Investing in international real estate

We are operating in a global economy, and that applies to every sector, including real estate. While most people investing in real estate will obviously stick to their own country, or even their own area, more ambitious investors are realising the potential of overseas investing.

One way to get into international real estate investment is to travel to the country you are thinking of investing in, take a good look round, make local contacts, work through the local rules and regulations and appoint a property manager. But for many potential investors, that isn’t an option.

A good alternative, and a far less risky way to get into international real estate investment is through what are known as Real Estate Investment Trusts (REITs).

What are REITs?

REITs offer an opportunity to enter the international real estate market for investors who don’t have a huge amount of capital. They originated in Australia and the US but are now a common part of the international real estate sector. An REIT will own and manage income-generating real estate, and most major REITs are publicly traded bodies on stock exchanges.

Advantages of REITs

There are many advantages to REITs for the real estate investor with a global perspective. REITs often have tax advantages, in terms of not being required to pay corporation tax if they pass on a certain proportion of their income to their investors. This high dividend yield is another reason why REITs compare well to other forms of investment. And by investing in an REIT, you are simultaneously diversifying your portfolio, and taking advantage of the expertise of professional property buyers and managers, who know the country or countries you want to invest in.

CFDs and REITs

When you invest in an REIT, you also have the option of being able to hedge your investment if you think the value of property owned by the REIT may be about to decline. This can be done through what are known as Contracts For Difference (CFDs) which enable you to take an opposing position on the REIT in question. This is a form of financial trading that has become increasingly popular though it is important to understand how it works fully before getting involved. Fortunately, there are plenty of online resources that can help you to learn about CFD trading.

Do your homework

As with any form of real estate investment, the key to success is research. In fact, you can never do too much homework when it comes to investing in this sector. Make sure that you are well informed about the housing market in the countries you are thinking of investing in, and if you are using a REIT, research its performance and operations carefully before making your investment.

Conclusion

Investing in real estate internationally can be a great way to improve your real estate portfolio and take advantage of growing housing markets in other countries. And by using an REIT as the vehicle for that investment, you can reduce your risk and maximise your investment return.

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