Where
is the best place for you to buy (or invest) in real estate today?
Unfortunately,
there is no one answer to that question. Much depends on two things: the
type of “investment” that you’re looking for; and how that investment fits
into your overall plan.
Start by
deciding why you’re buying the real estate. Think of all real estate
falling into a continuum with one end being your personal residence and
the other end being pure investment. For your personal residence, many
factors influence what you buy, but the most important one is whether you
enjoy spending time in the property. On the pure investment end, again
there are many factors, including the projected return, your overall diversification
strategy, and how the investment fits into your portfolio.
Most real estate
purchases outside of your home country are likely to fall somewhere in
between. Perhaps you’re looking for a second home somewhere you can avoid
winter… and if the property can be rented out when you aren’t there, the
extra income is a bonus.
You may be
looking for an income property where you can vacation a couple of weeks
each year. Perhaps you’re shopping for your retirement home, but retirement
isn’t for another five to 10 years.
Another criterion
is the amount of cash you have to put down. Whether financing is available
in the country…and whether you can qualify for financing will play
a role. If you have but $50,000 to buy something, then the answer to “where
is the best place to buy” is likely to be different than if you have, say,
$500,000.
Before
chasing after potential returns ask yourself where you fall in the continuum.
Decide what type of property you are looking for, and how much you can
spend. Once you have that information it will help you focus your search.
Even on the
pure investment side of things, you have to determine how much, if any,
time you want to spend in the country to manage the investment. You may
find a great opportunity somewhere you don’t enjoy. If that is the case,
the second best place to buy might suit you better.
For example,
in May 2005 Berlin was the “next” hot spot. Property prices were
low, big funds from the U.S. were buying up thousands of apartments, and
the German economy was turning around. Great…but I have no desire to return
to Germany.
It’s a fine
place, but it isn’t that interesting to me. Did I miss out on an opportunity?
Perhaps. However, another opportunity took its place. I went to Thailand
instead in June 2005 and found something that fit my criteria on the continuum.
Your “best”
place to buy real estate isn’t dependent on where the best expected return
is in the world at the moment. The place with the best expected return
changes constantly, just as stocks. Look for the appropriate opportunity,
the one that works best for you given your current circumstances. Don’t
wait for the “best” place or time to buy according to third-party criteria.
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