Ask any cow. It’s bound to happen. Call it the “grass is greener on the other side of the fence syndrome.” Investors with their entire portfolio vested in U.S. equities and real estate can’t help but wonder if they’re missing out on exceptional deals in another country. The short answer is “absolutely.” It is almost certain that somewhere on this globe of ours there is an investment that reaps returns for a handful of people that far exceeds yours. You can also be certain that there are about a million other “opportunities” out there that will crush you and, on the surface and from a distance, they look exactly like the moneymaker.
Here are a few problems Jason Hartman sees when he looks at the idea of income property investing outside the U.S.
1. Where’s the Mortgage?
Think the American mortgage industry has gotten picky with their 20% down payment requirements and silly ideas that a borrower should be able to afford their loan they’re signing their names too? Trust us, you can find much worse deals in other countries. The bottom line is that a mortgage with bad terms makes it hard to create a positive cash flow.
2. Where’s the Data?
The truth is that foreign real estate industry systems, compared to the highly technical data collection systems here, is a sort of hodge-podge of information. There’s nothing like the MLS, and unless you can put boots on the ground you’re taking a very big chance if you buy.
3. Where’s the Oversight?
Despite the ongoing hue and cry from some quarters that our country is circling the toilet bowl for the final time when it comes to civil liberties or lack thereof, trust us, it’s worse overseas. Many countries don’t even pretend to adhere to the ‘rule of law’ and corruption is a way of life. Sure, we’ve got our problems but the American system of buying and selling property is still safer than anywhere else.
4. Where’s the Societal Framework?
Foreign countries, especially those with a marked lack of democratic experience, simply do not have the system development in place to make it conducive for a foreign buyer to risk his or her money. Customs can be a mess. New democracies are still feeling their way along and old dictatorships long ago realized that chaos is their ally.
5. Where are the Deals?
After literally traveling to dozens of countries, Jason can definitively state that buying investment property in attractive regions is a numbers game, and the numbers simply do not work. Regardless of what you might hear on your favorite financial cable television network, the kind of real estate you would want to buy are priced too darn high.
The bottom line is why would you want to take a blindfolded, flying leap into the unknown when there are so many profitable income properties to be found right here at home? (Top image: Flickr | Honza Soukup)
The Jason Hartman Team
