INVESTING
How To Invest In Offshore Property
Hedge your Rands with Offshore Investing
BY NEALE PETERSEN
South Africans are fairly new to investing in property abroad. In many other countries, however, investors have been at it for decades. British investors, for example, have invested in European countries like France, Spain and Germany for years and for decades in Cyprus and Australia. Americans, on the other hand, are fairly parochial and prefer to stick to their own country.
South African investors have a great opportunity with a weaker sterling and dollar and below market value properties in the United Kingdom and United States at the moment.
‘ Location, location, location’. This is an important aspect of investing offshore, especially when you are so far away from your investment. Countries like Australia don’ t allow foreign investors to invest in existing properties – only in new developments. United States and India tend be cash only deals, while Cyprus is an excellent destination for getting citizenship in a Euro-based economy.
There is still caution in South Africa towards investing offshore. Here is a‘ How To’ guide for South African investors thinking of taking the plunge:
1Understand your underlying reasons for investing offshore It is important to have a proper strategy in place before you invest offshore. Your reasons should be very clear. Reasons such as diversifying your portfolio may not be strong enough, as it could lead to‘ deworsifying’ if you don’ t know what you are doing. Specialising rather than diversifying is a better strategy. Lifestyle reasons, retirement, emigration, permanent residency or maximum return on your investment are other reasons for investing offshore. Make sure you have clarity on yours.
2Recruit an independent advisor It is not necessary to visit the country before you invest, however, if you are planning on buying below market value( BMV) properties or one in an area you have little information on, then it probably will be necessary to either visit the country and the property yourself, or at least have somebody trustworthy who can do investigations for you on that specific property and location in that country.
3Research the country you investing in Make sure you do proper homework on the country you plan investing in. When buying or selling a property offshore, learn about the country’ s economy, political environment, and, most importantly, its legal system.
4Investigate the best financing options A lot of countries such as the United States are not granting finance to foreign investors, while others nowadays require up to 50 % deposits. Since the financial crisis and the glut of distressed properties, cash is king. You will also need a foreign bank account to transact for rates, taxes, levies and property manager commissions, solicitors fees, etc.
5Research the property Understand pricing as it varies from country to country as well as province or state. Know what the average values are and where you can maximize value as an investor. Understand the rental yields that a property can offer as well the capital growth. The lower you buy now the better return you can get.
6Verify the title deed In South Africa, we have a fairly sophisticated title deed process and system. It is important that you get both the correct legal advice on your property title deed, as well as confirmation that you are in fact the legal owner of the property.
7Purchase property in a legal entity It is more advisable to purchase a property offshore in a legal entity such as a company, trust or corporation. Transacting is far easier this way, especially if you are renting out the property.
8Understand the cash flows Understand all the income and expenses as well as any tax that you may be liable for when buying or selling the property. Also understand what is tax deductible and what is not. In a country like New Zealand, there is no capital gains tax, no land tax or stamp duties and no financial transfer taxes or wealth duties.
52 FEBRUARY 2017 SA Real Estate Investor www. reimag. co. za