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10 ways of losing money when investing in real property abroad
In days of assets declaration, many Argentinians will take this opportunity to declare any real property acquired abroad. Many of them did so in order to enjoy vacations and some others, instead, for investment purposes. For sure, those who bought some property to enjoy holidays must be happy, but, what about those who did so as investment? For many of them, it hasn´t definitely been a good deal. It is not easy to invest in property abroad. Investing is not just purchasing. There are rules that must be obeyed. Otherwise, rather than profit, unpleasant surprises are encountered. If you are going to invest or you have already done so, check the following 10 ways of losing money to avoid making a mistake again:
1. Assets are acquired considering some projected profit from rent which is never reached because such projection only comprises visible charges such as taxes and building common expenses, thus excluding some hidden charges such as commissions for real property agencies, property administration, vacancy, civil liability insurance and property insurance, maintenance and repairing work allowances, etc.
2. The income tax that must be paid on profits earned is not taken into account and there is no information on how to fiscally optimize these taxes.
3. The legal aspects to conduct the eviction of tenants in arrears are unknown.
4. High repair and remodeling costs are incurred due to lack of knowledge or because of the need of hiring experts in this matter.
5. It is assumed that a broker or administrator engaged in property sales and administration will efficiently solve any and all tax, legal, accounting, financial, inheritance, administrative, strategic issues, among others.
6. The acquisition time is not taken into account. There is late access to the market, when prices are almost or already at their peak level or, exit is not performed in time waiting until property gets even higher, but everything has its limits.
7. Always investing in the same market and type of asset in the opinion that they will make the same profit, when it has been proved that replicating recent success is really hard.
8. Sale and rent restrictions on assets are not considered. For example, in the United States, there are assets which, for a certain period of time, can only be occupied by the owner and they cannot be rented. Therefore, there is no possibility of obtaining rent profit. In other cases, property can only be inhabited by people older than 55 years old, thus restricting the rent and sale market.
9. Current regulations on currency inflow and outflow in a certain country are not considered, thus being exposed to fines or complex legal situations.
10. When buying or selling, some key indicators are not considered but they should be taken into account such as: inventory of properties similar to the one you want to buy, the inventory of the properties under construction and the permits granted for new construction works, among others. These are public data which can be accessed by real estate operators.
By just taking the last case as an example, if the inventory had been considered at the moment of investment, for sure, not a single Argentine individual would have bought apartments in Brickell – Downtown the way they did during the last 3 years.
The current inventory is about 3000 units and it is not being sold at the market price, which is lower than the value paid when purchased between 2013 and 2016 during the pre-construction process. In the next 2 years, another 10,000 apartments will come into the market due to current construction works. If the already finished brand-new apartments are not sold today at the intended price, imagine the situation in the short-term when the inventory will be 4 times the current one. A perfect bubble about to explode.
It is a very good deal to invest in real property in many international markets but only if done properly. There are rules and they must be obeyed and you must be well informed as well. Or, you can buy some property to enjoy the sea, whether you make a profit or not, indulging yourself a bit is also important in life.