Investment diversification has always been a cornerstone of any successful strategy. Investing in different asset classes aligns with the famous saying, “Don’t put all your eggs in one basket.” In this context, international real estate investments can be a great addition to your portfolio.

The recent COVID-19 pandemic demonstrated how differently assets behaved in various parts of the world, further underscoring the importance of diversifying assets and locations. Investors who had already diversified before the outbreak benefited from the competitive advantage of having investments spread across multiple countries. This outcome is less likely when investments are concentrated in a single foreign nation. However, this strategy requires careful analysis of asset allocation.

But what factors should you consider to make the best decisions? In this article, you’ll discover various types of real estate investments abroad. We assume that the investor already has an account or a company set up with available funds overseas. By the end of this article, you’ll have all the insights you need. Let’s dive in!

What Are the Types of Real Estate Investments Abroad?

There are several options for investing in foreign properties, including:

● Direct property purchases.

● Participation in a company that owns real estate.

● Purchase of shares in a fund that holds stakes in companies with real estate assets.

● Investments through REITs (Real Estate Investment Trusts), which are similar to Brazilian real estate funds (FIIs).

In the case of REITs, investors receive 85% to 100% of the income generated, which may even be exempt from income tax depending on the country or legal structure used to organize the investment.

Beyond the type of operation, it’s crucial to define your investment goals. You can invest to generate recurring income (through rents from residential, commercial, or industrial properties) combined with property appreciation over time. Alternatively, you can invest in a development project aimed at selling the property after construction to capture capital gains.

Which Countries Are Most Popular for Investments?

The United States and Portugal are top destinations for Brazilian investors.

In the U.S., key markets include New York, California (notably San Francisco and Los Angeles), and Florida. Florida, in particular, stands out due to its unique appeal.
Florida boasts a population of over 21 million, a GDP of nearly $1 trillion (as of 2019), and limited space for new construction, creating lucrative investment opportunities. Cities like Miami, Orlando, Tampa, St. Petersburg, and Jacksonville are prime locations. To illustrate, Orlando attracts 60 million tourists annually—ten times the number of tourists Brazil received during the 2014 World Cup.

In Europe, Portugal presents unique opportunities with special conditions for investors. Due to historical ties between Brazil and Portugal, specific investment schemes are already in place. One example is the “Golden Visa,” which grants free movement across Europe to individuals who invest in properties over 30 years old valued at €350,000 or more. Policies like these made Portugal account for 17% of all Brazilian foreign investments in May 2019, according to a report by Estadão.

How to Invest Safely?

This is perhaps the most critical point of the discussion. Since the U.S. real estate market rebounded after the 2008 crash, poorly structured investment models have emerged, leading to penalties and fines from the IRS (U.S. Internal Revenue Service). Therefore, it’s essential to partner with reputable investment firms and collaborate with partners or associates who possess local expertise and recognition.

The choice of country is another crucial factor. Mature economies are always the best options. Unstable countries do not offer reliable guarantees of investment returns, while stable economies can generate consistent profits over the years.

Lastly, it’s vital to understand how to declare taxes on these assets in the respective countries. Tax regulations are stringent, and any non-compliance can result in hefty penalties. It’s worth ensuring everything is done correctly to avoid overlooking critical details.

Final Thoughts

Diversifying investments mitigates risks and helps create a balanced portfolio. It’s not advisable to concentrate all your assets in a single investment type, even if diversified. International real estate is an excellent choice for diversification. Just ensure you select a skilled investment advisor and opt for a mature real estate market. By doing so, you increase your chances of success!