The Best FX Rates in Town

Date: 09/16/2005

International Living Postcards– Saturday Edition

Saturday, Sept. 17, 2005
Paris, France

Dear International Living Reader,

I don’t worry too much about which way the currency markets will go. It’s true I hold real estate in three different currencies (U.S. dollar, euro, and sterling) but up or down, I know these currencies–and any other currency I get into in the future–will go my way.

Allow me to explain: If you buy the right type of international real estate, you can leverage your purchase in a foreign currency (perhaps generating a rental cash flow in that currency to repay your mortgage) and create a non-dollar denominated net worth for the long term.

Should the dollar get stronger, you have a self-amortizing investment that doesn’t affect your current dollar cash flow.

Should the dollar get weaker, you will look smart to your neighbors.

If the exchange rate isn’t to your liking when it comes time to sell your property, you have the option of keeping proceeds from the sale in the same currency (i.e. sell a house in France and use those euros to buy a house in Italy).

But what if the exchange rate doesn’t suit you when it’s time to buy?

Again, I’ve never worried about this…and that’s a mistake that has probably cost me thousands of dollars many times over.

Typically I instruct my bank to carry out the currency exchange when I move funds to where they need to be. For example, if I am making a euro purchase from a dollar account, my U.S. bank handles the entire transaction–according to their exchange rate.

A better way is to use a currency broker.

The best rate for trading currency is the interbank rate, the rate used by banks to trade hundreds of millions of dollars worth of currency with each other. The worst rate is the tourist rate, the rate you get when you use the foreign exchange counter at your bank to purchase travelers’ checks (or maybe the rate your credit card company uses when you make a non-U.S. dollar purchase).

Believe it or not, even though we’re talking about hundreds of thousands of dollars, most U.S. buyers (including me) only get the tourist rate when they exchange funds for a real estate purchase abroad.

A currency broker can often undercut the high street bank rate by about 1%. No, that’s not going to make or break your real estate investment, but on a $100,000 transaction, that’s a thousand bucks you don’t need to spend. Sounds good to me.

In addition, currency brokers can lock in today’s rate for an exchange in the future (up to two years). Useful if you’re making installment payments or mortgage repayments abroad and need to know exactly how much that villa in Spain or English country cottage will cost you in dollars.

What’s more, a good currency broker won’t charge you extra for these services…unlike your local bank.

I met Doug Johnson (e-mail doug.johnson@hifx.com), an experienced currency consultant, in March and he told me about his currency exchange house, HIFX. I was impressed.

HIFX can do everything I’ve mentioned above, and more. They have offices in North America, the United Kingdom, Australia, New Zealand, and Spain. Reuters rank them consistently among the most accurate in the world for their currency market forecasting.

The next time I buy real estate outside the U.S. dollar, I’m going to use HIFX. I could save thousands. You could, too: http://www.hifx.com.

Lief Simon
Real Estate Editor, International Living

P.S. I don’t receive any compensation from HIFX for recommending them. I recommend them simply because I believe they offer a good service.