Investing in Real Estate Abroad in 2020 — Massive Opportunity or Too Risky?
In these times of economic turmoil and uncertainty, alternative assets are top of mind for many investors. Real estate has proven one of the best investments to weather such crises, and this current downturn is no different.
More specifically, international real estate is uniquely positioned as investors seek stability, steady yield, and diversification.
It allows them to tap into the higher growth potential (and lower costs) of emerging economies, different asset types and geographies, unique tax advantages, and a more global lifestyle.
Moreover, recent swings in currency values have drastically lowered prices across some of the most attractive markets in the world — Colombia, Turkey, Mexico, and more. If you’re a USD investor, property values just got ~20-30% cheaper!
Yet, the asset class remains notoriously difficult to access and navigate.
It all starts with figuring out which countries offer the strongest investment potential and best fit for you, and that can be a daunting task given the vast universe of foreign markets out there. To help simplify that initial step, Remote Ventures recently released the ‘Top 25 Global Real Estate Markets in 2020’.
Despite the Crisis, Opportunities Abound
You might be thinking — ’but what about the pandemic that’s currently decimating each and every market around the globe?!?’
Of course, the downturn has dramatically impacted the immediate prospects for real estate worldwide. Even in normal times, buying property abroad was a complex and risky endeavor. Now, as virtually the entire world is on lockdown, it’s become a fair bit trickier.
However, as the chaos unfolds in the coming months (and years), opportunities will undoubtedly emerge as well. Savvy investors are keeping a close eye on the markets and positioning themselves to move on great deals when the timing is right.
For instance, those with ample cash on hand (particularly USD) are seeing some favorable forces take shape — an incredibly strong dollar, massive levels of distressed inventory, motivated sellers (many landlords took on too much debt and now rental income is vanishing), and rock bottom interest rates across many markets.
As highly leveraged property developers face a capital squeeze and are forced to sell, prices will likely push lower and create some strong buying opportunities. In fact, many have already begun to liquidate their assets.
Identifying Opportunities in a Rapidly Changing Landscape
The economic landscape is undergoing intense and rapid change. While the ‘Top 25 Global Real Estate Markets in 2020’ serves as an initial guide for narrowing down high potential countries, the underlying data is evolving quickly. By the end of the year, we can reasonably expect things to look quite a bit different.
Nevertheless, it’s instructive to begin mapping out a consistent set of specific criteria for continuously monitoring these markets and identifying profitable opportunities.
For instance, let’s quickly look at how recent developments have already begun impacting several prospects featured in the index…
In emerging markets such as Colombia, Mexico, Turkey, and Brazil, local currencies have severely plummeted against the US dollar in recent months. With declines ranging from ~20-35%, the dollar now goes farther and effectively gives USD investors an even greater discount. Capital cities like Bogota and Istanbul were reasonably cheap before, but these recent currency movements have pushed prices lower yet.
Granted, tourism and rental demand will remain slow in these markets for some time (just like everywhere in the world), but they are major international hubs and well-positioned to bounce back and regain their growth trajectory soon enough.
We can also see the fallout hitting developed European countries, like Spain and Portugal. In recent years, these were red hot property investment markets, but many people have likely overextended themselves and will be forced to liquidate 2nd homes or rental properties. Many Britons keep summer places in these countries, and will be feeling the squeeze both from the macro mayhem coupled with the lingering uncertainty around Brexit to boot.
That said, both Spain and Portugal will certainly remain perennial, world-class travel destinations. As the world reopens and things begin to move again, we can expect such markets to inevitably rebound with a vengeance.
So, whether it’s depressed currencies or motivated sellers, the point is — prices are getting cheaper in the near-term, while the upside potential is still there further out.
Defending Against Inflation with Real Assets
While USD investors are currently enjoying increased buying power, that won’t always be the case. Therefore, it’s an opportune time to put that capital to work, finding ways to move into more resilient and productive long-term stores of value.
As governments pump unprecedented levels of new stimulus money into the economy (with trillions more on the way), we are ultimately heading for a period of high inflation.
Generally, “real assets” maintain their value and provide the most effective hedge against an inflationary environment — none more so than real estate itself.
International real estate presents a unique opportunity to arbitrage a strong dollar and acquire such assets at an exceptional value. In the process, this will help build a stable and income-producing portfolio to defend against impending inflation.
A Buyer’s Market Ahead
International real estate is becoming an even more relevant investment class in light of the current downturn. Not only is it a great way to grow your wealth, but also preserve your wealth as it protects against economic downturns and sinister forces such as inflation.
These uncertain times will eventually pass and as things shake out, there will be exceptional opportunities to be had.
Looking ahead, it’s impossible to say precisely how it all plays out. At this point, what’s most important is to establish your own set of criteria, continually monitor markets with strong investment potential, understand how the opportunity landscape is evolving, and be ready to move on deals when you find them!
About Remote Ventures:
Remote Ventures is an international real estate investment company building software to help you easily scout foreign markets, find up-and-coming neighborhoods, identify and analyze properties, close deals, and turn them into cash-flowing investments. It has a free online course and Youtube channel that breaks down the frameworks, strategies, and tactics to take you through the entire investment process from start to finish.
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