Overseas Property Investment

Risk and reward in overseas property investment

Before we go into more detail on how and where to invest, let's look at what are the risk and return involve in overseas property investment. There are few main risk factors you must consider when you make your overseas property investment: political risk, currency risk, and liquidity risk.

Political Risk

Political changes and instability in a country could affect investment return for example change in government, legislative bodies, other foreign policy makers or military control. Political risks are notoriously hard to quantify because there are limited sample sizes or case studies when discussing an individual nation.

Liquidity Risk

The risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to cash out.

Currency Risk

When you invest in overseas property, you are exposed to potential risk from fluctuating foreign exchange rates. On the contrary, you also have the potential to reap gains if the foreign exchange rates move according to your favour.

Every country has different investment procedure and policy. Below are the main checklist when you plan to invest in overseas property

Developer: You must know the developer track record to minimize the risk of the development will not be completed.
Location: What is the master plan on the specific location that you are intending to buy?
Tax: Understand the tax policy. Common tax payable are stamp duty tax, rental income tax, capital gain tax, inheritance tax, goods and service tax
Payment scheme: Understand the payment scheme, to better manage your cash flow.
Loan: If you need loan, make sure the loan guideline for foreign investors. Alternatively you can check with you local bank if they provide loan on the property (country) you intend to buy.
Ownership type: Strata title, shares, or rights to use. Are you eligible to own only leasehold or freehold tenure?
Resale procedure: Any limitation on who you can sell to in the future? Is there any tax payable if you sell within certain period of time? Do you need to fully paid your property before be able to sell?
Liquidity: Demand of rental and resale property in the country.
Return projection (rental and price appreciation): What is the projected rental and capital appreciation in the future? What is the prospect of the country and the location that you bought? Is there any new infrastructure? Increase of population number? Increase of employment?