At the height of the overseas property investment boom it was commonplace for commentators to make sweeping generalisations and to throw out best-case scenarios as genuine predictions. At the time articles (claiming to be offering overseas property investment advice) would talk about how you could pay for the mortgage for a second property off the rental income of the first, and so on ad infinitum. Now, most people know that such dreams rarely come true.
But of course, on the best overseas investment properties you can easily double your money. So that is not to say you cannot multiply your overseas property investments or that we cannot give advice on how to do so, we just have to be more pragmatic in our tone, and conservative in our estimates.
When buying overseas investment property, the most successful investors are those who detach themselves and choose based on only the facts. Right now the world of international investment property is awash with bargains, and multiplying investments is not only possible but easier than it has been for many years.
In days gone by emerging markets gave the best chances to multiply investments, but now we have millions of below market value opportunities around the world it is not so clear cut. In fact, whether you choose an emerging market or established one is just as likely to be based on your credit rating as anything else.
Multiplying Property Investments Abroad - BMV in Established Markets
If you have an immaculate credit rating then you can still get a mortgage in the established markets hardest hit by the financial crisis (read with piles of below market value properties).
If you have equity to buy your first property then you should certainly use it, debt costs more than savings earn.
In the US right now you can pick up residential properties at 60% below their replacement cost. Atlanta has been recommended as one of the first to see recovery, and we have found some fantastic 3 bedroom apartments in Fairington for $49k. The property is tenanted and earning a net yield of $552 per month (13% yield as well). The property is covering its own costs and we have no mortgage, so we save the rental income in a savings account.
In 5 years time we have $33,672 ($33,012 + 2% interest), we can then put this down as a 10% deposit on 2 properties costing $168,360 each, giving us a portfolio of 3 properties. Or we could put down a 20% deposit on 1 property costing $168,360. Then we would have 2 properties earning 2 rental yields, but of course we would have to pay the mortgage on the second property. In this case it is essential we choose carefully on the second property, to ensure it doesn't end up costing more than it earns.
Multiplying Property Investments Abroad - Emerging Markets
In emerging markets property values are growing and rental yields are strong. In a market like Turkey, where foreigners can get mortgages, it is possible that you could buy with your equity, sell with 35% capital appreciation after 5 years, add that to any rental savings and get a mortgage to buy 2 or 3 properties.
Anyway, this is how it is done; you buy, make a profit and buy more. The less leveraging you do however is best. If you have managed to save and raise equity for property one, then on your next purchase maybe you can use property one's earnings, plus other income flows to build up a 50% deposit on your next purchases. This brings down the costs of your mortgage, and reduces the risk.