Tuesday 19 November 2019
It’s no secret that Aussie property prices are sitting pretty high when compared to other markets overseas, leading some investors to broaden their horizons and scoop up properties internationally instead.
According to Dream Design Property (DDP), investors are opting for foreign property markets over local ones in search of higher capital gains and stronger rental yields. Whether it’s in the UK, Europe or the USA, investors are looking at cities abroad to find lower median house prices with potentially bigger returns.
For example, DDP found cities like Manchester, Berlin and Orlando were among the most affordable in 2019 with median property prices ranging from AUD$299,000 to AUD$575,000, and rental yields between 5.7% and 7.3%.
But with investing in property overseas comes the effort of sending and receiving money internationally, whether it’s putting down a deposit, paying off your mortgage or receiving regular rent payments. So here are a few things to get under your belt to ensure you get the biggest bang for your buck out of your investment property overseas.
When buying a property overseas, you are likely to face costs like a house deposit and mortgage repayments, meaning you’ll need to send money abroad. While it may seem convenient to use your current bank to do this, usually it isn’t the most financially savvy option.
Banks often charge higher fees on international money transfers and may not offer the most attractive exchange rates either. And if you’re making regular payments these costs can really add up. This is where foreign exchange specialists generally have the upper hand, as they tend to charge lower fees and offer more competitive exchange rates so that your hard earned cash doesn’t get swallowed up as it travels overseas.
Here are some key things to look out for when considering an international money transfer:
RELATED ARTICLE: How to send money overseas with minimal transfer fees
Being on the receiving end of an international money transfer often means that the way the money gets to you from overseas is out of your control. But being in the know about the options out there can be useful, especially when advising your overseas renters on how to make their weekly, fortnightly or monthly payments to you.
Paypal: Getting your renters to pay you via Paypal could be a solid option, and it’s completely secure. Just bear in mind, there is a recipient fee of 5% of the sent amount, meaning you’ll get charged for receiving money. Plus, both sender and recipient must have an account with Paypal to send funds to each other.
Bank account to bank account: Transferring money overseas via a bank account usually isn’t the cheapest option, so if your overseas renter is sending you payments through their regular account it will likely affect how much you end up receiving, or end up costing them more. You are also likely to be charged a recipient fee by your bank, which could be as high as $35.
IMT to bank account: If your renters pay you via a foreign exchange specialist, they are likely to get a sweeter deal on exchange rates, pay less fees and may even be able to lock in an exchange rate, meaning you receive more from the transfer. Have a dig around, there’s likely to be something to suit your situation, just remember that the sender has to sign up to the IMT specialist you choose to have access to the benefits.
RELATED GUIDE: Renting a property overseas
Before you jump into buying an investment property overseas, there are three key things to familiarise yourself with.
1. Know the market
Getting to grips with the local property market you intend to buy in is crucial so that you know what you’re getting into. Whether you need to do your own research or get local advice, it’s useful to familiarise yourself with local property prices and the property buying process in the area.
2. Learn the rules
It’s important to know both the rules overseas and here in Australia when it comes to own a property abroad. Make sure you disclose the rent you receive from your overseas property on your tax Australian return, as it falls under your worldwide income that must be taxed under Australian law. In some cases though, if you are already being charged in a particular country the ATO may waive your tax requirements. There are also likely to be rules in the country you intend to buy in - whether that’s local property tax, insurance or fund exchange control requirements. Rules differ from place to place, so don’t assume that everything works in the same way that it does at home.
3. Stay on top of the exchange rate
Whether you buy a property in the US or somewhere in Europe, it’s likely you’ll be putting down a deposit or receiving rent in the local currency. So staying on top of the exchange rate is really important, as it ultimately affects how much you’ll receive or have to pay in Aussie dollars initially. It could also mean that you’re prepared in case there are rate fluctuations at any point in time.International money transfer tips