Residential Rentals Abroad

Just how good an idea is it to own rental properties abroad? There are several advantages and disadvantages to doing so. An astute investor can take advantage of currency trends and situations where the perceived risk is higher than the actual risk. The most important caveat is that the investor must have a deep understanding of the legal and social niceties of the market.

The rule that capital flows to the highest yield with the lowest risk, implies that one will receive a higher yield in risky markets. Unfortunately, this is not always the case. The countries in Central Europe that are new or coming members of the EU have seen such an increase in the price of properties that the yield is no higher than Western Europe. The safety is not commensurate with the yield.

Commercial properties probably offer the greatest security. In many countries residential tenants receive so much protection and preference over the landlord that one loses control of the property by renting it. In fast growing cities there is considerable upside potential in the rental rates. Some countries have some rather unique ways of renting properties.

In the USA and Western Europe, most commercial leases are on a net basis. This means the tenant pays for everything. In South America commercial leases are a fairly new phenomenon in many places. The occupant would buy a floor or half of the floor in an office building. This is changing. Most of the leases are not on a net basis now; but change is coming.

In South Korea, the deposit is often as high as the value of the property. The rent is extremely low or non-existent. The landlord can invest the security deposit and keep the return on that deposit. This could be a possible risk for the tenant.

Market knowledge and understanding of the local culture is essential in any investment.





David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
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