By now, it’s relatively common knowledge that real estate investments are up there are one of the best types of investments that can be made. That is even more so the case when it comes to foreign real estate investment- albeit only after the completion of due diligence.
Before one jumps at the idea of investing in real estate, there are some points one must bear in mind. For instance, they must know whether it is even legal for noncitizens to own properties in the host countries. In some cases, it may be allowed, but with strict restrictions on the types of properties that can be purchased, or where they could even be located. There are also tax concerns, which vary between countries and property types. Only local accountants or tax attorneys can thoroughly answer questions in that regard, in addition to financing options (if there are any at all.) While cash pay be the international language, one mustn’t forget the exchange-rate-factor. Property management is another consideration that must be taken very seriously, especially when factoring potential natural disasters, security from trespassers, general maintenance when there may be a language barrier.
For more tips and tricks to make the concept of foreign real estate investment more approachable, we decided to turn to Baruj Avram, the Founder of Titanium Group. The US-based Titanium Group, is the parent company of the widely-respected Regency Real Estate Developers, which is based in Panama and co-Founded by Baruj’s Father and Max Harari.
Under the guidance of Baruj and his team at Titanium Group, Regency Real Estate Developers became known to be the largest and most successful real estate company in Panama, covering everything from high end buildings to affordable housing, hotels, office buildings, mixed-use developments, and more. Both Titanium Group and Regency maintain high standards in the management and development of innovative real estate projects across Panama, not only for the level of service, but also for the goodwill efforts that are pushed by Baruj to give back to the country and its people. Baruj has quite a track record for his philanthropic efforts worldwide, both personally and through his businesses. In that regard, he is most notable for his work with the Lev LaLev Charity Fund. Baruj provides the Lev LaLev Charity Fund with 50% of the funding for their operations and initiatives. This charity provides orphans with food, shelter, therapy, and mentoring, all in addition to support through many of life’s milestones, holiday wardrobes, and recreational activities.
When asked for his insights and pointers in foreign real estate investments for novices, Baruj has the following pearls of wisdom to offer:
Seek Guidance From a Team of Professionals
There are many complexities, loopholes, and fine prints that need to be considered when going about with foreign real estate investments. It’s important to seek guidance from credible local real estate professionals that have done business in your area of interest, with a focus on the types of properties you’re looking into. For instance, Titanium Group secured numerous types of projects in Panama, including office spaces such as the Tower of the Americas; residential properties such as the Tuscany Tower, and Urbis Tower; commercial properties such as the Mall Chiriqui, and Balboa Center; and mixed-use properties include the Albrook Commercial Park, and the City Depot. Such projects placed Titanium Group in a position to be able to assist with properties of all sizes in Panama. Most every country has its own set of reputable real estate development companies, with the right connections with the best contractors, accountants, mortgage experts and property managers to help serve as a guide.
Understand Legal Guidelines
This is one of the conversations you would want to have with the professionals in your real estate development company of choice. Understand how the law dictates how foreigners may buy land and/or properties. There may be instances in which special permissions are needed depending on certain qualifiers or based on intent. Understanding the law would help avoid the grief that stems from missteps and oversights.
Don’t Overlook Taxes
Adding foreign real estate to your portfolio change up the game during tax season when reporting investment gains. With that in mind, it is important to proceed with such transactions with a crystal-clear understanding of the tax implications which concern the investment itself. This is especially the case in terms of transfer, income and capital gains taxes, as those tend to vary greatly from one country to another. Everything must revolve around fiscal planning, as mismanagement of it can take a major toll on the total return of your international investments.
Consider Financing Options
Before purchasing the property, ask yourself where the capital will come from. There are many cases in which cash would be king, and you can’t forget that banking rules vary between countries. It’s entirely possible to pay a much higher interest rate for a foreign mortgage, depending on the interest rate environment in that country. On that note, if having access to investment capital is an important criteria for adding foreign real estate to your portfolio, you may want to consider a real estate investment trust in place of direct ownership. This option enables investors to have liquidity similar to what they would have with equities. The upside is that it provides the same tax benefits as owning property directly, without the additional burdens that are typically associated with managing properties.
Strategically Allocate Funds
At Titanium Group, we advise novices in foreign real estate investments to start small. Less really can be more. Smaller investments are the best way to test the waters. If and when inevitable mistakes are made, at least the losses wouldn’t be as dramatic as they would have been had the project been of a much larger scale.