Buy Property Overseas

The investment strategy of buying land abroad can produce excellent results if you do your homework. Land investments produce returns in the form of capital gains on selling the land and regular returns through renting out. The last option will typically involve constructing a residential or commercial building on the land.

Capital gains result when you sell the property at a price above what you paid for it. This can happen only if the price of the land goes up in the area where you invest in. So you check for the existence of factors that can lead to land price increases at the location.

Land price increases occur when demand for land goes up. The demand can go up owing to population increase because more people in an area means more demand for accommodation and land. Demand can also go up owing to increased economic activity that again tends to increase the demand for commercial and residential accommodation.

The major feature of land is that its supply at a location cannot be increased by making new land. Owners of existing land can thus expect the prices of their land holdings to increase as demand goes up. What they have to ensure is that increased demand will not lead to other people dispossessing them of the land.

Such dispossession can happen in a country where rule of law is weak. It can also happen if the system of land records maintenance is so poor that disputes can arise about the identity of a piece of land and its owners.  Losses can also occur if buyers have no reliable way to verify whether the property has been charged to a third party by way of mortgage or otherwise.

Buying land abroad will hence have to involve a due-diligence research to check on the political stability, rule of law and land records maintenance system.

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