Financial planners in Perth are often asked if investors can make a lot of money investing overseas. The short answer is “yes, but it is really risky.” While the risks can be overcome and some investors can make money with overseas investments, we would rather see you use your investment loans right here in the Perth area.
So, why are we so convinced that it is safer to invest assets such as your SMSF in Perth? There are numerous reasons, but the most important is proximity. It is a lot easier to manage local investments than to manage investments halfway across the globe.
Case Study: What are You Really Getting Overseas?
In 2005, a single mum from Sydney named Eve was promised 20% returns per year on investment properties in Buffalo, NY, USA. She ended up buying three properties.
The first property was a 6 bedroom home that had been turned into a triplex. She bought it for $79,500 and was told she could rent it out for $18,000 USD per year, for a gross return of 23%.
The second property was a 4-bedroom apartment which sold for $51,900 USD and she was told it would fetch $11,400 per year for a return of 22%.
The third property was a single family home which cost her $34,900 and was supposed to bring in $8,100 per year for a return of 23%.
Adding all three properties together and adding the spotter’s fees she had to pay “buyer’s agents” in the US, she paid out $250,000 AUD. To get the money, she mortgaged her family home.
Since buying, she has spent over $95,000 in repairs and maintenance. She spent a total of close to $350,000 and sold the three properties for a total of around $37,000. She lost over $300,000 on the deal.
What it Means to You
If you can’t watch your property closely, you need to have a trustworthy representative overseas. It is difficult to find good property managers and tenants overseas if you aren’t there to assess them.
In addition, vandalism, shoddy maintenance and squatters can become a huge problem. There are also two totally different sets of laws when you invest overseas: Australia’s and theirs.
Call Purely Finance today at (08) 9472 9766 to talk about less risky investments.