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OS HomesA STRONG Australian dollar and the weak US housing market mean a growing number of us can afford to invest in overseas property, but the risks can be high.

Steve McKnight, author of From 0 to 130 Properties in 3.5 Years, says if you have “time, money and risk appetite”, investing overseas holds potentially lucrative opportunities.

“On the other hand, Australian property, although less glamorous, is an easier and safer option for more passive investors or those looking for capital growth,” he says.

McKnight, who has bought more than 50 properties in the US over the past 18 months, says one of the main risks is currency fluctuations.

“When buying overseas property, you must pay with foreign currency,” he says.

“The risk is that you suffer an adverse currency movement as exchange rates change, resulting in a loss because you will receive less Aussie dollars back than you sent over.”

He says potential investors should always travel to the country in which they’re considering investing to get a feel for the area and create a trusted “on-the-ground” management team’.

“Your overseas team needs to be your eyes, ears, arms and legs,” he says.

Mortgage Choice broker and franchisee Russell Crook says potential overseas property investors also need to be familiar with local laws.

He says in some countries foreigners aren’t even allowed to own property, and titles can also work very differently in many places so uninformed investors may find themselves leasing a property rather than owning it outright.

Crook also suggests getting local, independent legal advice.

“The other factor is simply that no mainstream lenders in Australia will lend against the property you’re purchasing in another country,” he says.

Crook says potential investors can borrow against a property they own in Australia and use that money to buy overseas. But if they can’t raise enough they may have to borrow in the country in which they’re investing which poses even more risks.

AMP financial planner Mark Borg says that when investing in places like the US, where councils and rental tribunals function completely differently than in Australia, it is vital people are familiar with all legislation that impacts them.

He says insurance products are also vastly different in the US, and there will be tax implications involved with earning money in another country. “Different country, different laws it’s all just different,” he says.

Borg says with all the added risks, investors should expect high returns from an overseas property purchase. But he says they need to accept that most things will be different.

“You can then pay the money to seek advice and take appropriate action and sometimes the best decisions are not to go ahead,” he says.

Story by Nhada Larkin http://www.heraldsun.com.au

Tags: investment, overseas, property, real estate

View the original article here

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