When buying real estate outside your country of residence, the first and most important question to ask yourself is: Why am I buying this property?
The answer to this question will determine the type of property, location, budget and management strategy best suited to your needs. Do you want to generate rental income and build wealth, or are you looking for a vacation home for family and friends – a place to serve as a second or third home? Let’s break it down in more detail.
1. Buying for investment: Focus on income and depreciation
If your main goal is to earn a return on investment, you should choose a property that offers:
– High rents to generate a steady income.
– Potential for capital appreciation over time.
– Good occupancy rates due to location, tourist or business demand.
Key questions for investors:
1. What is the demand for rentals?
Locations with high tourist traffic or business activity often attract more tenants.
2. What is the average rental yield?
Look for markets where rental yields are at least 6-8% per year to cover expenses and make a profit.
3. Is the property easy to manage remotely?
You may need a local property management company to handle reservations, maintenance, and tenant relations.
Ideal types of real estate for investors:
– Apartments or condominiums in tourist centers (e.g. Bali, Phuket).
– Villas for short-term rentals in vacation destinations.
– Commercial real estate in urban centers.
Pro tip: When investing overseas, consider properties with flexible ownership structures (e.g. freehold or leasehold) that fit your investment timeframe. Also, research the tax implications and make sure there is a local management solution in place to optimize operations.
2. Purchases for personal use: Lifestyle and convenience orientation
If the property is primarily for personal recreation, your priorities are likely to be different. A vacation home should offer comfort, location, and amenities that fit your lifestyle. It should be a place where you can relax and unwind, whether on vacation or for extended periods of time.
Key issues for buyers in personal use:
– How often will I use the property?
Frequent visits justify more of a personal investment, while irregular visits can be beneficial in renting out the property when not in use.
– What amenities or features do I need?
Do you need proximity to beaches, entertainment centers or cultural attractions? Do you need extra guest rooms or personal space for work?
– Is the location convenient for traveling?
Choose a location with good air service and convenient local infrastructure.
The perfect type of property for personal use:
– Villas or apartments by the sea in picturesque areas.
– Houses in quiet suburbs for longer stays.
– Serviced apartments that offer hotel-like amenities.
Pro tip: Some buyers choose to rent out their vacation home when they are not using it, allowing them to offset the cost with rental income. In such cases, it’s important to find a location with year-round demand.
3. Hybrid Approach: The Best of Both Worlds
Many buyers choose a hybrid approach – purchasing a property that they can use personally for part of the year and rent out the rest of the time to generate income. This approach provides both financial gain and lifestyle flexibility.
Key questions for a hybrid strategy:
1. What is peak rental season?
Combine personal stays with the off-season to maximize rental income.
2. Who will manage the property when I’m not home?
A reliable management company will be needed to handle guest relations, reservations and maintenance.
3. How does the property structure support rentals?
Make sure the property type and local laws allow for short-term or vacation rentals.
Ideal property types for a hybrid strategy:
– Vacation villas with easy rental management options.
– Apartments in tourist destinations with flexible rental programs.
– Timeshare properties or serviced apartments with rental agreements.
4. Location is everything: choose a strategy
Whether you are buying a property for investment or personal use, location is one of the most important factors. Consider the following when choosing a location:
– Tourist Attractions: Properties near beaches, cultural attractions or entertainment centers attract more visitors.
– Infrastructure: Access to airports, hospitals and transportation networks increases property value.
– Market Trends: Invest in emerging markets such as Bali, Phuket or Georgia where property values and rental yields are increasing.
Pro tip: Properties in an emerging market may offer higher yields, but properties in a well-developed region provide stability and consistent rental income.