There are many reasons why investing in real estate is a good idea. One of them is that you get a big return on your investment when you rent out your property. Another is its diversification potential. This is a risk management strategy that mixes a wide variety of investments within a portfolio*. Let’s take it a step further and take you to the other side of the Atlantic Ocean. Why? Because investing in Real Estate overseas is one of the best things you can do.
It is Lief Simon, real estate investment and offshore diversification expert at Live and Invest Overseas, who refers to foreign real estate as the “New Swiss Bank Account”. He is right. I am not talking about the high level of privacy that Swiss Bank accounts used to have. I am talking about the low levels of financial risk and good interest rates, what you obtain when investing in Real Estate overseas.
Increase profitabilityIn their latest blog, Noval Properties -a development, construction, and project management company in the Dominican Republic, that I exclusively represent in the Greater Toronto Area- describe how investing in real estate overseas (or outside your home country), takes you to another level. You’ve got control with Real Estate!
By listing your rental property on different online booking sites to increase occupancy, you increase its profitability. Further, you can make improvements (kitchen or bathroom remodel) to drive up your property’s value.
An explanation on 3 ways to get a Return On Investment in the Caribbean is given:
- Short-term rental (less than a week)
- Extended stay rental (one to six months)
- Long-term rental (six months or more)
Capital appreciationAside of rental cash flow, you’ve got capital appreciation. For example, an investor’s appreciation strategy might be to buy and hold for seven years then resell for a profit. On the other hand, you could invest in a property in the pre-construction stage of development to immediately resell and exit the investment once construction has completed.
The investment strategy that you’ll use will depend on your investment objectives, the desired rate of return, and timeline.
Layers Of DiversificationInvesting in real estate overseas can provide you with several layers of diversification by:
- Type of asset (beachfront condo for rental, mountain villa, lot)
- Geographic location (Punta Cana, Santo Domingo)
- The currency that the asset is held in (U.S. Dollars, Pesos)
- The currency that real estate income is earned in (U.S. Dollars, Pesos)
- Rental Market (Retirees, Snowbirds, Tourists, Digital Nomads)
- Buyer Market (Domestic and international)
FinancingOverseas real estate developers typically offer in-house financing, sometimes at no-interest, depending on the stage of development. The terms will vary from 20% to 60% down with the balance to paid within three to five years.
In the Dominican Republic, bank financing is available to foreigners or non-residents. Banks will typically offer 70% LTV financing up to 20 years at 7% to 12% interest per year for non-residents. Foreigners who have Dominican residency can get more favourable terms and interest.
With the financing option, real estate investors have more cash to acquire more property or improve on existing ones.
Further, you can use your rental cash flow to pay for your property 100%.
Make your Caribbean dream a reality in Punta Cana by signing up here for one of the amazing information sessions on Punta Cana on December 21st, 22nd, 28th and 29th! You pick the the date! We will provide you with all the information in regard to beautiful properties on the island and all the options about investing in property overseas.