You've just got to do it ...
People are amazed that we've purchased a property in Europe, specifically Italy. When we ask them about their consternation, the usual replies include something about either risk or difficulty (or both). I thought I'd give you my feelings on these concerns.
But, I must add that these are often the same people who would buy a timeshare in Mexico or some Caribbean country. I'll explain why they see their decision as "no risk" later.
There are a few types of risk to consider, I guess. The blatant "I've been ripped off!" result of risk and the "I (believe I) lost some money!" result of risk. Both of these types of risk can be mitigated by research and information. Get on the Internet and do your research. It's that simple. Understand property ownership laws in the country you have interest in. Read about what others have done. Join message boards and discussion groups and ask questions. Travel and work with a real estate agent in your country of choice and just look (as in don't buy). Buy books on the topic, or at least check them out at your local library. Pick up real estate newspapers in the areas you are interested in and study them. Ask locals what they think about your ideas, what they would do if they were you, and whether you are getting a good deal. Do all of this with multiple sources for each topic. Do not just take the word of one person who can speak English if you can't speak the native language. Take your time. Remember, all good things come with time. Make a quick decision and you'll be disappointed.
I contrast this to finally taking the plunge once you've done all the research ... in an "OK, here we go!" way. You may feel like you've made a knee jerk reaction when you actually haven't. It's a big decision. Here's a suggestion. Weigh the pile of pictures, brochures, and newspapers you've collected during this search. If they total 10 pounds or more, you've done your homework. Good for you. Go for it!
Assuming you feel comfortable with the land registry system (to protect your ownership interest) and that you're getting a fair deal, the "I lost some money!" risk should be considered. This is a bit more complex with a foreign property because there is both supply/demand risk, as well as currency fluctuation risk.
The supply and demand risk is no different in foreign lands than it is here. Look at historical sales prices, figure out if the market in your chosen area is at a peak or a trough. See if prices have held steady, dropped, or gone up. In other words, do your homework here too. Try to determine if the area is growing in popularity (for any reason), or not.
If you're planning on keeping your foreign property in the family for a long time, as we are, the currency fluctuation risk is less important. However, if you feel this may not be a "forever" transaction, the potential currency fluctuation (our dollar's value vs. the value of the foreign currency) is something important to consider.
In our situation, we feel good that we now have more of our portfolio invested in Euro instruments (in this case a property). The dollar vs. Euro rates have swung wildly over the past few years. Where we once could buy Euro for around $0.85 (and it was for a long time that we could do this), we've seen it go higher than $1.30. Today, it trades at around $1.23. If you'd bought a E200,000 property at the lower exchange rate ($0.85) and sold it today at a break even in terms of Euro (meaning you sold it for exactly the price you paid, E200,000), you'd have paid $170,000 for it and sold it for $246,000. You would have made almost 45% on the exchange rate alone (if my math is correct)!
Of course, the converse is also true!
The good news is that if this is a "buy and hold" situation, exchange rates always seem to ebb and flow over time. It may be a long time (10 years+), but it seems to happen this way as almost an indisputable fact of life.
Now, back to my time share friends. I believe they feel safer with a time share investment in Mexico or the Caribbean than they would with an Italian property like me, solely because of the difficulty factor.
Most time share operations will deal with them in English, may even be US companies with properties in Mexico or the Caribbean, and just plain make life simple so they can separate people from their money. In Italy, and elsewhere, this becomes a challenge. I took a number of years to learn the language well enough to read business documents without the need for a translator. It's not as straightforward as dealing in English, but it can be done.
There is also the distance factor that makes things a bit more difficult with a European property vs. Mexico or the Caribbean. Sure, it's a day's trip to Europe no matter how you slice it, vs. a few hours to Mexico or anywhere in the Caribbean. It requires more planning, and costs more (in most cases).
The trade offs are numerous. I would not consider Mexico or any Caribbean country as safe or as stable as Italy, Spain, France, or any other EU country. They may be closer, but that doesn't mitigate the risk you're assuming.
After all the study and thought, you just need to pull the trigger at some point and realize that to have your dream, you need to act. You've just got to go do it. Too many people dream of this, yet are afraid to act. The worst that can happen, if you've done your homework, is you lose a little money on a resale ... that should be the absolute worst case ... if you've done your homework!
Good luck with your decision. If I can help in any way, please let me know.
Ciao ... Marco
But, I must add that these are often the same people who would buy a timeshare in Mexico or some Caribbean country. I'll explain why they see their decision as "no risk" later.
There are a few types of risk to consider, I guess. The blatant "I've been ripped off!" result of risk and the "I (believe I) lost some money!" result of risk. Both of these types of risk can be mitigated by research and information. Get on the Internet and do your research. It's that simple. Understand property ownership laws in the country you have interest in. Read about what others have done. Join message boards and discussion groups and ask questions. Travel and work with a real estate agent in your country of choice and just look (as in don't buy). Buy books on the topic, or at least check them out at your local library. Pick up real estate newspapers in the areas you are interested in and study them. Ask locals what they think about your ideas, what they would do if they were you, and whether you are getting a good deal. Do all of this with multiple sources for each topic. Do not just take the word of one person who can speak English if you can't speak the native language. Take your time. Remember, all good things come with time. Make a quick decision and you'll be disappointed.
I contrast this to finally taking the plunge once you've done all the research ... in an "OK, here we go!" way. You may feel like you've made a knee jerk reaction when you actually haven't. It's a big decision. Here's a suggestion. Weigh the pile of pictures, brochures, and newspapers you've collected during this search. If they total 10 pounds or more, you've done your homework. Good for you. Go for it!
Assuming you feel comfortable with the land registry system (to protect your ownership interest) and that you're getting a fair deal, the "I lost some money!" risk should be considered. This is a bit more complex with a foreign property because there is both supply/demand risk, as well as currency fluctuation risk.
The supply and demand risk is no different in foreign lands than it is here. Look at historical sales prices, figure out if the market in your chosen area is at a peak or a trough. See if prices have held steady, dropped, or gone up. In other words, do your homework here too. Try to determine if the area is growing in popularity (for any reason), or not.
If you're planning on keeping your foreign property in the family for a long time, as we are, the currency fluctuation risk is less important. However, if you feel this may not be a "forever" transaction, the potential currency fluctuation (our dollar's value vs. the value of the foreign currency) is something important to consider.
In our situation, we feel good that we now have more of our portfolio invested in Euro instruments (in this case a property). The dollar vs. Euro rates have swung wildly over the past few years. Where we once could buy Euro for around $0.85 (and it was for a long time that we could do this), we've seen it go higher than $1.30. Today, it trades at around $1.23. If you'd bought a E200,000 property at the lower exchange rate ($0.85) and sold it today at a break even in terms of Euro (meaning you sold it for exactly the price you paid, E200,000), you'd have paid $170,000 for it and sold it for $246,000. You would have made almost 45% on the exchange rate alone (if my math is correct)!
Of course, the converse is also true!
The good news is that if this is a "buy and hold" situation, exchange rates always seem to ebb and flow over time. It may be a long time (10 years+), but it seems to happen this way as almost an indisputable fact of life.
Now, back to my time share friends. I believe they feel safer with a time share investment in Mexico or the Caribbean than they would with an Italian property like me, solely because of the difficulty factor.
Most time share operations will deal with them in English, may even be US companies with properties in Mexico or the Caribbean, and just plain make life simple so they can separate people from their money. In Italy, and elsewhere, this becomes a challenge. I took a number of years to learn the language well enough to read business documents without the need for a translator. It's not as straightforward as dealing in English, but it can be done.
There is also the distance factor that makes things a bit more difficult with a European property vs. Mexico or the Caribbean. Sure, it's a day's trip to Europe no matter how you slice it, vs. a few hours to Mexico or anywhere in the Caribbean. It requires more planning, and costs more (in most cases).
The trade offs are numerous. I would not consider Mexico or any Caribbean country as safe or as stable as Italy, Spain, France, or any other EU country. They may be closer, but that doesn't mitigate the risk you're assuming.
After all the study and thought, you just need to pull the trigger at some point and realize that to have your dream, you need to act. You've just got to go do it. Too many people dream of this, yet are afraid to act. The worst that can happen, if you've done your homework, is you lose a little money on a resale ... that should be the absolute worst case ... if you've done your homework!
Good luck with your decision. If I can help in any way, please let me know.
Ciao ... Marco
posted by Mark Pukita | 11:01 AM
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