Property deals in America that come at a reduced price may seem unreal when compared to the high prices experienced in Australia, however, does it make sense to invest in a property that is located thousands of miles away from home or is it just a shrewd way for people to lose money?
It is not always that case that money will be lost, especially if people carry out the right research and in some instances luck is on their side. For those buyers who do not carry out the right due diligence or are not aware of the rules and regulations set by the country that they wish to purchase in could face problems.
As an example, the US and UK have inheritance tax which means that should a homeowner pass away the beneficiary could end up having to pay a high tax bill of up to 40% of what the property is worth.
Getting the right advice is crucial because there are a lot of costs involved and if people are not aware of what questions they should be asking then they can end up in trouble.
For those properties that have a low price, those who are looking to purchase should understand whether the returns are really worth the time and money that will have to be spent to carry out due diligence. There are also foreign ownership restrictions that have to be looked so that the investor is not purchasing a property that they should not own.
One large risk is the change in foreign exchange rate which at times can alter dramatically. One way to make it safer is to purchase in the currency of the country through opening an account there, but for those making a first time purchase this can be difficult.
Bali Realty which is owned by an Australian has seen its client base increase to the point where 75% of it is made up by Australians looking for overseas property investment. They are often visitors to Bali on a regular basis, spending on average around 4-6 weeks there and then looking to see a return on their investment for the remainder of the year via holiday rentals. In Indonesia, it is not legal for foreigners to own a freehold property title but they can purchase a long-term lease which can range from 25-35 years. This still entitles the owner to the same rights and they are able to sell the property whenever they wish, they can also expect to see an increase in the value of their property.
In Bali, the returns from rental properties are usually higher than Australia, which is around 6-10% new after all costs. However, many people are not aware that Indonesian banks will not lend money against a property that is leasehold.
Legal advice should be sought after, which will help investors to avoid making mistakes and losing money.
IMAGE: Bali property (Epstock/Shutterstock.com)