There’s no doubt that investing in real estate is a big commitment. Every investor wants to carefully weigh their options, investigate the properties that they purchase, and be assured in the security, trustworthiness, and success of their assets.
For some reason, many real estate investors have an inherent fear of out-of-state investing never mind international. They stick to their local markets for fear of being scammed, for being unable to reach their property in crisis, for being uninformed, or not knowing the market adequately.
Truth be told, thousands of real estate investors invest interstate. In fact, thousands are also investing in international markets. This is certainly true of sophisticated investors, the vast majority of whom are not local to the markets in which they invest and some are even overseas and this can be some of the most successful investing.
If you’ve found yourself feeling apprehensive about international real estate investing, you aren’t alone. However, those fears are worth putting to rest for the sake of your financial future.
1.Market diversity creates security
Diversification is key in any investment portfolio. In order to hedge against risk, you buy different stocks, or, in the case of real estate, you invest in multiple properties across multiple markets. The reason is this: should a market go through economic troubles, the success and performance of your portfolio is not contingent on a single market.
If you were to invest in your local market, you would depend solely on its economic status, real estate market, and rental demand—no matter what that looked like. Diversification in other markets means that you can invest in markets with key indicators for long-term strength, like a diverse local economy, population growth, and business-friendly local legislation.
2.Market access increases options
Beyond investing internationally as a means for portfolio diversification, investing long distance opens up your options. If we’re honest, we don’t all have a local market that is conducive to buy-and-hold investing. There may not be a strong rental demand or population growth to make it a successful endeavour where you are. At the same time, even if rental demand is strong, home prices may be so high that the debt-to-income ratio would be unfavourable in your local market as it is in many parts of Australia.
Because not every market is suitable for investing, looking beyond the local market is necessary. When you go beyond your local market and expand your options into other markets, a whole new world of opportunities opens up!
3.It creates reliance and relationship
International investing demands a different model that the hands-on investing that comes with sticking to one’s local market. Investing in international markets such as the US, forces you to find good companies or providers you can rely on to assist you with your investing.
For the investor, this creates a meaningful bond of trust with their provider. They know your markets. They know your properties. You put your portfolio, the management, the day-to-day success, and your long-term vision in their hands. Ultimately, this benefits you because you are not relying on your own knowledge, skillset, or self to get the job done.
Instead, you can rest in the security that a whole team of experts well-versed in the markets you want to be in is handling your portfolio down to the last detail.
4.It forces you to be a passive investor
Lastly, investing in distant markets forces you not to be so hands-on. There is a certain comfort in the drivability of your investment properties. When you sacrifice drivability, however, you also sacrifice tenants calling you at two in the morning. You sacrifice being the point of contact for repairs and problems. You sacrifice the headache of property management.
The question of real estate investing is always about your time. What is your time worth? What do you want to do with your time? To be honest, most of us don’t want to spend it managing our properties, especially as our portfolios grow bigger and better.
Being an international investor takes the “hands on” option off the table. You can’t worry about it. You can’t feel guilty about not doing it. It isn’t your job. Your job is to think about the big picture and plan for your best financial future.
You can only leave your properties in the hands of the people who know best.