International Real Estate: How and Why to Invest Outside Brazil

International real estate is an excellent opportunity for Brazilian investors seeking to diversify their portfolio and expand their sources of passive income.

The global real estate market offers unique opportunities, with property valuation, rental income, and other advantages that are not available in the local market.

In this article, we will explore how to invest in international real estate, the main destinations for this type of investment, and the reasons why you should consider this option for your investment diversification strategy.

Why Invest in International Real Estate?

Investing in international real estate offers a series of advantages, such as protection against Brazilian inflation, the possibility of accessing more stable markets, and the chance to take advantage of valuation opportunities in regions with high growth potential.

In addition, by investing outside Brazil, you can obtain passive income in hard currencies, such as the dollar or the euro, which can be very advantageous, especially in times of instability in the local market.

1. Geographic and Risk Diversification

Investing in international real estate helps reduce risks associated with the Brazilian economy. When you allocate part of your portfolio to foreign markets, you are diversifying your assets across different geographies, which protects your investment against economic or political crises that may affect Brazil.

• Country risk mitigation: The Brazilian economy, although robust, can be impacted by internal or external crises. Investing abroad offers a level of protection against this type of risk.
• Exposure to stable economies: Countries like the United States, Germany, and Canada have more stable economies, which can provide a more predictable return.

2. Access to Strong Coins

By investing in international real estate, you have the opportunity to generate passive income in hard currencies, such as the dollar, euro, or British pound. This is advantageous, as these currencies tend to appreciate against the real, ensuring that the value of your investment is protected against the devaluation of the real.

• Profitability in hard currency: Income received in dollars or euros is more stable and tends to generate higher returns when converted into reais.
• Protection against inflation: Inflation in Brazil can erode purchasing power, but by investing in international real estate, especially in hard currency markets, you can protect your capital.

3. International Valuation Potential

Some regions of the world have experienced significant growth in the real estate sector, driven by factors such as urbanization, population growth, and economic development. Investing in international markets allows you to take advantage of these valuation cycles and maximize long-term returns.

• Growing markets: Developing countries or expanding cities offer great opportunities for property valuation.
• Touristic or global cities: Investing in tourist cities such as Miami, Paris, or Lisbon can guarantee continuous valuation, as these destinations maintain high rental demand.

How to Invest in International Real Estate

Investing in international real estate may seem complicated, but with the right knowledge and the right approach, the process can be simple and profitable. Here are a few ways you can get started:

1. Buy Real Estate Directly Abroad

One of the most traditional ways to invest in international real estate is to buy the property directly in the country where you wish to invest. While this involves more red tape and upfront costs, this is a solid way to acquire a long-term property.

• Choice of country and city: The first step is to choose the country and city where you want to invest. Countries such as the United States, Portugal, and Spain are popular with Brazilian investors due to their economic stability and demand for real estate.
• Purchase process: The buying process may vary by country. It is important to enlist the assistance of a specialized lawyer or broker who understands local laws and helps avoid legal or tax problems.
• Taxes and fees: Remember that each country has its own tax rules. There may be property taxes, registration fees, and other transaction costs that must be considered.

2. Investing in International Real Estate Funds (REITs)

Another way to invest in international real estate without having to buy a physical property is through REITs (Real Estate Investment Trusts). REITs are real estate funds that allow you to invest in properties of different types and locations, without having to buy the property directly.

• Portfolio diversification: By investing in REITs, you have access to a diversified portfolio of properties in different regions of the world, which reduces the risk associated with a single asset.
• Accessibility and liquidity: REITs are traded on stock exchanges, such as stocks, and offer greater liquidity compared to physical real estate. You can easily buy and sell your shares.
• Passive income: Many REITs distribute rental income to investors on a regular basis, providing passive income in hard currencies.

3. International Real Estate Crowdfunding

Real estate crowdfunding allows you to invest in international real estate projects with a low initial value, participating in a pool of investors. This option has become increasingly popular, especially in markets such as the United States and Europe.

• Affordable investment: Some crowdfunding platforms allow you to start investing with amounts starting at a few thousand reais, making this an affordable option for small investors.
• Geographic and asset diversification: Crowdfunding offers the opportunity to invest in various real estate projects around the world, increasing the diversification of your portfolio.
• High return potential: Many real estate crowdfunding projects offer above average returns, due to the high risk and the potential for asset valuation.

4. Partnerships with Local Companies

If you want to invest in international real estate in specific markets, one option is to seek partnerships with local companies. They can offer a deeper understanding of the market and help with the purchase and management of real estate.

• Professional management: Local businesses can assist with property management, including maintenance, rental, and sale, ensuring that the investment is effectively managed.
• Access to exclusive markets: Partnerships with local companies can offer access to exclusive markets and real estate that are not available to individual investors.

Challenges and Risks When Investing in International Real Estate

While investing in international real estate offers several advantages, there are also challenges and risks to consider:

1. Cultural and Regulatory Differences

Each country has its own set of real estate and cultural regulations. Understanding local buying, selling, renting, and tax laws is crucial to ensuring that you're protected.

• Local laws: Study the country's legislation, especially regarding foreign property and inheritance rights, which can vary significantly.
• Bureaucracy: Some countries require extensive documentation and bureaucratic processes for foreigners who wish to acquire property.

2. Currency Fluctuation

Investing in international real estate may expose you to currency fluctuation. The valuation or devaluation of the local currency against the real can directly affect the amount of your investment and the return on it.

• Exchange risk: Fluctuating exchange rates may impact investment profitability, especially if you have foreign currency income.

3. Remote Management

Managing an international property can be challenging, especially if you don't live in the country where the property is located. This may involve rental management costs, maintenance, and possible communication difficulties.

• Management costs: Hiring management companies to manage the property can increase operating costs.
• Logistical challenges: Dealing with unforeseen issues, such as repairs and legal issues, can be difficult from a distance, which may require specialized professionals.