Investing In Scattered Properties

The below topics are discussed in much more depth
on our members' Investing In Scattered Properties page

H ave you ever thought that it would be really great to own properties in various locations around the United States, or even around the world, so that you could write off your vacations to those locations. 

      Although the idea of having properties scattered around the country or around the world sounds intriguing, and even exciting, actually doing it is fraught with potential problems.
      However, those discouraging words said up front, we'll provide some discussion on the subject that will at least alert you to the potential problems if you decide to pursue the idea further. Depending upon your tenacity, talents, contacts, and financial situation these problems may be tolerable, even if not completely eliminated, and you can investigate further. At least you may have a better understanding of issues that you need to investigate.

Management Is The Key
      Although rental property investment has historically been one of the best long-term investments, property management is the key to profitable and relatively trouble-free real estate investment.

Laws & Customs
      We don't mean to imply that you don't need to know local laws and local customs because it is extremely important that you do. However, the information on our site will provide a sound foundation to real estate investment and property management anywhere in the world. You would then need to learn the laws and customs of the areas in which you wanted to invest.
      Knowing and following the landlord-tenant laws and other property-related laws of the jurisdictions in which you operate rental property is perhaps the most important requirement of good property management. Even in the United States, there are differences in laws among the states and some of these differences are very significant and potentially quite costly.
      And, it isn't just the laws, but also customs.

Hire Management?
      You may feel that the "management problem" can be solved by hiring a professional manager for each location. Unfortunately, in addition to paying for management services and giving up much control of the property, selecting the right property manager will probably not be as simple as it might seem .
  For additional information regarding this subject, visit our Short-Term Rentals page.
      Finding a property manager in various locations can be difficult. 
      By the way, we have in our discussions in our Investors Web  about selecting property managers and selecting real estate agents (discussed below).

Find The Property
      Although we have so far discussed the potential problems regarding ownership and management of properties located in various distant locations, there are also potential problems associated with finding and purchasing the properties in the first place. Serious study and investigation will be required before you are ready to invest outside your local area.
      Depending upon a local real estate broker to find your property in an unknown area is very risky for other reasons also.
      The most practical solution to buying property at a distant location would be to have a very knowledgeable and trustworthy person (broker or not) in that location make the basic property selection for you. However, in discussing the matter here , we found that we could think of only a few people that we might consider using for this purpose even in areas about which we have at least some basic knowledge. Even with the most trustworthy person doing the groundwork for you, you still need to do a fair amount of investigation and analysis of your own.

      Another major issue to consider when investing in multiple jurisdictions is the income tax consequences. In the United States there is always federal, usually state, and sometimes local income tax to be considered.  The matter is further complicated by the fact that some states have reciprocal agreements with other states regarding certain tax issues, including whether one state gives its residents credit for taxes paid in another state, and there is little uniformity in this regard.
      There is also the issue of property taxes that are based upon the government's valuation of a property.
      In addition to income taxes and property taxes, there are often other taxes associated with rental real estate in the United States. Similar taxes exist in certain other countries.
      A final tax issue that must be considered is that of estate taxes. How will any estate tax in the country of your property affect you even though you are not a citizen or permanent resident? Even here in the United States there are sometimes problems because a person owns properties in multiple states and each state .
      Dealing with taxes in other countries is made considerably more difficult if one doesn't know the language well enough to read the laws and discuss issues with the authorities. Finally tax treaties between countries may also come into play when investing across borders, further complicating the matter.

      Because of the complexities and risks involved, it is strongly recommended that investors buy  properties in their local area or a nearby area.
      There may be important reasons why you want to invest in far-off places. Perhaps you plan to retire there or for other reasons expect to move there in the near future.  In this case you can at least restrict it to one particular location where you already have contacts or about which you are quite knowledgeable .

      In conclusion, while it is not impossible to successfully operate income properties in various locations around the world, the added time, expense, investment risk, stress, and other complications associated with doing so must be well understood.

The above topics are discussed in much more depth
on our members' Investing In Scattered Properties page.