Diversification and Other Reasons Foreign Real Estate Can Be a Good Idea

Wealth creation…asset protection…and income for your retirement: These are all things that foreign real estate ownership can do for you.

There are a number of reasons why real estate investment can be so much more attractive than other types of investment.

Diversification

Smart investors know that to protect and grow wealth, you can’t put all your eggs in one basket. Having a strong stable of foreign real estate in your portfolio can help to insulate you against market changes. When you invest strongly in one location, you’re at the behest of the market. The value of your investment rises and falls as the markets change…or as currency exchange rates weaken or strengthen.
Put all your investments in one location and you could take a hit when crisis hits. But spread your investments around and you insulate yourself from blips in the market.

With all investments, I recommend a ”buy and hold” strategy. What that means is that you invest in a piece of real estate…and hold it until the moment is right to sell.

A long-term strategy means those buyers are insulated from currency changes…and those who have spread their investments across several real estate markets can pick and choose their moments to sell, maximizing their profits and protecting themselves from short-term market changes.

Investing for Retirement

As part of a retirement plan, foreign real estate can pay off massively if done the right way. You could put a chunk of money in a savings account every month for decades. That’s certainly a sensible strategy and not one I recommend you forgo. But while having a pot of money in a savings account can provide a sense of security, unless you’ve got a great deal, your returns are only ever going to be minimal.

Contrast that with the return you could see on a well-placed, well-timed real estate investment. A couple of years ago, I told found an opportunity to buy in a vibrant beach city in Mexico. At that time, you could pick up a condo for $136,500. Now, that same condo would list for $190,000. That’s a paper gain of more than $50,000.

Saving sensibly is a well-worn and smart strategy. But if you have money to spare, foreign real estate investment is worth considering. Buy in the right place and you won’t just protect your nest egg; you could watch it grow substantially.

Building an Income for Retirement

In many of the markets on my beat, I don’t just look for the potential for strong capital appreciation; I look for opportunities that come with a strong rental income kicker. If you’re gearing up for retirement, the right real estate buy could set you up with a strong rental income to supplement your retirement income.

This is something I’m doing myself. I’ve bought in vacationer-heavy markets, like the Riviera Maya and Cabo, both in Mexico. It takes a little bit of time to create a steady rental income…but the rewards can be more than worth it.

With some forward planning, you could be primed to make a killing in rental income when your time comes to retire.

I’m setting myself up for the future with my real estate buys. Right now, I don’t need income. But when the time comes to retire, I’ll be set up to earn a strong monthly income from my portfolio of properties.

Take the Riviera Maya, for example. On a property worth around $200,000, you could be looking at an income of $100 a night (or more) in the right location. Rent it for less than half the year (155 nights) and you could see a gross yearly income of $15,500. That’s a gross yield of at least 7.75%…on an investment that you could profit off when the moment comes to sell.

About the author: Ronan McMahon is a director of Pathfinder, International Living’s preferred real estate advertiser.

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