Written by Daniel Ortega, Head of Retail Sales Vantage IRA

By now, hopefully you know the importance of having a well-diversified retirement portfolio. If you’ve been reading our monthly AZREIA articles and other advocates of alternative investing, you know that a Self-Directed IRA is the best way to diversify beyond the stock market.

With housing prices increasing throughout the country, and specifically in Arizona, many real estate investors are looking outside their current markets for profitable deals. Investing outside of the U.S. is still an underutilized investment strategy, especially within Self-Directed IRA, mainly because most Americans have been led to believe it isn’t permissible, so very little time has been spent learning how it can be done. The good news is that it is permissible and could offer IRA investors with increased diversity into emerging markets with lower purchase prices.

I recently met with an international real estate developer who educated me on the pros and cons of investing internationally.

Daniel: What are some of the advantages of buying real estate outside of the United States?

Real estate developer: Many investors aren’t aware that they can hold real estate within a self-directed IRA, let alone international real estate. Therefore, the opportunity for an investor to purchase a great investment property or properties is still very likely. We’re talking beach front property in certain countries that are affordable and can spit out 12-15% return on investments per annum.

Daniel: What are some of the disadvantages to buying real estate out of the United States?

Real estate developer: Well, it depends. Purchasing real estate out of the country is always difficult because it isn’t something you can necessarily drive by when you feel like it, nor is it something an investor can manage on their own. In my experience I’ve seen many investors try to do things themselves and that can sometimes lead to disastrous experience. Additional pitfalls an investor could face would be finding the right real estate agent and property management company. Working with international investors isn’t as common as you would think, so making sure these professionals have the tools and resources to support you is very important.

Daniel: This sounds like a ton of work. How long does it take get a property under contract and to finalize a purchase?

Real estate developer: This depends on the country, the real estate agent, and the investor. Some countries make it difficult for international buyers, while others encourage it. Finding a country that does not have tight restrictions or regulations for international buyers will certainly help expedite the purchase. Finding a real estate agent that is familiar in working with international buyers is another key component. When issues arise, and they often do, you want someone that can get them solved quickly and cost effectively. Lastly, has the investor done everything needed to close the deal? Do you know where the funds are coming from? Are they accessible? Do you understand the tax ramifications for investing internationally whether personally or through a Self- Directed IRA. On average, investment transactions that I deal will close within 30-45 days.

Daniel: Why is investing in international real estate a good option for Self-Directed IRA investors?

Real estate developer: Well, as I alluded to before, because this is such an underutilized investment strategy you could purchase properties that are inexpensive compared to American dollars and market conditions. One important caveat to consider is that it is important to identify a credible and experienced property management company that can maintain the property in great shape and serve as a local resource for any renter needs. This helps tremendously in getting the highest return on your international investment. Due to Arizona’s hot real estate market, many investors are finding it difficult to identify deals that pencil out or that they have enough capital to purchase. This is leading a growing number of investors to seek lower-priced opportunities in countries like Mexico and Costa Rica, where there is a high demand for tourism. With lower property values, investors can sometimes afford buying more properties, which not only could help supercharge your Self-Directed IRA, but give you a great quality of life post retirement.

Here at Vantage, we specialize in Self- Directed IRAs, and we support investors who have a desire to invest in real estate both domestically and internationally. We are familiar with the mechanics of facilitating transactions like these and we have resources available to you that can assist you.

If you’re interested in learning more about investing your IRA savings beyond the U.S. borders or domestically, please visit www.VantageIRAs.com/AZREIA.