Of you consider buying a property overseas, you might be making one of the best decisions of your life.
The benefits of owning foreign property are numerous, especially if you are purchasing it as an investment project and the property is sure to bring good returns.
However, making this purchase won’t be easy as overseas real estate deals always are more expensive than they appear at a first glance. This means that you’ll need to do a lot of thinking and calculations before committing to this deal. Most importantly, you’ll need to find a cheap way to transfer money abroad. Otherwise, the cost of the transfer itself will take out a large part of any prospective revenue you can make off the property.
Extra Costs to Keep in Mind When Buying Property Overseas
The first thing you should think of when you decide to purchase property abroad is how much it will cost you. The actual price is only a fraction of this cost because there are also a variety of expenses that you won’t be able to avoid. These include:
- Attorney’s fees
- Dedicated accountant’s fees
- Local taxes
- Taxes in the country where you buy the property
- Real estate agent’s fees
- Document preparation and other set legal fees
Note that this list can increase depending on the laws of your own country as well as the one you choose to invest in. These factors will also determine how much these extra costs will amount to. But you should be prepared to pay way over 1-2% of the property’s price.
Note that in some cases, non-residents have restrictions on buying properties. For example, if you want to buy a property in Mexico, it might be necessary to set up a trust in order to pay for it. This alone can cost you several thousand. That’s why you need to choose the location for your real estate investment very carefully as it will have a major impact on the profitability of this venture.
The Role of Currency in Overseas Real Estate Investment Costs
There is another major expanse, which often goes overlooked by people seeking to buy a property abroad. However, it has the power to render a deal that might seem good into a total loss. This factor is currency.
To pay for a property abroad, you’ll need to transfer a large amount of money to a foreign bank. This means that you will have to not only pay transfer fees but also lose some (most likely a lot) of money on currency exchange. The majority of the world’s countries only allow such deals to be paid for in their local currency, so there is no avoiding that.
Adding money transfer fees charged by banks as well as popular companies like Western Union or MoneyGram to the losses incurred by currency exchange fees and rates can result in you paying up to 3% of the total transfer amount. If you choose a wring bank, the number can climb even higher.
Considering all other additional expenses that go into purchasing a property abroad, these added currency costs can make it a doomed project. At least this is how the industry used to work, which is the reason why until recently only the richest could afford to purchase overseas real estate.
However, modern technology changed this situation effectively removing one of the biggest costs that made such deals unviable. The solution to this problem came in the form of online currency exchange platforms, which are so effective that the leading money transfer providers today are growing at an unprecedented rate. These companies make formerly expensive overseas money transfers not only affordable but also fast and efficient.
As a result, today anyone with a moderate capital can purchase a property overseas. Whether you buy it as a vacation or retirement property for yourself or as an investment to be rented out or fixed up and resold for profit doesn’t matter. What matters is that with these online money transfer services you can make large transfers without losing up to 3% of the money.
In fact, with some of the leading providers, this transaction can end up costing you less than 0.5%. This is the exact price you’ll need to pay if transferring up to £500,000 a year with WorldFirst as per the company’s new pricing. And if the amount you pay is higher, the cost will get even lower. As this market is extremely competitive, you can expect to see other providers trying to offer even better terms, thus creating more opportunities for those wanting to purchase real estate abroad.
Benefits of Using Money Transfer Companies When Investing in Overseas Real Estate
There are many money transfer providers today that can help people who want to purchase real estate overseas because for all that these companies have different outstanding features, all of them aim to provide the lowest possible rates. Most importantly, they try to keep their foreign currency exchange rates as close as possible to the mid-market. This reduces the biggest cost of cross-border money transfers.
However, lower costs aren’t the only advantage offered by online money transfer companies. Other benefits they provide include but aren’t limited to:
- High security.
Top companies in the money transfer industry use bank-grade encryption to keep the transaction as secure as possible. As the access to your personal bank account is limited for this transfer, the risks are actually lower overall.
- Hedging tools.
Many of the leading money transfer platforms offer some hedging tools to make your international payments cheaper. For example, you can use forward contracts to secure a favorable currency exchange rate. This can be a very important benefit for someone who needs to make transfers to or from countries with volatile currencies.
- Due to the way these online platforms operate, they can provide speedy transactions, as opposed to banks that need to go through a variety of formalities. Online money transfers are easy and can be near instantaneous. The fact that you can make them using the company’s website or a smartphone app also helps you save time.
Money transfer companies like WorldFirst, Currencies Direct, and TorFX are changing the real estate industry by allowing more people to purchase properties overseas. These changes are possible because the companies make transfers much cheaper, and they keep looking for ways to bring those numbers further down. With the competition growing, these businesses come up with new ways to facilitate overseas transfers for their customers. Therefore, you should shop always shop around to make sure you get the best possible terms for your overseas real estate deal.