Dateline: Tbilisi, Georgia
In today's world, everyone is curious to know which country is the "best" for real estate investing. While this question is frequently asked, the answer is not as straightforward as it may seem.
As I observe my current real estate ventures in the beautiful country of Georgia, I can't definitively claim that it is "the best." In fact, I wouldn't say that any country is unequivocally the best.
To do so would not only be dishonest but also unfair to you.
Having real estate properties in various locations around the world, from the United States to Cambodia to Montenegro and more, I can attest that what suits me might not necessarily be the best fit for you.
Through years of personal experience in emerging, frontier, and developing markets, I have developed a formula that aligns with my needs and requirements for real estate investing. However, I always strive to provide guidance to the readers of Nomad Capitalist as well. Hence, today, I am here to answer the question: "What is the best country for real estate?"
My response may surprise you. Instead of naming specific countries, I want to answer your question with seven questions of my own.
There are seven crucial questions that you should ask yourself, considering your personal preferences and situation when it comes to real estate investing. By honestly answering these questions, you will discover the best country for your real estate investments.
I understand that some people don't appreciate being asked these questions. We are accustomed to receiving instant answers. However, just like in medicine, where diagnosis precedes prescription, foreign real estate investing also requires proper assessment.
My success in various property markets worldwide is deeply rooted in this formula. Let's explore the questions you need to consider:
1. Who Are You and What Do You Want?
This question revolves around understanding your objectives as a real estate investor. What are you aiming to achieve by investing in real estate in a foreign country?
There are different types of investors with unique real estate needs, such as hardcore investors, new investors, or individuals seeking to safeguard their funds offshore. It is crucial to identify your needs to narrow down your options effectively.
For instance, you might aim to protect a significant sum of money through offshore investing or seek a foreign real estate market that promises substantial profits. Alternatively, you may want to be prepared in case of emergencies in your home country, ensuring your funds are secure outside its borders.
Consider the example of Indian citizens who melted down their gold to jewelry and wore it out of the country when the Indian government forbade the export of gold and cash. They understood the importance of investing their gold abroad to safeguard their wealth.
Real estate can serve as a backup plan in case of unforeseen changes in your home country.
2. Where Do You Want To Be?
It is essential to determine your desired location when considering the best country for your real estate investments. What is at stake for you?
One of my acquaintances had $250,000 to invest and was adding to it every month. Yet, it was sitting in a bank earning a meager 3% interest while he aspired for a 10-15% return.
Many people find themselves in a similar situation, including myself. It is crucial to assess the financial loss incurred by not being where you want to be.
For instance, if $250,000 invested at a 12% return yields an additional $30,000 annually, the loss over a decade would amount to $300,000. This discrepancy can significantly impact your financial situation, making it essential to seek guidance from experts who ask the right questions instead of simply offering generic solutions.
3. Yield or Appreciation?
Deciding whether yield or appreciation is more important to you is vital when exploring real estate opportunities in foreign countries.
You may be a traditional investor looking for properties that appreciate over time. Alternatively, you might prioritize cash flow, regardless of the property's potential appreciation.
For instance, certain cities in the US Rust Belt offer high yields of 20%, 30%, or even 40%. I invested $50,000 in a property in this region myself, as it provides a 41% gross yield and a 29% net yield.
On the other hand, countries like Montenegro, Cambodia, Malaysia, and Georgia offer properties with significant potential for appreciation. I have personally experienced appreciation in these markets, with some properties already receiving offers 20% above the purchase price.
While it is possible to achieve both yield and appreciation in real estate investing, it is essential to define your financial goals clearly. Focus on one aspect at a time to maximize long-term benefits.
4. What Are Your Concerns?
Investing your money inevitably raises concerns. Before deciding on a country to invest in, it is crucial to address your worries honestly.
Do you fear a potential real estate market bubble in the US or China? Are you concerned about frontier markets and the rule of law? What if a dictator disrupts your investment?
For example, investing in Cambodia, a frontier market, offers tremendous opportunities, but it may not appeal to everyone. My father, a savvy investor himself, is apprehensive about investing in Cambodian real estate due to his past experiences during times of conflict.
By identifying your concerns, you can eliminate options that do not align with your risk tolerance and preferences. If frontier markets make you uneasy, eliminate countries like Cambodia from consideration. It is better to eliminate options than face the stress of a decision you may regret.
If you seek substantial appreciation and have a higher risk tolerance, developing markets may offer profitable opportunities.
Similar to hiring people, when faced with a hundred resumes, it is prudent to discard those candidates who are clearly not suitable, simplifying the decision-making process.
5. What's Your Learning Curve?
Assessing your knowledge of real estate and your willingness to be involved in property management is crucial.
While Georgia presents a beautiful destination for real estate investment with attractive appreciation and cash flow potential, there are limited property management services available in the country.
To succeed in Georgia, I spent time educating myself about the market and actively participated in my investments. Although it is possible to purchase new expat properties and engage an agent for renting, it often involves a trade-off between appreciation, cash flow, and convenience.
To invest in Georgia or similar markets and expect US-level quality, one must be prepared to put in more effort. The higher yields offered in these markets often demand more work from the investor.
Lack of awareness about foreign markets can lead to disappointment. Many turnkey investments promoted at offshore conferences turn out to be less lucrative than advertised. Therefore, it is crucial to seek guidance or conduct thorough personal research to make informed decisions.
6. How Much Money Do You Have?
This question holds significant importance. Your available capital determines which country is the best fit for your real estate investments. Investing in a high-priced penthouse in New York City might not be feasible if you have limited funds.
For instance, someone I met in Cyprus shared that his friend bought a flat in Amsterdam for €11,000 per square meter, which is the standard price for small accommodations in that area, amounting to $300,000-$400,000.
In contrast, instead of spending a million dollars in Amsterdam, one could invest in Cambodia or Georgia, assist in developing a small building, and potentially double their investment within two years, sharing the profits.
Even individuals with $50,000 in investment funds can explore options in dumpy US markets or target frontier markets like Georgia and Cambodia. However, such investors need to be cautious to avoid overpriced properties.
It is essential to be aware of opportunities others might miss. For instance, my friend Reid buys properties at one-fourth to one-fifth the price of new constructions, reselling them to eager Chinese buyers. Staying informed and exploring the local market with the eyes of a local can lead to better investment decisions.
7. Do You Want Additional Flags and Passports?
Lastly, you must evaluate your desire to leverage real estate investments to obtain a second passport or establish other important connections.
For instance, Turkey offers a second passport to foreign investors investing $1 million in real estate. If you seek swift dual citizenship, Turkey might be the ideal country for your real estate investments.
Alternatively, if your goal is to obtain a second residence within the European Union, various EU countries offer "Golden Visas" to real estate investors.
Moreover, purchasing property in countries like Malaysia grants you the right to open a bank account, whereas it might be challenging otherwise.
Strategic planning allows you to diversify your assets while leveraging real estate investments to obtain multiple benefits.
In conclusion, there is no one-size-fits-all answer to the question of the best country for real estate investing. However, for me, the best country is one that is welcoming and does not pose unnecessary hurdles. If you need assistance in finding the right market for your real estate investments, feel free to reach out.
