What is Offshore Real Estate and Why Do People Invest in It?

An Introduction to Offshore Real Estate

Investing in the real estate market, whether locally or offshore, is known to be one of the most profitable investment opportunities available. Many millionaires — billionaires, even — all over the world recommend investing in real estate to build wealth. However, real estate can also be unpredictable and it can lead careless investors to bankruptcy with just a few bad moves.

Why Invest in Offshore Real Estate?

There are many possible scenarios why people invest in offshore property. As previously mentioned, there are many benefits that come with owning an offshore investment — whatever the investment may be.

Planning to live abroad during retirement years.

Many foreigners have a dream retirement lifestyle. Some opt to live in another country and spend their latter years in a new place of residence or a vacation home. This is one of the simplest reason why there are people who are purchasing real estate in offshore countries.

Getting paid in foreign currency.

Local currency sometimes experience big dips that people who are living or working abroad certainly want to avoid. This is another scenario why people invest in offshore properties.

Ease of managing finances overseas.

For people who are living abroad, supporting family members in another country involves several financial commitments that are difficult to manage while living far away. Investing in an offshore property in the place of the family’s permanent residence can help ease the burden from this concern.

Better financial regulation.

Admittedly, there are countries that have poorer financial regulations than the others. This drives investors to look for better places to invest in with better regulations that will suit their preferences.

Re-investing growth.

Many offshore investment accounts offer tax advantages that can be maximized by improving the rates of return. To do this, investors simply re-invest their growth. If the offshore company has a good tax status, the investments may indirectly benefit as the company passes on its savings.

What are the benefits of investing in offshore real estate?

Tax Advantages

Foreign investors usually receive tax incentives in many countries, also known as tax havens. This benefit is being offered to continuously attract more foreign wealth into the offshore country and eventually create a healthy environment for investments. In doing so, small countries with limited resources can dramatically increase their economic activity.

Diversified Investment Portfolio

Basically, offshore accounts offer more flexibility which gives investors limitless access to various international markets and major exchanges. Therefore, offshore investments help in building a more diversified portfolio for investors as there are countries that impose financial regulations that limit the available opportunities for local investors.

Asset Protection

Reorganization of asset ownership can also be done through offshore centers. Individual ownership of one’s wealth can be transferred using offshore foundations, trusts, or a corporation. Investors can elect to transfer their assets to an offshore entity from their personal estates which makes gives them immunity to domestic troubles such as lawsuits, creditors collecting on outstanding debts, or foreclosing lenders.

Confidentiality

Wanting confidentiality with their investments does not automatically mean that offshore investors are hiding something illegal. It is important to understand that, in the case of illegal activities such as money laundering or drug trafficking, offshore investments may allow disclosure of the investor’s identity.

The downside of offshore investing

While there are plenty of benefits awaiting offshore investors, there are also several disadvantages that an investor should consider prior to making a huge investment, particularly in offshore real estate.

High Costs

Simply put, making an offshore investment is not cheap at all. Setting up one involves steep costs such as legal fees, corporate registration fees, etc. In some instances, investors are even required to own a residential property in the country in which they are planning to make an offshore investment just to be able to set it up.

Growing Regulatory Scrutiny

In recent years, there has been controversy regarding the tax revenue lost as a result of offshore investments. This pushed many countries to create more regulations that will restrict and eventually close these loopholes. This made offshore investments’ revenue become a focus of scrutiny from both regulators and tax laws.

Tips for Offshore Investors

Offshore investments, like investing in any other asset, require due diligence by doing enough research and preparations to avoid legal and financial repercussions moving forward. and choose a reputable investment firm. In any industry involving money, the threat of financial fraud follows. Staying on the safe side is preferable to making a risky and thoughtless investment and later regretting it.

Be compliant.

Check the internal revenue guidelines in the country of residence, especially the unauthorized transactions for investors. Sometimes, there is also an available list of disqualified persons to transact with.

Study the local offshore real estate investment laws.

In most countries, there are laws surrounding the purchase of a real estate for foreign investors. Make sure to study the policies and laws in place. Better yet, have a consultation with a local attorney to ensure that the transaction will be legal and legitimate.

Choose the offshore country wisely.

It is not enough to choose the offshore country that offers the best tax incentive. It is wise to choose a country with a good economic, social, and political situation. It is also best to consider the property’s environment including the climate and ecological concerns, especially if the offshore property is intended for residence or as a vacation home.

Prepare for financial responsibilities right away.

Making an offshore investment will require establishing a bank account in the offshore country to pay mortgage payments and other fees that the purchase entails. It can be used to collect income if the property is rented out. Laws for this activity differ for every country so it is best to research the process ahead of time.

Find a reliable real estate professional.

Even in local real estate investments, it is best to hire a well-connected professional who can help score the best deals in the best locations in the country. More so for offshore real estate, especially if there is a language barrier. Do due diligence in choosing an agent with a good record and top-notch credentials. If possible, it is also a good idea to consult with an investment advisor to receive multiple perspectives in making an international investment.

Invest in a Luxury Condo in the Philippines

In the Philippines, foreigners can legally own condo units as long as 60% of the entire condominium building is owned by Filipinos. As for a single-detached house, foreigners can consider a long-term lease agreement with a Filipino landowner.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Brittany Corp

Brittany Corp

Developer of luxury homes in the Philippines