So you’ve acquired an overseas investment property. What do you do with it now?
Should you be selling for a quick profit? Turning it over to a professional international property management company? Or are there some more creative steps to be taken to maximize returns?
10 Tips for Managing International Property Investments:
1. SELLING YOUR INTERNATIONAL PROPERTY INVESTMENT
With the brisk pace many international real estate markets have been appreciating it may make sense to sell and cash out to restructure, and take advantage of getting in on the ground floor somewhere else. The same may apply to those that have held properties for a while, and are seeing local markets decline. While you may not actually suffer any loss if you hold onto a property until the market turns full cycle, the US housing crash proved just how low prices can go. Those in declining markets, needing access to capital in the next few years may be best served by exchanging their holdings now.
2. RENT IT OUT
Selling may be very appealing to London property owners right now, in order to dodge the looming 2015 UK capital gains tax on foreign and expat investors. In the USA some investment firms are cashing out of markets like San Francisco, California after pumping up prices by 60%. Those investors are taking their profits and moving to cheaper markets such as Miami, Florida.
However, solid investments in great locations will always be in demand. For those desiring wealth preservation, and looking for reasonable yields, simply leasing out their properties may be the best move. Value fluctuations are only paper gains and loses until exit. Cash flow from rental income distributions are the actual returns which can be used or reinvested.
Units may be rented out on annual leases, or seasonally to vacationers, with the potential for reserving some time each year for personal use.
3. HIRE PROFESSIONAL INTERNATIONAL PROPERTY MANAGEMENT
A few investors may make out alright self-managing their investment properties. Most will find it tedious, and risky. This is compounded further when dealing with overseas real estate. It is normally a good idea to enroll professional, third party management. There are some firms which market themselves as ‘international property management companies.’ However, the best time to vet and select a property manager is prior to making an acquisition. A quality international property advisor should be able to connect their clients with the best local management, and provide supervisory services.
4. LEASE OR SELL PROPERTY RIGHTS
Sophisticated property investors may wish to maximize their returns by leasing or selling off the additional rights that come with a real estate purchase. Some examples of this include air, mineral, and timber rights. Today this may also include providing land to be used for wind farming and solar power generation.
Investors that have acquired more property than they need on one parcel, or recognize that a parcel is not fully being used may choose to subdivide it and sell off pieces. This works for commercial, residential real estate and land.
6. REFINANCE IT
Those that have purchased property for cash, or that have high interest rate loans may be wise to take advantage of today’s low interest rate environment and refinance. Executed wisely this can fuel portfolio expansion and diversification at a very opportune moment, without reducing investment income. An international mortgage specialist can assist with selecting the right loan, in the right country and currency for optimizing each individual’s portfolio.
7. OFFER SHARES AND RAISE CAPITAL
For those seeking to recoup capital invested, who cannot obtain conventional financing, or that simply wish to add value to a property, may consider alternative methods for capital raising. These funds can be used to invest in property improvements, or to expand elsewhere. Examples of this include; crowdfunding, fractional ownership, or selling share of a holding company.
8. REBRAND, REPOSITION, REPURPOSE PROPERTY
One of the most significant ways that investors under the guidance of expert international property advisors can add to their wealth, passive incomes and investment returns, is to reposition holdings under management. This may simply involve new marketing, though can extend to full remodels, obtaining rezoning classification, or tearing down and possibly replacing improvements. The highest and best use of a property can change over time, and identifying that higher and better use can add substantial value to the property.
9. TAKE ADVANTAGE OF INCENTIVES
Local governments frequently initiate incentive programs that can be extremely advantageous for overseas real estate investors. This often surrounds efforts for greening cities, revitalization projects and providing affordable housing. These incentives usually take the form of tax breaks, buyouts, grants and interest free loans. In the US many municipal governments will pay for rental deposits, property improvements and even guarantee rent for certain tenants. This can make international property management far easier and more profitable.
10. LEVERAGE TAX PREFERRED VEHICLES
At every stage of an investment there are opportunities to reduce tax liability, and thus increase net returns. This may involve investing via offshore corporations, donating or committing property to a charitable trust, using tax free or tax deferred retirement accounts, 1031 exchanges, re-insurance and selling company stock versus direct sales for cash which may be immediately taxable at a higher rate.