Starting a property company abroad might sound like an odd thing to do but let me tell you why I decided to start it in the UK instead of in my home country Sweden.
This is just an overview and for those of you who want to dive deeper, I will shortly be posting a series on this topic. Of course I want to add as much value as possible so my intentions, as always, are for this to be applicable to all of you, regardless of where you live!
Why I decided on properties?
Properties is one of the assets I have been interested in for a very long time. Many will also argue that properties has been or even is the greatest wealth builder of all times and to some extent I agree.
Long term ownership in properties have a few benefits going for them and the key ones are inflation or appreciation (value going up) as well as leverage which is commonly used. The latter meaning that you borrow money to buy the asset and hence, the return on your own invested money can be very high.
Properties are also one of the easiest assets to buy using leverage as there are loads of lenders happy to lend on competitive terms as the property (asset) often is easy enough to put a value on.
I would also say that most millionaires and billionaires have a decent property exposure and why not just learn from those who have already shown they are successful investors? There are of course many reasons as to why property investment can be a bad investment but I don’t intend to go into details here, rather just give you the bigger picture.
I have previously written a series on how I invest in domestic properties and what to think about etc. The first post in that series, can be found here: Buying a property part 1 – why, what and where?
Well, but WHY?!
Ok, the above only gives you an idea about a couple of the main benefits including money and wealth. If I build a long term portfolio, that means cash-flow and cash-flow is what we all live of. The only question really is where that cash-flow is coming from and most people get it from their day jobs. As of lately and with Covid-19 in mind, many have unfortunately realized that those day jobs might not be that safe to depend upon after all.
My main reason for investing in properties is to create a base of wealth that will support me and my family in infinity whilst supporting other families and helping them find quality homes with great landlords. When I think about the asset class as such, I honestly find it hard to think about any other asset than can accomplish this whilst being easily available to anyone of us! If you know of anything, please comment so that I can learn!
As you know, I love investing and numbers so looking at deals is something I do all the time anyway. Intellectual stimulation and number crunching whilst building long term financial stability and cash-flow and at the same time being able to continue serving others is a win-win for me!
Property investing domestically or internationally?
To be honest, most people would say locally! I do agree and there are many reasons why investing locally is a great way to start a property journey. Here are a few:
- Local knowledge
- Knowing the regulations
- Understanding the demand
- Understanding the pricing
- Understanding financing options
- Being able to work in the business in order to keep costs down
Starting a property company abroad can be a real pain in the neck for the same opposite reasons. However, some of the obvious reasons for investing abroad would be because one thinks the returns are more attractive or because the price range is different (easier to get started).
As I have stated before, knowledge is key and the ones who know the least tend to pay the most and vice versa! So many times investing abroad can seem very attractive when we often are presented with “selling numbers”, i.e. deals showing great returns. If we don’t understand the actual market well, we have to trust others and of course there is a risk involved in that. So for sure one is adding on layers of potential risks whilst investing in a foreign country.
So why the heck did I decide on starting a property company abroad?!
There is a simple answer to that question, I wanted to be an owner and not an operator! Let me explain what I mean by that if this concept is new to you. It is very, very important.
By owning something locally, with all it’s potential benefits, it is very likely I would become heavily engaged in the operations of the business, all of it. Talking to people, fixing things around the property, doing the accounting, viewing properties etc…
That doesn’t work for me unless it really is a passion of mine and property investing is not a passion as such (yet). What we all want is the freedom to use our time as we please and having the funds to do so. If I then use up all my time operating a local property business, I am stealing time from myself! I want my time at my disposal to do things I really enjoy. Setting up a company abroad with a local power team means I will have to outsource the majority of the work as I will not be physically present to deal with things!
Starting a property company abroad and investing there forces me to be structured and make decisions so that my company can operate without me spending 24/7 on the business! Of course I will have to spend time on it whilst setting it all up and building relationships etc., but it will be with an “owner’s” mindset and not that of an operator!
So the key reason for setting up my property company abroad is to force me becoming and acting like an owner and not an operator!
So why the UK you might wonder..?
Well, as with any investment I make, I do my research first. I don’t want to “hope for the best” just because someone shows me a deal and promises me the world in this foreign country. Honestly, this is something I’m a bit concerned about as all over social media it seems like people want to sell you property investments… I am always cautious. I mean, why should a swede invest in Detroit or Cleveland for example with all the additional layers of costs involved? A local investor should be able to make a better and more informed decision. There are of course situations and reasons as to why deals abroad might be interesting but I just want you to be cautious before you part with your hard earned cash.
So, back to the UK. The main advantages for investing in the UK for me personally are:
- Market rents (not the case in Sweden)
- Easy to finance even as a foreign owner (not the case in Sweden)
- English is the main language – easy enough
- “Cheap” renovations
- Only a couple of hours away with a flight
- Loads of letting agents in every village (none in Sweden)
- Poor quality properties – makes it easy to add value
- Loads of sourcing companies (not really any here in Sweden)
- Lots of brokers assisting with different kinds of financing
I honestly believe that many of the above points are applicable to most of you as they are just generic information about the market in the UK. That’s also one of the reasons why there are so many foreign investors in the UK. The language of course makes it easy as well as its “central” location in Europe.
Your set-up = your Power Team!
As you could see in my previous points, there are quite a few people you will need to work with in order to make your property investments abroad a success. Your local “Power Team” are the ones working with you and taking care of everything that needs to be dealt with during a transaction or ownership.
Your list of Power Team members include:
- Accountant – does the book keeping for you
- Solicitor – deals with legalities
- Deal Sourcer – assists you in finding great deals
- Project Manager – manages any renovations
- Mortgage Broker – finds the best mortgages
- Letting Agents – take care of you and your tenants
- Estate Agents – helps you achieve high prices when selling
- Handymen – help out when things break which they inevitably do
- Insurance Company – in case something happens to your properties
Remember that you will only ever be as successful as the people you surround yourself with so make sure to do your homework prior to taking on any larger commitments with any local parties. Use references and local sources as much as you can and try to meet them in person as well if you can.
Actions to take:
Check out the following posts:
- Series on investing in properties locally and using Airbnb
- Why you should always be automating!
- Need more time? – Apply the 80/20 rule!
- Leverage -Why you should always use it (wisely)!
- Learners are Earners and Earners are Learners!
- Number skills -why you have to know your numbers!
- Think and Grow Rich – Principle 1: Burning Desire