Purchasing an overseas investment is a daunting task. In addition to factors like cost and condition of the property, commercial real estate investors who want to own property in another country must also navigate financial systems and regulations that might work differently than those in the United States. Working with top real estate companies gives investors a good start, but in the end, successfully investing in rental property comes down to arming yourself with the information you need to make a sound decision.
GOBankingRates reviewed important indicators like monthly rent, rental tax rates and gross rental yields — the amount, expressed as a percentage, that a landlord can expect as return on his investment before taxes, maintenance fees and other costs — to find the best places to own investment property.
Keep reading to discover where you’re best off investing your money.
Rental Yield: 3.62 percent
Effective Rental Income Tax: 21.94 percent
Turkey lands near the bottom of the list due to its low rental yield and an effective rental income tax that’s higher than 80 percent of the countries surveyed.
Rental Yield: 3.8 percent
Effective Rental Income Tax: 17.25 percent
With a rental yield of just 3.8 percent and an effective rental income tax of 17.25 percent, Latvia likely isn’t a first choice for investors who don’t already have ties there.
Rental Yield: 5.45 percent
Effective Rental Income Tax: 26.44 percent
Robust rent and a decent rental yield aren’t enough to push Portugal farther up on this list; the country has the highest effective rental income tax rate of any country in this study at 26.44 percent. In fact, Portugal residents pay significantly more in taxes than Americans.
Rental Yield: 4.35 percent
Effective Rental Income Tax: 23.33 percent
The rents are high in Malta, and rental yields are in the top third of the countries surveyed. But effective rental income taxes are steep, and real estate prices are rising, so there might be better options for your investment.
Rental Yield: 6.51 percent
Effective Rental Income Tax: 24.75 percent
A relatively high rental yield of 6.51 percent partially offsets Colombia’s 24.75 percent effective rental income tax rate — the third highest in the study. It helps that low prices on groceries and other goods and services remain low compared with purchasing power.
Rental Yield: 4.48 percent
Effective Rental Income Tax: 14.7 percent
As one of the least-tax-friendly countries, Argentina ranks near the bottom of the list of best countries to own investment property. Its effective rental income tax is a hefty 14.7 percent, and rental yield is just 4.48 percent.
19. South Africa
Rental Yield: 3.88 percent
Effective Rental Income Tax: 12.8 percent
Despite having a less-than-stellar rental yield and higher effective rental income tax, South Africa has a cost of living that makes it a good retirement option for expats — but only a so-so choice for real estate investors.
Rental Yield: 5.52 percent
Effective Rental Income Tax: 10.7 percent
Foreigners can’t buy land for agriculture in Morocco, but they can buy investment property. Effective rental income tax falls about in the middle of the pack, and rent is the lowest of the countries surveyed, but solid purchasing power and low cost of living make Morocco worth considering.
Rental Yield: 3.98 percent
Effective Rental Income Tax: 25 percent
Canada has the fifth-lowest rental yield and second-highest effective rental income tax, but if you can find cheap real estate that doesn’t need much work, $3,740 in monthly rent can help you recoup your investment.
Rental Yield: 4.7 percent
Effective Rental Income Tax: 19 percent
At first glance, high taxes and relatively low rental yields might cause an investor to avoid Spain. But that could be a mistake, considering the country’s appeal to expats and purchasing power that holds up to one of the highest rents in the survey.
Rental Yield: 4.17 percent
Effective Rental Income Tax: 7.5 percent
Although its rental yield is the study’s seventh lowest, Greece’s effective rental income tax rate falls in the lower half of countries surveyed, so you’ll keep more of your rental income.
Rental Yield: 5.24 percent
Effective Rental Income Tax: 13.5 percent
A 5.24 rental yield and strong industry mean there’s plenty of opportunity for real estate investors in Hungary. However, it also has one of the 10 highest rental income tax rates of all the countries in this study.
Rental Yield: 6.24 percent
Effective Rental Income Tax: 10 percent
Although rent in Bulgaria averages on the low side compared with other countries surveyed, and the effective rental income tax rate is the fifteenth highest, a healthy 6.24 percent rental yield makes it a good choice for investors.
Rental Yield: 5.43 percent
Effective Rental Income Tax: 8.4 percent
Croatia might be one of the least-tax-friendly countries in the world, and its low average rent of $1,320 could leave investors wanting more. But the rental yield is stronger than in many other countries in this study.
Rental Yield: 3.99 percent
Effective Rental Income Tax: 2.71 percent
A relatively low cost of living is likely a factor in Germany’s popularity among expats — the perfect target market for real estate investors hoping to capitalize on the country’s low effective rental income tax rate.
Rental Yield: 5.12 percent
Effective Rental Income Tax: 0 percent
Cyprus rental yields have remained steady in recent years, even while other countries experienced declines. Property sales prices are modest. Rents are low, but so are effective rental income taxes; you won’t pay any tax on your first $23,339.22 of income.
Rental Yield: 2.79 percent
Effective Rental Income Tax: 10 percent
High rents — the highest in this study — keep France in the top 10 best places to own investment property, despite a low rental yield. The rental income tax is lower than in other notable European countries, like Spain and Ireland.
Rental Yield: 6.64 percent
Effective Rental Income Tax: 10.05 percent
High rents and rental yields keep Ireland in the top third of the best countries to own investment property, but climbing real estate prices warrant caution.
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Rental Yield: 5.13 percent
Effective Rental Income Tax: 2.73 percent
Although Thailand’s average yield is 5.13 percent, a medium-sized, centrally located property in Bangkok, for example, can generate yields of up to 8 percent. Combine that with a low effective rental tax rate and relatively high rent, and Thailand looks like a promising opportunity for investors.
Rental Yield: 5.48 percent
Effective Rental Income Tax: 7.5 percent
The survey’s fifth-highest rent and modest income tax offset Barbados’ lackluster rental yields. But you’ll need permission from the country’s Central Bank to purchase investment property.
Rental Yield: 8.61 percent
Effective Rental Income Tax: 20 percent
Indonesia’s effective rental income tax is one of the survey’s highest, but high rents and the survey’s highest rental yield should prompt investors to take a look.
Rental Yield: 5.75 percent
Effective Rental Income Tax: 2.08 percent
Panama’s high rental yield, low taxes and solid rents keep it high on the list of best countries to invest in real estate. Investors also benefit from Panama’s retiree-incentive program and robust property ownership rights for foreigners.
3. Costa Rica
Rental Yield: 7.48 percent
Effective Rental Income Tax: 5.16 percent
Although Costa Rica’s rents are comparatively low, it has the second-highest rental yield in the survey, and its effective rental income tax is lower than 72 percent of the other countries reviewed.
2. United Arab Emirates
Rental Yield: 5.19 percent
Effective Rental Income Tax: 5 percent
The UAE has a lot going for it. In addition to low effective rental income tax rates and high rents, the country is one of the most tax-friendly countries in the world, which leaves residents with more income to devote to rent.
Rental Yield: 6.13 percent
Effective Rental Income Tax: 4.06 percent
Despite the Philippines’ low cost of living, the country’s rental yield is a respectable 6.13 percent, and its effective rental income tax rate is one of the lowest of the countries surveyed, making this the best country overall for buying investment property.
Click through to read about some common real estate myths you should know.
Methodology: GOBankingRates determined the best countries to own investment property based on the following factors: (1) rental yield; (2) average monthly rent; and (3) rental income tax rate. Each factor was assigned a score. Those three scores were then combined to form an overall score to determine which country offers the highest potential income for property owners. Data was sourced from GlobalPropertyGuide.com, unless otherwise noted.