Expat mortgages + how to invest in real estate online and without being a landlord

  1. The time costs — real estate is less of an investment, and more like running your own business. You can’t rely on capital values most of the time, so need to focus on yield and leverage. So you have revenues from rent, and sometimes from the capital values once you sell, but you also have costs for taxes, maintenance and so on. You also have the time costs of being a landlord, especially if you go down the Airbnb route, which means checking in many tenants.
  2. It isn’t easy to beat markets long-term — beating markets short-term, can and does happen, but over 40–50 years, it isn’t easy. What has made this situation harder, is that it is getting harder and harder to get 95%-100% mortgages, so leverage is getting harder in most markets. Given the time costs and direct costs of owning property, moreover, beating markets by 0.1% by year isn’t enough to mitigate for the costs
  3. It is an illiquid asset — unlike REITS or index funds, you can’t easily sell direct real estate. That also makes you vulnerable to tax changes — you can’t simply sell your property if a new radical government comes to power
  4. There has been a populist backlash — previously one of the biggest positives about property has been that it has been tax advantageous in most countries and you can use real estate investments to get second residencies and even passports. So many investors could “kill two birds with one stone” by getting an overseas residency and property. That is still possible in some places, but it is much harder than before, with many countries closing schemes or raising requirements. Likewise, many of the tax advantages of property have been closed down in numerous countries. If we take the UK as an example, the British Government has dramatically increased taxes on second homeowners.
  5. The tax rules and general rules are always changing — it seems with ever budget, brings a new tax or change. The direction of travel seems to be towards more tax and regulation.
  6. High valuations or high risk — most markets are either very risky or have high valuations. Some of the cheap emerging market opportunities, like in Georgia, are risky. Some of the safer options are overvalued.
  7. REITS have often outperformed direct real estate — the very best markets might have regularly beaten REITS, but most don’t, at least if you calculate the net returns.
  8. The risk — is higher in buying just 1–3 houses, than holding a diversiifed global index or REITs.
  9. Rentals and tenants — once you buy a rental property, you might not find somebody to rent it easily or quickly. Or you might end up with bad tenants
  10. There are a lot of hidden risks — with liquid investments, I know most of the risks and how to reduce them. Property has some obvious and direct risks. It also has many hidden and unforeseen risks.
  11. Fewer opportunities compared to the past- than in previous years and decades. Gone are the days when you could invest in many safe areas, around the world, which have excellent rental yields and a lot of home for capital appreciation. Sure a few areas might exist. In general, however, a lot of the better opportunities exist in high-risk countries.
  12. It is a cult — in many countries, property ownership has become a cult. That is always a bad sign. To paraphrase Buffett, “when there are too many people on one side of the boat, or argument, you should be careful”. A lot of peer pressure ensures people are obsessed with properrtyownership.
  13. I would prefer to run my own business — property is like running your own business in many ways. There are costs, indirect and direct. There are revenues and potential liabilities. If I am going to spend that much time on something, even 10% net per year isn’t enough, to justify that kind of hassle and time pressures.
  14. It is outside my area of expertise — I have seen some people, who do very well buying properties at auction. They get a cheap price. They then redo the properties and resell them, for a huge profit. They can only do this, however, due to specific expertise they have. Often they can do the electrics, plumbing or other tasks themselves or at a cut-price. I am not in this situation. Often real estate professionals, know ways to make profits. For most people, they aren’t in that situation.
  15. Renting isn’t dead money — it is a huge misconception.

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