the entire Singapore textbook out of the window. Investment tricks that may work here can become detrimental to your investment overseas. The risks compounds when you are not familiar with the laws, culture and practice of the land. It would be in your best interest to engage the help of someone you are familiar with who has already bought into the territory you are considering.