International real estate investment can be a particularly interesting possibility because it has several advantages.
Purchasing real estate abroad can help investors significantly boost their assets significantly by taking advantage of the economic boom in certain particularly favorable geographical areas. In addition, owning several properties in the world offers the opportunity to live in a more cosmopolitan way and to discover different ways of life. This form of transhumance, similar to writers (such as Hemingway), provides a much more enriching experience than tourism.
Acquiring different properties around the world can be part of a specific heritage strategy. Indeed, owning a villa in France on the Côte d'Azur benefits from legislation that secures its owner. In this case, it enjoys a stable monetary (in the euro zone) and political situation. However, if the owner is seeking to generate higher income (with rental) or create added value (because of his or her taxation), he or she will have to choose another geographical location. This choice depends above all on the tax situation of the latter, which must be carefully analyzed. For example, Belgium has launched an information campaign on the property situation of its citizens outside its borders.
Beyond the simple practical aspect, the cross-border acquisition strategy can create several effective leverage effects. Instead of injecting its capital into this type of investment, the loan provides a guarantee and financial flexibility.
If the acquirer chooses to purchase using its own funds, it immobilizes part of its resources over a minimum period of three to five years. This amount could be used to finance other investments that preferably require cash (business capital investments, security deposits). Sometimes, too low a debt level slows down the growth of its assets, which is why most experts recommend borrowing for real estate investment.
To this end, various financial mechanisms support investors in their acquisition projects. For example, the grouping of credits, proposed by many companies such as Solutis, multiplies the financing options for the acquisition of a property anywhere in the world, provided that the first one is owned in France.
The consolidation operation aims to finance two housing units if a first loan exists. This financial project can be used to secure a second property by incorporating the financing of the grouping of a first habitat. In general, the bank requests a mortgage or the pledge of life insurance to cover itself in the event of default. Taking into account the first home’s market value reduces the risk from the bank’s point of view, which helps to reduce the resulting hedging costs.
Since September 2016, interest rates have been falling to a historically low level. This situation seems beneficial to those who rely on credit to take advantage of its leveraging effects. The interest in taking out a loan in France is not limited solely to administrative matters. When interest rates rise above 5% in some countries (outside the euro zone), the average 20-year rate does not exceed 1.29% (according to the housing credit observatory) in France.
Sometimes the countries in which the investor wishes to buy may experience some monetary instability. With the grouping of loans, repayment is made with a stable currency, the euro. This scenario exists mainly for countries that index their currencies to the dollar. Sometimes, the grouping of credits can also avoid the setting up of legal structures or the opening of accounts, since repayment is made to a financial institution in the national territory.
If modernization projects are to be planned, the grouping of credits can be used to finance a dwelling by integrating a real estate loan and a loan that provides the budget for the work. Instead of mobilizing its own funds to improve its housing, the credit group can respond to several projects within its housing. For example, it happens that a professional activity is the subject of the occupation of a part of the dwelling.
This financial mechanism can include both the acquisition of real estate and the price of a professional installation. This strategy is particularly suitable for professionals who will amortize borrowing costs against operating expenses in order to reduce their tax burden.
Keep reading: Ecology, which impacts on real estate?