Most buyers looking at property opportunities abroad are full of confidence. The relatively affordability of land, ground floor development deals and desirable locations provides strong motivation and they feel sure they'll be able to get a good deal. After all, they've bought property successfully in the US. They know how real estate markets work.
Trouble is – things are a little different in many international markets. If you apply the same real estate investing strategies as back home, you may inhibit yourself from getting a great property deal. And the likely hood of you knowing your about to make a mistake is pretty slim when dealing with international real estate deals.
5 International Investing Mistakes To Avoid
Mistake 1: Buying a Vision; not Reality
You stand in awe of the glossy rendering. You count out the 18 holes of the golf course on the master plan in front of you. You imagine having a massage at the planned “Wellness Center” to ease out those golfing-induced knots in your shoulder. You start to schedule monthly visits to your vacation home. After all when the new road gets built it will only take an hour to get to your property from the airport …
Hold on a moment. You're about to buy the developers vision of what their project may look like in the future. You've looked past the current reality. Look around. How much of the proposed master plan has actually been completed? Take a worst case scenario and ask yourself how much your vacation property will be worth if the golf course never gets built, the wellness spa never opens and the road from the airport is never paved?
The Fix: Buy only what you can actually see and touch. Don't pay the price for what your property may be like in the future, if all goes well.
Mistake 2: Catching a Case of Land Fever
Land fever … sunshine fever … we've all had it at some point in our international investing careers. I mean how can you not feel that tingle of excitement when you compare the prices with back home? The anticipation of ownership builds, you see other people hunting down the deals, and suddenly you find yourself caught up in a panic fueled land grabbing frenzy. After all they're not making any more beachfront are they?
The Fix: Slow down. Realize that you've let your emotions take over. Start to engage your head. Let the facts, hard data and dry mathematics drive your investing strategy, not hype and raw emotion.
Mistake 3: Only Viewing Real Estate with One Agent
This may work in the US where agents are tapped into the MLS – effectively a giant shared database of properties for sale on the market. But in many international markets, MLS type databases do not exist. Instead, each agent maintains his or her separate, private listing database. So by limiting yourself to one agent you are unlikely to see all there is for sale.
It's also important to realize that in many emerging markets anyone can sell real estate. So yes, this means chasing down a listing given to you by your hairdresser or going on a detour to see a property with your taxi driver.
The Fix: Book a property viewing with every active real estate agent in your market. Then spread the net even further and tell everyone you meet that you are in the market for a property.
Mistake 4: Not Getting Good Legal Advice
I've seen buyers purchase property without an attorney. I've seen them agree to use the seller's attorney or the real estate agent's attorney. I've seen them hire attorneys they are unable to communicate with due to a language barrier. These are all big mistakes that can create problems down the line.
You must have the title researched by an independent attorney who is representing your interests before you purchase in any international real estate market. Title insurance is not a requirement in many countries, but I'd strongly recommend it. The process of applying for title insurance will force your attorney to dig deeply into the title history of your proposed purchase. Insurance is typically inexpensive at a cost of around 1% of the insured amount.
The Fix: Hire a competent independent attorney to conduct your due diligence and back this up by applying for a title insurance.
Mistake 5: Not Leveraging the Current Buyers Market
The financial crisis has been tough on many international real estate markets. Inventories are high and the gap between asking prices and sales prices has widened considerably since 2008. Use this to your advantage. Remember that many sellers like to keep their ‘official' prices firm but will offer incentives on the side. It means they can lower their prices without actually lowering their prices.
The Fix: Negotiate hard, especially if you are a cash buyer. The market is advantageous to buyers so use that to your advantage.