The current investment climate in the United States is volatile.
The Bureau of Economic Analysis’s third-quarter GDP readings, while positive, reveal a lackluster performance by the U.S. economy. Inflation is high, and the financial markets remain unpredictable.
Recession is on everyone’s minds, and experts from Fannie Mae to Freddie Mac are predicting downturns.
In times like this, people look to hard assets like real estate to store and insulate value. Real estate is a dependable store of wealth—a tangible, physical asset rather than something notional, like Bitcoin or stocks.
Instead of buying into the U.S. housing market, which, along with the housing markets of several other rich economies, is heading towards a price slump, investors should buy property overseas.
Overseas property is the cornerstone of any diversification strategy. It’s a safety net against things like volatile markets, economies, and political situations, and it’s an investment that can bring capital growth and cashflow across currencies.
But beyond being just an investment, a piece of property overseas provides other unique benefits. Here are seven reasons why you should buy overseas property.
#1. Overseas Property Comes At A Discount For U.S. Dollar-Holders Right Now
When buying property in a foreign currency, the local currency's exchange rate affects the sales price in dollar terms. A currency advantage means that whatever your capital budget, it’ll buy you more.
The current strength of the U.S. dollar is creating extraordinary opportunities for dollar-holding property investors around the world. It’s at historic highs against the euro, the pound, and other key currencies.
A house costing 100,000 euros would have cost you US$133,000 at an exchange rate of US$1.33 to the euro back in 2013 but only US$99,000 at today’s US$0.99 per euro.
Right now, the enhanced spending power of the greenback means you can diversify your real estate portfolio overseas at a discount.
#2. Overseas Property Costs Less Than U.S. Property
On top of the savings brought by the current currency advantage, overseas property can be many times cheaper than comparable U.S. property. Beach property in Northern Cyprus or Ceará, Brazil, for instance, can cost less than US$100,000. In top U.S. beach towns in California or Florida, you could easily pay 20 times that.
#3. Overseas Property Can Provide Income
In addition to being a second home, renting out your overseas property to short- or long-term visitors can generate cashflow that can be used to offset the carrying costs of your property or to build a nest-egg in the local currency.
Net yields tend to be lower in Europe, but in places with tourism appeal, double-digit returns are possible. In Northern Cyprus, for instance, a small beach property can cost less than US$100,000. With short-term rental markets back at pre-pandemic levels, net yields of more than 10% are realistic.
To take advantage of the U.S. dollar’s strength in Europe, consider coastal areas of Portugal, Spain, France, and Italy for a short-term vacation rental investment. Rental properties can be found for less than US$200,000 in these countries that historically have strong tourism demand.
Another advantage of buying an overseas property with the currently strong conversion rate for the U.S. dollar to the local currency is that the exchange rates could swing back to historical averages sometime in the future, meaning that you could realize a U.S. dollar appreciation in the value of the property, even if the underlying price of the property is unchanged in the local currency.
#4. Overseas Property Brings Privacy And Tax Advantages
Overseas property is one of two remaining asset classes that Americans are not required to report to the IRS every year. Here's the relevant reference from the IRS's website: "Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938. For example, a personal residence or a rental property does not have to be reported."
The IRS likely leaves foreign real estate alone because, even if it wanted to, it’d be unable to seize or force the sale of your second home in Belize, your penthouse in Colombia, your beach house in Brazil, etc. Lawyers, former spouses, friends, ex-employees, and so on are likewise stone-walled.
Renting out your overseas property can bring tax advantages. You can deduct the cost of every trip you take to check on your property on your U.S. tax return. It’s possible to deduct the interest paid on your mortgage for your foreign home from your taxable income.
#5. Overseas Property Brings Diversification And Risk Reduction
When buying property overseas, you reduce market risk, exchange rate risk, risk of seizure by the U.S. government, and liability risk. U.S. courts can’t seize your foreign property.
Overseas markets may rally while the U.S. housing market heads towards a slump. By investing abroad, you’re putting an egg in a different basket.
#6. Overseas Property Can Bring Residency Perks
Buying real estate above a certain value can be a fast track to residency in that country. Countries like Portugal, Spain, and Greece have Golden Visa programs that exchange low-hassle residency and access to the Schengen Area for property purchases. Other countries, like Montenegro and Northern Cyprus, will grant residency for a property purchase of any value.
Overseas residency is another essential component of any diversification strategy. Obtaining legal rights to live in another country means that you have a place to go if you ever want or need to leave your home country permanently.
Your overseas property could be your plan B if government regulations become too stifling at home. It could be a place to ride out the next pandemic. Some countries had much less intrusive COVID lockdowns than the United States, for instance.
Residency usually leads to citizenship after a certain number of years has elapsed. Gaining a second passport opens up the possibility of renouncing your U.S. citizenship—a serious consideration but one that increasing numbers of Americans are doing every year.
#7. Overseas Property Allows For Low-Cost Vacations
A piece of property overseas is an investment, but ideally you buy in a place where you also enjoy spending time. It can double as a retirement plan—today's investment can be tomorrow's retirement residence, earning you rental income until you’re ready to move in yourself.
Real estate overseas can also double as a holiday or second home, an investment that you and your family can enjoy from the day you make it. You could organize house swaps with other overseas vacation home owners. Spending time immersed in rich cultures where society is more peaceful benefits your wellbeing.
The cost of living in many of the most desirable places around the world is less than in the United States, especially the costs of services and health care. By spending time in your vacation home, you can avoid winter heating bills or worse, potential grid collapses like the southern United States saw last year.
Go somewhere warm where you don’t need heating in winter but not too warm where you need air conditioning.
Downsides To Investing In Overseas Property
Just as there are unique benefits to buying property overseas, there are also unique downsides.
Not many countries have an equivalent to the United States’ Multiple Listing Service. No MLS means that agents can't show you everything available that fits your parameters, because they don't have access to everything available. They have access only to their proprietary listings. If they don't have what you ask for, they show you something regardless of whether it meets your needs.
In most cases, you’ll need to be prepared to buy with cash. It can be difficult for non-resident buyers to get mortgages. It’s possible in some European countries, but it can be more expensive than it is in the States.
Banks may require you to take out a local life insurance policy naming the lending bank as the primary beneficiary if you die before the mortgage is paid off.
Most life insurance companies around the world will insure you only up to age 70 or 75. That limitation restricts the mortgage term if you're older than 50 when applying for financing. A 65-year-old, for example, can qualify for a 10-year loan at best.
Another factor to consider when buying property in Europe is transactions costs. These can be as low as 1% but as high as 10%, depending on the country.
If there’s a place you really want to vacation every year, then owning the property and renting it out can reduce your vacation expenses. But you may feel obligated to use the property for vacation, and if you use it for more than the thresholds for the expense deductions, the direct financial benefits are reduced.
On the flipside, if you opt not to use your overseas property yourself and rent it out instead, it becomes a pure investment, which can also trigger tax obligations.
Overseas Property Brings Diversification And Risk Reduction. When buying property overseas, you reduce market risk, exchange rate risk, risk of seizure by the U.S. government, and liability risk.
Overseas Property Brings Diversification And Risk Reduction. When buying property overseas, you reduce market risk, exchange rate risk, risk of seizure by the U.S. government, and liability risk.
With a low-cost entry point and global markets on the rise, investing in overseas property can offer significant returns. Additionally, some foreign countries may provide tax incentives for non-residents who purchase real estate within their borders.
United States citizens should note that they must file Form 8938 if they have significant assets outside of the United States, yet foreign real estate is not required to be reported.
Canadian investors lead this pack, by a long shot, with nearly 9.4 million acres of U.S. land — more acreage than 44 of the top 50 foreign landowners combined, according to the report. (These people own the most land in America.)
Upon sale of real property, the foreign investor will be subject to FIRPTA withholding tax at the rate of 15% of the total sale price (not on gain realized from sale) subject to certain exceptions. FIRPTA tax must be withheld from the purchase price by the buyer and is treated as an advance payment of U.S. taxes.
A high ownership rate of 63 percent in France had elevated opinions of real estate as the safest investment. The city has a thriving property market, with demand driven by domestic and international buyers. Paris's investment property prices have remained relatively stable, with an average increase of 8.7%.
hinder domestic investments and transfer control of domestic firms to foreign ones. risk political changes, exposing countries to foreign political influence. influence exchange rates. Influence interest rates.
Yes, you must report foreign properties on your U.S. tax return just like you would report any owned U.S. property. To do that, you first need to know what type of ownership you have because it affects what tax forms you must file.
In 2020, Hong Kong had the most expensive residential property market worldwide, with an average property price of 1.25 million U.S. dollars. The government of Hong Kong provide public housing for lower-income residents and almost 45 percent of the Hong Kong population lived in public permanent housing in 2018.
Chinese buyers comprise one of the largest groups of foreign buyers of residential property in the United States. Historically, between 20,000 and 40,000 residential properties were bought by Chinese nationals, but in 2022, both the sales volume and percentage of all foreign-bought properties declined.
China, Canada, India, Mexico and Brazil were the top five countries of origin for foreign U.S. buyers. Chinese buyers had the highest average purchase price, at “just over $1 million,” per the report, with 31% of purchasers from China opting for properties in California.
The main investing countries in the U.S. are Japan, Germany, Canada, the United Kingdom, Ireland and France. Most of these investments are in manufacturing, financial and insurance activities, and trade and maintenance. In 2021, California received the most investment, followed by Massachusetts and New York (BEA).
If you're an expat and you qualify for a Foreign Earned Income Exclusion from your U.S. taxes, you can exclude up to $108,700 or even more if you incurred housing costs in 2021. (Exclusion is adjusted annually for inflation). For your 2022 tax filing, the maximum exclusion is $112,000 of foreign earned income.
Yes. If your property is considered a rental property, you can depreciate it on your income tax returns. Unlike U.S. property, which is depreciated over 27.5 years, foreign residential property is depreciated over 30 years.
In general, yes — Americans must pay U.S. taxes on foreign income. The U.S. is one of only two countries in the world where taxes are based on citizenship, not place of residency. If you're considered a U.S. citizen or U.S. permanent resident, you pay income tax regardless where the income was earned.
After Hong Kong, New Zealand and Australia were the least affordable countries overall in the study which looked at the U.S., Canada, the UK, Hong Kong, Singapore, Australia, New Zealand and Ireland. This chart shows the places where it's hardest to afford a home (2023).
Switzerland. Switzerland is one of the best countries to invest in. It has one of the lowest federal corporate tax rates in the world, at 8.5%, allowing businesses to save a significant amount of money on their profits.
The Safest Place to Own a Home Hasn't Changed in Five Years
Nashua, New Hampshire and Laredo, Texas came close behind Columbia as the safest cities in the U.S. Portland, Maine; Warwick, Rhode Island and Yonkers, New York all landed in the top six cities for safety.
Expenses on foreign transactions tend to be substantially higher. Currency volatility is an additional layer of risk in making foreign transactions. Liquidity can be a problem, especially when investing in emerging economies.
The researchers found that annual increases in FDI enhance the depletion of energy, forest and mineral resources in developing countries. This finding suggests that FDI can promote unsustainable resource use.
Yes, US citizens can purchase property in Europe. In fact, many US citizens are purchasing property in Europe in recent times due to the soaring dollar and rising interest rates, which have made American buys splurge on real estate acquisition across all of Europe as property prices have decreased respectively.
1. What are the restrictions on foreigners buying property in California? There are no specific restrictions on foreigners buying property in California.
Through FATCA, the IRS receives account numbers, balances, names, addresses, and identification numbers of account holders. Americans with foreign accounts must also submit Form 8938 to the IRS in addition to the largely redundant FBAR form.
There are two basic types of forfeiture actions that can be initiated by the United States against foreign assets. One would be against assets that are located in a foreign country; the other would be against foreign assets located within this country.
The nation's largest private landowners are the Emmerson family in California who own over 2.4 million acres. The bulk of that land is dedicated to timber in Northern California.
Is There Any Land in the US That No One Owns? Depends on what you mean by no one. There is plenty of publically-held land owned by the federal government or states. However, there is no land in the US that does not have a designated owner.
In terms of percentages, as shown in Table 3, foreign entities owned 2 percent of U.S. agricultural land in 2011, and in 2021, foreign entities owned 3.1 percent of this land.
If you sell a foreign property, you may be able to deduct some or all of the capital gains. However, the home must qualify as your primary residence, which requires you to have lived in it for at least two of the past five years.
If you sell a foreign property, you may be able to deduct some or all of the capital gains. However, the home must qualify as your primary residence, which requires you to have lived in it for at least two of the past five years.
Hong Kong. Hong Kong, located in southeastern China, tops the list as the world's most expensive city. With sky-high prices for accommodation, restaurants, and necessities like milk and bread, the city's cost of living is notoriously high.
China is home to more of the world real estate market assets (by value) than any other country at $42.7tn or 21 per cent of global real estate value, just ahead of the US at $42.1tn.
The least affordable was Miami, where the median-priced home costs $598,000 and would require a monthly payment of $3,183 to cover mortgage and taxes — more than 85 percent of the local median household income of $44,581 (or $3,715 a month).
Portugal is actually considered one of the most affordable countries in Western Europe and is an average of 50 percent cheaper than living in the United States.
Spain and Portugal have very similar cost of living. While Portugal tends to be on the cheaper side for most things, it's also possible to have a cheaper cost of living in some Spanish cities.
Mainly yes, Portugal has a free healthcare system. It's free for all Portuguese citizens and residents. Citizens and residents of the country who contribute to the Social Security Fund can receive free medical care through the National Health Service, SNS.
Do US Citizens Have to Pay Taxes on Foreign Property? All US citizens must file a yearly tax return regardless of where they live in the world. When filing your return, you must report your worldwide income. This includes any gain or loss from selling a foreign property and rental income.
The US is a renter-friendly country with a high demand for rental properties. Therefore, you can easily find tenants for your investment property in the USA and generate good rental income. Rental yield is defined as the gross annual rental income as a percentage of the property purchase price.
The rights to purchase and own property in the United States is the same for a foreign investor as they are for a United States citizen. These tax benefits are the major factor luring more and more investments by foreign investors in the US real estate market.
There are no restrictions for foreigners who want to buy properties in Italy. However, the Italian authorities have the power of making some verifications of criminal records and other aspects.
That means any gain from selling your primary residence overseas is usually tax-free, as long as you meet the occupancy requirements and your gain is below these thresholds: $500,000 – if you're married filing jointly. $250,000 – if you use any other filing status.
Yes, you must report foreign properties on your U.S. tax return just like you would report any owned U.S. property. To do that, you first need to know what type of ownership you have because it affects what tax forms you must file.
Yes. If your property is considered a rental property, you can depreciate it on your income tax returns. Unlike U.S. property, which is depreciated over 27.5 years, foreign residential property is depreciated over 30 years.
Of the 1.3 billion acres of private agricultural land in the United States, foreign entities fully or partially owned roughly 40 million acres valued at $74 billion in 2021.
Chinese ownership of U.S. farmland jumped more than 20-fold in a decade from $81 million in 2010 to nearly $1.9 billion in 2021. Hu pointed out that the Fufeng Group, a China-based chemical manufacturing company, bought 300 acres of land for a corn mill in Grand Forks, North Dakota.
Many Chinese and Hong Kong nationals may find this an intriguing option because of the relatively cheaper housing prices in the United States (compared to metro areas of other western countries) and the availability of coastal area properties in many country locations.
Cross-border investment has grown as financial markets have become increasingly globalized. Since 1985, foreigners have consistently owned more U.S. assets than Americans own foreign assets.
Yes, everyone can retire in Italy. Non-EU citizens need to apply for an Elective Residency Visa, also known as Italy Retirement Visa. EU citizens can freely relocate to Italy. From 2022, the retirement age in Italy is set at 67 for both genders.
An Italian residence permit by investment is valid for 2 years. The status can then be renewed for 3 years, provided that the minimum investment is kept. A new Nulla Osta is needed for the renewal. After the renewal, the investor can apply for permanent residency in Italy.
Living in Italy is significantly less expensive than living in the U.S. The simplest reason is that housing and health insurance costs are much lower. But it doesn't stop there.
Introduction: My name is Jonah Leffler, I am a determined, faithful, outstanding, inexpensive, cheerful, determined, smiling person who loves writing and wants to share my knowledge and understanding with you.
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