By Femi Oyedele
Overseas property investments are international property investments. They are properties brought abroad or in a foreign land. Most investments involve the foregoing of a large capital sum now, in return for an income, with property, via a rent or capital appreciation. It is thus, a significant investment in the lifetime of man. Investing in real property therefore requires competence, skill and knowledge (CSK). Property investment is the procurement of a piece of real estate either in the form of land or landed properties.
Landed properties include houses, offices, hotels, industries, tourist centres, warehouses, school buildings, hospital buildings, recreation grounds, petrol stations, amusement parks, shopping centres, car lots etc. Investing in properties is one of the few ways of eating one’s cake and having it. It is a less volatile investment. Investment in landed and landed properties is very popular because land and landed properties are basic needs of man, factors of production and means of generating wealth. 90 per cent of the wealthiest people in the world between the sixties and seventies, made it through property investments.
Overseas property procurement became popular after the Second World War. The Second World War and the civil war forced many nationals and Chinese to leave China. Since that time, overseas properties investments have become popular up till date. Different overseas properties investment analysts have different reasons for picking different countries as their countries of investment-choices. United Kingdom, Spain, United States of America, Panama, Thailand, South Africa, Indonesia, Morocco, Philippines, United Arab Emirates, Australia, Germany and France are some of the best overseas properties hot spots.
There are international laws covering foreign property investments. Example is “the Aliens Tort Claims Act (ATCA). There are many repressive governments found in Sub-Saharan African countries today. Political violence or better still political risks to foreign investments properties and the person of foreign investors becomes the responsibility of the host government as a result of a bilateral investment treaty and by virtue of international law. Buying real estate overseas makes so much more sense when you do it as part of a big-picture plan.
Large scale commercial property investment has for each year been a global phenomenon, and research cited by the Investment Property Forum in 2007 estimated that around 15 percent of the total value of the invested stock in the UK is owned by overseas investors. Property investment is usually to generate income (primary and secondary streams of income) and is tax-efficient in some countries like Nigeria where there are fewer taxes on investment properties. Some overseas countries give residency permits to those investors that have properties in their countries.
Property investors now see overseas property markets as local markets with the use of technology and application of electronic marketing in property transactions. With effective information technology, property investors now invest in overseas property markets with ease. This is because property investments that meet the investor’s requirements are sometimes in overseas countries. Property investors are aware of the different yields of property investment globally and know how to find the professionals that can help them invest and manage overseas properties taking the laws of the country of purchase of the investment properties, especially their tax laws, into consideration.
Since returns on property investment depend on demand for it, property investments are most profitable in areas where there is higher demand for property than supply. Foreign properties are good form of investment which rarely goes to bankruptcy and collapses to zero value unless there is war, wildfire, hurricane or earthquake. There is a caution in buying overseas properties due to presence of rogues in overseas property markets. Professionals must be contacted to help in this area because the principle behind property procurement is “caveat emptor”.
Most overseas property investors invest because of the after-sales-services. After-sales service refers to the treatment of customers in the aftermath of a sale. For example, after the sale of a property, after-sales service may include collection of rent, repair and payment of statutory charges from rent collected. After-sales service is an important part of non-price competition. Property management is offered by most property agents that sell overseas properties. There are also some property agents and assets managers that have international branches. Overseas properties investment is desirable but there are always cautions.
The challenges of investing in overseas properties include the cost of overseas properties which may be very high. Every country has its own share of rogue agents who may defraud you in an attempt to buy overseas properties. Some rogue agents will capitalize on the fact that you are not a resident or citizen of the area where you want to buy your property and or that you do not speak the local language to dupe you. Interest rates on loans from banks are not fixed. An increase in interest rates will increase your repayments and decrease your disposable income.
Each country has its own law governing procurement of properties by international investors. You need to contact a lawyer to tell you what you need to do to buy properties in the international country of your choice after contacting an estate surveyor and valuer who will help you search for a titled and transferable property. You cannot sell off a part, for example, a bedroom if you need to access some cash in a hurry. But you can use your property as collateral for loan. Property management is an essential requirement of overseas investment properties.
The property must be sound in order to get better rental income on it. Good tenant selection and retention requires competence, skill and knowledge. It is better to diversify on different properties like residential, hotel, warehouse, shopping complex etc, so that housing bubble will not totally affect an investor. If the value of the property goes down you could end up owing more than the property is worth, this is known as negative equity. The advice is to contact a professional estate surveyor and valuer to advise you.
The benefits of investing in overseas properties include the fact that some overseas countries have stable political stability conducive for economic investment. Overseas properties can be used as collateral for international loan. Overseas properties can be less volatile than shares, stocks or other investments. You can earn rental income for as long as the investment property is tenantable. Due to the fact that property is a basic need of man, there is high tendency that the property will appreciate in value over time. This situation is a benefit for the investor called capital growth over time and capital gain when the property is sold.
Some overseas investment properties are tax-efficient as the taxes and charges on it is very small in Nigeria. In United Arab Emirates, no taxis paid on rental income. You can use your overseas property as holiday home. In some cases, your overseas property entitles you to get residency permit of the home country. Overseas properties can be used for diversification of investment and spread risk across countries and can also be used to generate pension or for second stream of income.
Oyedele, an estate surveyor and valuer, wrote from Lagos.
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