Any real estate investor who wants to deal with overseas properties should know that foreign currency exchange rates are an important factor to consider. In this particular business, fluctuations in FX rates might leave you without income or even in a negative balance. Considering the current recession and volatility on forex markets, you’ll need to be extremely careful when choosing where to invest.
Will the Dollar Shoot Up in the Wake of Economic Instability?
The COVID-19 pandemic, compounded by the Saudi Arabia-Russia oil crisis, the US-China trade war, and many other factors caused a recession. It’s definitely the worst one in recent history. As a result of all these global economic issues, forex rates are going crazy. Even the most stable currencies often used for hedging are getting dangerously volatile.
However, the US Dollar stands strong in spite of it all. This isn’t a surprise considering that it’s the reserve currency of the world. Therefore, while many countries, including the US, struggle because of the recession, the Dollar should be getting stronger.
However, this isn’t all that good for the real estate market in the US. The recession has already slowed down housing sales by a lot. The situation might continue to get worse in this industry, which means prices will change for the worse. The problem is exacerbated by the fact that foreign investors might start leaving the market fast. With a strong dollar and the world in recession, purchasing American properties will become too expensive to make a good investment.
Strong USD for Real Estate: Should You Invest Abroad?
Regardless of the housing situation in the US, making some supplementary income with real estate investment is always a good idea. The point here is just that you have to look outside of America to put that investment money to good use.
USD exchange rates will continue to change favorably for cash-heavy investors who have their cash in that particular currency. Therefore, you will get a chance to make some truly fantastic deals on properties in other countries.
Also, don’t forget about the most important benefit of investing abroad. By doing this you get access to markets where yield from a rental property is much higher than in any part of the US. Therefore, at the moment, you might make a deal that’s already good even better.
Granted, the recession might make it harder to get a steady flow of rental money at the moment. However, this is a highly lucrative long-term strategy.
How to Invest in Real Estate Overseas with Maximum Benefits
Of course, forex rates can put a damper on your ambitions as an overseas real estate investor. However, today you have a way to mitigate those risks. To do this, you’ll need to consider using the services of money transfer companies operating in the USA. Unlike banks, which charge high fees and always have bad FX rates on offer, these companies make international transfers much cheaper.
The main advantage of money transfer companies is that they offer forex rates close to mid-market. This means that you lose as little money as possible when exchanging currency through this service instead of a bank. Of course, you might lose some regardless of how low the margin is. This will depend on the FX rate and currencies in question. However, as an investor standing from a position of strong USD, you should be saving money instead of losing.
Moreover, these companies usually charge no fees or only a small fee for the service. Therefore, you might save about 3% or even more on every transfer.
When using bank wire transfers, you might need to pay double the fees. That’s because you’ll have to pay your own bank as well as the recipient bank. Combined with unfavorable forex rates, the cost of transfers alone might make your overseas investment a black hole.
However, money transfer companies are able to cut these costs because they operate differently from banks. Instead of making an actual transfer across the border, they allow you to transfer your money to the company’s domestic account. Then, the company’s branch in the destination country sends a transfer from its domestic account there. Thus, you make two cheap and fast domestic transfers instead of a complicated and expensive international one.
In addition, money transfer companies offer extra services that might help investors. Hedging tools, like forward contracts, and forex counseling are most beneficial of these services. They can help you reduce risks in the currently volatile forex markets. Therefore, you might be able to make an even better deal regardless of the recession and its negative effect on the real estate market.
In Conclusion: Don’t Miss out on the Chances You Get
The great thing about being a real estate investor is that you don’t have to like it to succeed. In fact, you don’t even have to be a professional in the real estate industry, especially when investing abroad. You can use expert advice in choosing the best region to put your money in and FX tips from money transfer companies to minimize your losses on currency exchange.
Therefore, if you have an opportunity to enter this market, you definitely should use it. Now is a difficult time for the world at large. And experts state that this recession will last for a while. Using this downturn to get some more financial security for your future is a chance that doesn’t come often.