Updated: Feb 12, 2022
Where to start is often the biggest hurdle for most people. But once you have guidance you can begin with desktop research to narrow down your areas of interest. This post will cover high level considerations for selecting a geographic area.
Start with You.
Should you invest overseas or at home? Many people will by default purchase their first property in their home town where they are familiar with the neighborhood and local market usually as a homeowner. But when you view property through the lens of investment, factors such as the return on investment and property prices naturally affect where you purchase and investing abroad can offer attractive prices and returns compared to those back home. Ultimately though, real estate investing is a journey and choosing where you invest depends on more than just numbers.
Firstly, consider whether you personally love travel or have an affinity for a particular country. Although technology continue bring down barriers, secondly it is important to consider how much you know about a particular market and how accessible it is to you. Having contacts in your city of interest is a great start but remember you will likely need to spend time over there yourself so its best to pick places you love to visit.
Country specific considerations
Once you have some places in mind, it is important to understand the macro environment of the region as it will affect how your property will perform over the period you hold the investment. Some things to find out about your locations of interest at this stage are:
1. Economic - Does the country have a stable economy with stable growth, employment rates, population growth, interest rates and foreign exchange rates?
2. Political - Does the country maintain a hospitable climate for outside investment. Even if a country's economy is strong, if the political climate is unfriendly (or becomes unfriendly) to outside investors, the country may not be a good candidate for investment.
3. Environmental - is the region prone to extreme weather, air and water quality issues or natural disasters?
Countries which are politically and economically stable usually have markets which overseas investors are already active in. They carry lower risk, are safer investments and political considerations are less important. The local economy and market cycles is what affects the performance of investments and will need to be looked into. Examples of developed markets include the United States, Canada, France, Japan, and Australia.
Emerging markets on the other hand are characterized by high levels of economic growth which can sometimes translate into high returns on investments. However, they tend to be riskier due to political uncertainty, unexpected changes and their economies may be more prone to booms and busts. Many of the fastest-growing economies in the world, including China, India, and Brazil, are considered emerging markets. Check for travel advice and warnings before making travel plans.
The best locations to invest in typically have job growth, population growth and affordability. When you find a location ideally within a stable region which that has all three, you’ll probably be able to find good investment opportunities for both cash flow and appreciation.