Today’s top investors will tell you that local real estate makes for a great investment. It’s often a key diversification factor in their portfolios. But what about global real estate? Although it’s not for everyone, there are some key benefits to consider when entering this worldwide market.
So far, the global real estate market is performing very well. According to research from CNBC, 18 out of the 23 European housing markets had exponential growth with double-digit successes in global real estate funds in 2016. This year, there’s been excellent room for growth in overseas ETFs when compared with U.S. property funds.
This is good news for the global real estate market, especially after years of struggling in Europe and Asia. The rapid growth is inspiring a lot of overseas real estate investments.
“There is a real opportunity here,” Duncan Rolph, of Miracle Mile Advisors in Los Angeles, told CNBC. “International real estate funds are priced less than U.S. [funds]. Yet they pay dividends over four percent.”
The savvy investor will take advantage of this opportunity and will enter the global real estate market. Those interested in greater diversification and potential profit might look into the current global real estate market.
Make Money on Vacation Properties
Overseas travel is booming. Every year, it contributes more than 7.61 trillion U.S. dollars to our economy. This money encompasses spending on entertainment, accommodations, attractions, transportation, attraction, and food. Investors can make significant earnings by purchasing real estate in any of these areas.
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One of the best markets for global tourism is Europe. Every year, 616.2 million people visit a European destination, and owning vacation properties in this part of the world can offer great returns.
Look into popular areas for your investments. Rome, for example, is one of the most popular European destinations with hundreds of things to do. A waterfront property in such an ideal area will be easy to fill and provide consistent returns.
Share in REITs Globally
Many countries have adopted global Real Estate Investment Trusts (REITs) over the last few years. They offer a variety of benefits to the savvy investor. They provide multiple income streams as well as diversification and long-term appreciation. Shareholders will pay income taxes on the dividends, but otherwise enjoy the rewards of their investments.
Global REITs have matched returns on U.S. stocks over the last 11 years. They’ve managed to exceed international stock prices and paid higher dividends than U.S. and international stocks in 2016, according to Charles Schwab research.
“There’s a lot of room for funds to flow internationally,” Rolph of Miracle Mile said, pointing out the diversification opportunities in more developed markets. Investing in these funds before the end of the year could lead to positive profits for the next few months.
Gain Access to Multiple Markets
According to a white paper from T. Rowe Price, the global real estate market offers diversification through access to multiple markets. “By investing in a global portfolio, it offers the ability to limit the impact of any property downturn in a specific country or region, while also being able to exploit opportunities in other better-performing markets,” the paper says. In other words, access to multiple markets lowers your risk and increases your chances for success.
There are a variety of real estate sectors out there, including retail, holding and development, residential, resorts, services, industrial, and healthcare. Based on your experience as an investor and the overseas market you’re approaching, you’ll have access to many different types of investments to decrease risk and maximize earning potential.
Get Lower-Risk Experience
If you’re smart and invest in REITs and other hot-ticket global real estate items, you’ll gain investing experience at a slightly lower risk. When an investor focuses only on their own domestic market instead of considering the world of real estate as a whole, they face a higher degree of risk. Ignoring that holistic perception of the world can make things dicey for the typical investor.
That being said, there are different risks facing global investments. When you step away from the domestic market, you don’t always understand everything that’s happening outside that sphere. There may be significant differences in currency fluctuations, geopolitical factors, foreign taxes, foreign laws, accounting standards, and more.
Those who go into global real estate investments with eyes wide open and a focus on the holistic nature or investments can gain a favorable risk/return ratio. Careful investments are important for global real estate success.
All in all, prices are growing in the global real estate market, and trends indicate that it could be a highly lucrative market for the savvy investor. While the industry is still hot, consider making the move into global investments.