Investing in International Real Estate For Dummies® Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com Copyright © 2019 by John Wiley & Sons, Inc., Hoboken, New Jersey Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the Publisher Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions Trademarks: Wiley, For Dummies, the Dummies Man logo, Dummies.com, Making Everything Easier, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc., and may not be used without written permission All other trademarks are the property of their respective owners John Wiley & Sons, Inc., is not associated with any product or vendor mentioned in this book LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM THE FACT THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ For general information on our other products and services, please contact our Customer Care Department within the U.S at 877-762-2974, outside the U.S at 317-572-3993, or fax 317-5724002 For technical support, please visit https://hub.wiley.com/community/support/dummies Wiley publishes in a variety of print and electronic formats and by print-on-demand Some material included with standard print versions of this book may not be included in e-books or in print-on-demand If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com For more information about Wiley products, visit www.wiley.com Library of Congress Control Number: 2019933833 ISBN 978-1-119-52752-7 (pbk); ISBN 978-1-119-52755-8 (ebk); ISBN 978-1-119-52754-1 (ebk) Investing in International Real Estate For Dummies® To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Investing in International Real Estate For Dummies Cheat Sheet” in the Search box Table of Contents Cover Introduction About This Book Foolish Assumptions Icons Used in This Book Beyond This Book Where to Go from Here Part 1: Building a Successful Real Estate Portfolio Chapter 1: Introducing Real Estate Investment Strategies Taking Your Real Estate Investments to the Next Level Focusing on Investment Strategies That You Can Use Internationally Running Your Property Portfolio as a Business Getting Your Financial Ducks in a Row Blending Real Estate Strategies to Create a More Robust Portfolio So Which Strategies Are Right for You? Chapter 2: Investing at Home or Abroad: Which Is Right for You? Deciding Whether to Invest Abroad: It’s Not All about the Numbers Considering Your Budget Assessing Your Risk Profile Figuring Out How You’ll Manage Your Property Drilling Down to the Right Market for You Focusing Your Attention on One or Two Key Markets Chapter 3: Treating Your Real Estate Portfolio as a Business Aiming for Passive Income as the Ultimate Goal Drafting a Dream Team Investing in Systems and Technology to Grow Your Business Promoting Your Real Estate Business Managing Your Cash Flow Like a Boss Getting the Right Insurance Chapter 4: Protecting Yourself against Market Fluctuations Diversifying Your Portfolio with Multiple Revenue Streams Finding Strategies That Work Well in a Boom Market Finding Strategies That Work Well in a Credit Crunch Doing the Opposite of What the Mass Market Is Doing Tailoring Your Funding to Economic Fluctuations Considering Foreign Exchange Rate Risks Chapter 5: Getting into the Mind-set of a Successful International Real Estate Investor Continually Improving through Education Networking in the Right Places Setting Your Goals Cultivating a Positive Mental Attitude Visualizing for Success Harnessing the Law of Attraction Meditating to Manage Stress and Risk Part 2: Money, Money, Money Chapter 6: Weighing Traditional Finance Options Finance as a Key Element of Success and Growth Considering the Main Financing Factors Assessing a Range of Traditional Finance Products Finding the Right Product for You Dipping into International Finance versus Domestic Finance Chapter 7: Understanding Property Valuation Defining Value and Real Estate Valuation Seeing Why Valuation Is Fundamental to Property Success Looking at the Three Main Valuation Methods Knowing Which Method Is Best for You and How Much an Investment Is Worth Special Considerations for Valuing Property Abroad Chapter 8: Looking at More Creative Financing Options You Down with OPM? Investing with Other People’s Money Joining Up with a Joint Venture Securing Private Lending Crowdfunding Your Way to Real Estate Success Getting Control of a Property Instead of Owning It Applying Creative Financing Strategies Overseas Part 3: One-Off and Shorter-Term Income Strategies Chapter 9: Developing Properties Knowing What Property Development Means Deciding Which Development Strategy Is Best for You Sourcing Development Opportunities Financing Your Development Projects Managing the Development Five International Locations Where This Strategy Would Work Chapter 10: Dealing in Property Information Dealing in Investment Property Leads: The Five-Minute Lowdown Generating and Selling Property Leads Acting as a Retained Buyer’s Agent Five International Locations Where This Strategy Would Work Part 4: Ongoing and Passive Income Strategies Chapter 11: Making Rent-to-Rent Work for You Defining Rent-to-Rent: The One-Minute Rundown Addressing Rent-to-Rent’s Image Problem Applying Rent-to-Rent across a Range of Properties and Strategies Margin in the Middle: Understanding the Rent-to-Rent Financial Model Sourcing the Ideal Rent-to-Rent Property (and Landlord) Sorting Out Your Rental Agreement Finding Tenants and Managing the Property Identifying Five International Markets Where This Strategy Would Work Chapter 12: Leveraging Lease Options Understanding Lease Options and How They Work Understanding the Financial Model for Lease Options Knowing What’s in It for the Property Owner Sourcing Lease-Option Opportunities Negotiating the Deal and Contract Identifying Five International Locations Where This Strategy Would Work Chapter 13: Delving into Houses in Multiple Occupation Introducing HMOs Breaking Down the HMO Financial Model Sourcing HMO Properties Deciding Who You Want to Rent To Finding the Best Location for Your HMO Staying on the Right Side of the Law Managing Your HMO Scaling Up Your HMO Portfolio Identifying Five International Locations Where This Strategy Would Work Chapter 14: Renting to Students and Low-Income-Housing Tenants Knowing What’s Involved in Renting to Students and Low-Income-Housing Tenants Looking at the Pros and Cons of Renting to These Tenant Groups Sourcing the Right Kinds of Property for Students and Low-Income-Housing Tenants Marketing Your Property and Finding Tenants Drafting the Tenancy Agreement Physically Preparing Your Property for Use Managing Your Property Effectively Looking at Five International Locations Where This Strategy Would Work Chapter 15: Providing Serviced Accommodation Defining Serviced Accommodation Looking at the Pros and Cons of Serviced Accommodation Deciding What Level of Service to Offer Sourcing Serviced Accommodation Properties Preparing Your Property for Serviced Accommodation Use Navigating Planning and Regulatory Restrictions Getting the Right Business Processes and Systems in Place Managing Your Serviced Accommodation Business on an Ongoing Basis Identifying Five International Locations Where This Strategy Would Work Chapter 16: Providing Vacation Rentals, at Home and Abroad Knowing the Difference Between Vacation Rentals and Serviced Accommodation Choosing the Right Location for You Planning for Costs, Cash Flow, and Variations in Occupancy Sourcing the Ideal Property for Vacation Rentals Preparing Your Property for Use Marketing Your Vacation Rental Managing Your Vacation Rental Identifying Five International Locations Where This Strategy Would Work Part 5: The Part of Tens Chapter 17: Ten (Or So) Practical Ways to Get into the Mind-Set for Success Tapping Into Education Resources Using Productivity Apps and Tools Learning to Be in the Here and Now Cementing Your Goals Using a Vision Board or Goal List Trying Out a Visualization Exercise, Real Estate Style Incorporating Positive Affirmations into Your Day Recognizing and Giving Thanks for Your Successes Downloading Helpful Apps Chapter 18: Ten (Or So) Other Real Estate Strategies to Consider Delving into Buy-to-Rent (Single-Tenant) Properties Flipping Houses Running a Bed-and-Breakfast, Guesthouse, or Hotel Owning or Running a Care Home Becoming a Real Estate Agent, Rental Agent, or Property Manager Investing in Real Estate Investment Trusts Offering Emergency Housing Accommodation Getting into Commercial Property Trading in Freeholds Index About the Author Advertisement Page Connect with Dummies End User License Agreement List of Tables Chapter TABLE 8-1 Sample Deal Calculation for Approaching JV Investors Chapter TABLE 9-1 Example Cost Breakdown for a Refurbishment Project Chapter 15 TABLE 15-1 Comparing Serviced Accommodation to Standard Rentals List of Illustrations Chapter FIGURE 6-1: Growth with leverage Chapter FIGURE 9-1: Example schedule for a refurbishment project Introduction Welcome to Investing in International Real Estate For Dummies, and thank you for choosing me to guide you through the process of building a successful real estate portfolio I’m so excited to be sharing this journey with you! If I were a betting man, I’d wager that you’re drawn to real estate because you want the chance to create financial security — and, over time, real wealth You love the idea of working for yourself, of being in charge of your own destiny, of being liberated from the boring, 9-to-5 routine You want to feel excited about what you every day Those were certainly the things that attracted me to real estate more than 15 years ago Back then, I had a good, grown-up job at an investment bank in the City of London I was earning fantastic money for a young, single guy I was doing all the things I thought I was supposed to with my life, the way I had been taught and the way that society suggested But I was miserable I was desperate to escape it all and work for myself Real estate seemed a tangible, achievable way to that I wasn’t wrong I started small, renting out a room in my own house to start with Then I rented out another room after that Then I converted the garage to make another room, until I’d maximized that first house Then I took on another rental property, and another after that Pretty soon, I was expanding into other real estate strategies — and that was when things started to get really exciting Within ten years, I’d built up a diverse, robust real estate portfolio worth more than £20 million (or more than $25 million), and I was running my own group of successful real estate businesses transacting many millions worth of property each and every year There’s nothing particularly special about me I don’t have a larger-than-average brain (at least, I don’t think I do!) I didn’t come from a background of notable wealth or privilege And I had no real estate experience (beyond being a homeowner) when I started out But I was very determined, and I was willing to invest the assets I had in abundance — namely, my passion, drive, time, and energy — in immersing myself in the world of real estate If you have the same drive and willingness to commit to your continual education, you, too, can build a successful real estate portfolio This book shows you how to start or get to the next level About This Book Many investors start out by buying a property and renting it out to a tenant or household (the standard single-tenant model) That’s all well and good — and if that’s your main interest in real estate, I recommend you also read Eric Tyson and Robert Griswold’s excellent book, Real Estate Investing For Dummies (Wiley) This book, however, is designed to go beyond simply renting out a property on a single-tenant basis, toward building a portfolio that encompasses different real estate strategies (such as renting out a property on a room-by-room basis or providing serviced accommodation) Why? Because I believe there are better ways to maximize your real estate income than the standard single-tenant fixed-rate vs adjustable-rate loans, 105–107 International vs domestic, 118 land development loans, 115–117 link between leverage and growth, 102–103 loan guarantees, 116 loan length, 107 loan-to-value balance, 108–109 options for, 103–104 repayment vs interest-only loans, 109–110 second-charge loans, 115 standard residential investment mortgage, 112–113 translator, 43 Trustpilot (website), 48 TweetDeck (website), 52 Twitter (website), 341 Tyson, Eric (author) Real Estate Investing For Dummies, 3rd Edition, 37, 344 U Uber, 304 Udemy (website), 79, 334 United Kingdom for lease options, 241 for property development, 177 for property information, 197 for rent-to-rent, 222 for student/low-income properties, 283 for vacation rentals, 329 United States for HMOs, 263 for lease options, 241 for property development, 177 for property information, 197 for rent-to-rent, 222 for serviced accommodations, 307 for student/low-income properties, 283 for vacation rentals, 329 The Universe Has Your Back (Bernstein), 90 Upwork (website), 47, 334 utility bills, for HMO tenants, 259 V vacation rentals about, 309–310 cash flow planning for, 314–316 cost planning for, 314–316 locations for, 312–314, 329 managing, 327–328 marketing, 324–327 preparing property for, 320–324 seasonality, 316–318 serviced accommodation vs., 310–311 sourcing properties for, 318–319 tax advantages of, 311 valuation about, 13–14, 119 appraisal research, 133–134 appraisals, 121 comparing price to value, 120 cost approach, 132 effect on financing of, 125–126 evaluating methods for, 132–133 factors influencing, 121–122 importance of, 123–128 income/investment approach, 130–132 market comparison approach, 129–130 maximizing investments, 124 methods of, 128–132 process of, 122–123, 127–128 risk averse nature of appraisers, 126–127 special considerations, 134 yield vs return, 124–125 valuation fee, 110 value adding, 19–20, 61, 66, 156, 208 comparing price to, 120 factors that influence, 121–122 valuers, 123 Vancouver, for serviced accommodations, 307 variable mortgage, 72 virtual assistant, 44 vision board, 337–338 visualization, 88–91, 338 void periods, 11, 245, 292, 315, 350 VRBO (website), 324 W Warning icon, wear and tear, preparing for, 279–280 websites Adobe Sign, 52 Airbnb, 285, 324 Association of Serviced Apartment Providers (ASAP), 293 Booking.com, 286, 303, 324 census data, 250 Cheat Sheet, Coursera, 79 craigslist, 54, 273 CrowdProperty, 148 DocuSign, 52 Dropbox, 334 Evernote, 334 Eviivo's, 303 Experian, 259 Facebook, 55, 341 Fiverr, 47, 334 FlipKey, 324 FreshBooks, 52 Fundrise, 148 Gmail, 335 Google Calendar, 334 Google Drive, 334 having your own, 144, 325 Headspace, 336 HomeAway, 324 Hotpads, 54 iCloud, 334 importance of having for your business, 144 Infusionsoft, 52, 335 Instagram, 341 LinkedIn, 55 OneDrive, 334 Property Forum, 46, 54, 79, 191, 340 QuickBooks, 52 real estate education, RealtyShares, 148 Rent Manager, 53 Rightmove, 185 Roomi, 250 Salesforce, 52 The Secret Daily Teachings, 341 Signable, 52 Sleepio, 341 SpareRoom, 54, 250, 258 Sprout Social, 52 Squarespace, 52 Student, 273 Student Accommodation, 273 ThinkUp, 339 Trustpilot, 48 TweetDeck, 52 Twitter, 341 Udemy, 79, 334 Upwork, 47, 334 VRBO, 324 Wimdu, 304–305 WordPress, 52 world property prices, 27 Wunderflats, 304–305 Xero, 52 Yelp, 48 Zillow, 54, 185 Zoopla, 250 Wimdu (website), 304–305 word-of-mouth marketing, to students, 273–274 WordPress (website), 52 Wunderflats (website), 304–305 X Xero (website), 52 Y Yelp (website), 48 yield about, 38, 131 potential, 250 return vs., 124–125 yourself selling, 144–145 sourcing properties for development, 163–164 Z Zillow (website), 54, 185 Zoopla (website), 250 About the Author Nicholas Wallwork is a leading international real estate market commentator, entrepreneur, investor, and developer Nicholas heads up several real estate and investment companies and has produced and presented a number of real estate TV shows on Sky TV in the UK As an author, he writes a multitude of educational content dedicated to supporting landlords, real estate professionals, and investors across the industry through www.propertyforum.com (a real estate chat forum, educational hub, and news portal) and www.bullmarketboard.com (a stock market investing chat forum, hub, and news portal) Nicholas has a demonstrated track record of working on successful developments and investments in the real estate industry He has a wide breadth of real estate experience with specific expertise in developing houses in multiple occupation, micro studio and co-living apartment blocks, and private rented-sector developments He also has experience developing healthcare and assisted living properties Nicholas can be contacted at me@nicholaswallwork.com for any business enquiries He is also on LinkedIn, Facebook, and Instagram (@nicholas_wallwork) Dedication This book is dedicated to my soul mate and amazing wife, Britta Wallwork, and to my amazing, always positive family Siènna, Skyla, and Silàs Thank you, Britta, for believing in me always and without question, right from the outset We will always dream big and continue to enjoy every moment as though it’s our last Author’s Acknowledgments It has been a major dream of mine to one day write a book, and I’m extremely grateful to have been given this opportunity, one that I’m hopeful will lead to many more projects with Wiley It’s a huge team effort writing a book, and I’m specifically grateful to Annie Knight for taking the time to listen to my initial proposal and then for introducing me to my acquisitions editor, Tracy Boggier Thank you so much for taking me seriously over all those other proposals and making that introduction when you did I’m forever grateful to you for that Tracy has been amazing She’s so generous with her limited time Tracy is approachable and has helped point me in the right direction a number of times while championing me and my pitch throughout Without her, there might not have been a book at all, so thank you again, Tracy I’m truly grateful for your continued support A big thank you to Elizabeth Kuball, my project editor You’ve been most helpful helping keep me on track, giving general advice, and writing tips, and you’ve done a brilliant job understanding and assisting with the UK/US nuances while writing the book Thanks also go out to my wife and best friend, Britta, and all my family (hi, Mum, Dad, Andy, and my brother Simon!) and extended crazy Dutch family (John, Yvonne, Joyce, Maurice, and Daphne) and friends both here and in Holland (sorry, I can’t name you all!) who hear nonstop about my latest projects and big ideas A massive thank you to my best friend and business partner, Chris Sturmer; there’s nothing better than working with your friend and I wouldn’t be where I am today without our awesome partnership, for which I’m truly grateful We’ve certainly defied mixing business with pleasure A huge thank you to Claire for your help and support throughout You’re fantastic! Thanks to Robert for your trust and ongoing partnership Thanks also to some of my insanely talented, loyal, and supportive team: Kelly, Michelle, Lee, Stephanie, and Kath We couldn’t it without you guys A massive and heart felt thank you! A shout-out to Michael Hammond for working with us so closely It’s been a pleasure working on both our businesses together with such synergy Thanks to “mate” (you know who you are — that’s Ben Collins for the rest of the world) for believing in me when I came up with the idea of my first real estate company all those years ago and supporting the vision — it worked right! Thank you to all our JV investors who have trusted and believed in us over the years I’m proud we’ve been able to create win/win investments for us all Finally, thank you to all my mentors, successful people I’ve followed over the years, and to the law of attraction for always delivering I’m looking forward to the next step already Always be growing, onward and upward! Publisher’s Acknowledgments Senior Acquisitions Editor: Tracy Boggier Project Editor: Elizabeth Kuball Copy Editor: Elizabeth Kuball Technical Editor: Joana Meding Production Editor: Magesh Elangovan Cover Photos: © jamesteohart/iStockphoto Take Dummies with you everywhere you go! Go to our Website Like us on Facebook Follow us on Twitter Watch us on YouTube Join us on LinkedIn Pin us on Pinterest Subscribe to our newsletter Create your own Dummies book cover WILEY END USER LICENSE AGREEMENT Go to www.wiley.com/go/eula to access Wiley’s ebook EULA ... Investing in International Real Estate For Dummies To view this book's Cheat Sheet, simply go to www .dummies. com and search for Investing in International Real Estate For Dummies Cheat Sheet” in. .. Sheet for further tips on becoming a real estate pro Just go to www .dummies. com and enter Investing in International Real Estate For Dummies Cheat Sheet in the search box I’ve also developed online... Chapter Investing at Home or Abroad: Which Is Right for You? IN THIS CHAPTER Deciding whether investing internationally is right for you Factoring in your finances Weighing risks Considering how