Investing in International Real Estate

Investing in International Real Estate

There are several reasons why people invest in international real estate. One of the primary principles of investment is that “Capital flows to the highest yield with the lowest risk”. We see this principle at work in the reasons for cross border real estate investing. Some people invest to avoid risk in their home country. This may be economic, political or social risk. This money is usually called “flight capital” People living in a risky environment want to keep their money safe so they invest in another country.

Some people just do not want to put all of their eggs in one basket. These people are always looking for secure investments in other countries. When events cause problems or currency exchange rates are not advantageous these investors can draw income from the investments that are producing well and leave their other investments intact until conditions improve.

Currency trends are also a major reason for investing abroad. The trends between most of Latin America and the United States generally favor investments in the USA by Latins. The trends between the United States and the European Union have generally favored investments in Europe by people from the USA.

Currency trends can be tracked by way of the website http://www.oanda.com . Just find the two currencies that are to be compared and put today’s date in the window. After getting this exchange rate, enter past dates at regular increments to track the trends. Rates usually fluctuate in both directions over the short term. On a period of several years a trend will normally manifest in one direction. The trend will allow computation of projections in yield based on currency trends.

Investors project yields using various methods. In international transactions these yields have to be adjusted for currency fluctuations and country risk as well as the normal property considerations. My next post will discuss the methods of projecting yield and adjusting projections for risk.






David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World