International REI: The Importance of Money Transfer Companies | Think real estate
Many real estate investors may not think about it, but money transfer companies could have a major impact on their income. Any investor who really wants to make a lot of money knows that portfolio diversification is crucial for success. The more varied your portfolio, the more secure you are, especially in times of global economic crisis. Real estate investors are more secure by default because property is a more stress-resistant asset than stocks or bonds. However, real estate investing also comes with risks. Diversifying your real estate portfolio can also help. And for maximum impact, you should invest in properties overseas. This is when money transfer services can make a huge difference.
Why use money transfer companies and invest in real estate abroad
The security of portfolio diversification could be the number one reason for investing in overseas real estate. However, this is far from the only one. The best thing about international real estate investing is that you get all of these benefits at the same time if your strategy is right.
Other important advantages of investing in real estate abroad include:
- Higher returns.
Very often the return you get from overseas property will exceed domestic investments. This may not only be because prices and demand are better in some other countries. But in some cases, you can also save money through taxes.
- Fiscal advantages.
Taxation is a very complicated issue for international real estate investors. Therefore, you will need professional help to manage your taxes in each country. However, even with this added cost, you may be able to get a better return on your overseas investment due to differences in tax laws.
- Avoid problems with demand.
If you invest in rental property, you are heavily dependent on the economy, which greatly affects demand. To clarify, you might face some issues at the national level if your country is not doing very well at the moment. However, there are many places in the world where this is not a problem, even now during the COVID-19 pandemic. Several real estate markets around the world remain hot despite the circumstances. If you invest in these now, you may be able to cut your losses overall.
Of course, it is certain that investing in real estate abroad can be quite expensive. However, money transfer companies help a lot in solving this problem. They allow you to reduce the costs of each transfer. This means that you can save up to 5-7% on bank charges and exchange rates only.
International real estate investment: risks and costs
A major problem with international real estate investing is that buying and selling real estate abroad is risky. The problem here is that these transactions usually involve foreign exchange (FX) trading. As such, they are dependent on the exchange rate, which is not stable on a good day. At this time, in particular, Foreign exchange markets are extremely volatile because of the global economic crisis. This means that as an investor you are at higher risk than usual.
It is because of these risks and the high costs of cross-border bank transfers that money transfer companies are gaining popularity. Note that these companies differ a bit. This means that each of them has their own advantages and disadvantages for investors, in particular. But you might be happy to know that when you need to transfer money to pay for real estate, there are top 3 companies for that. They are Moneycorp, OFX and TransferWise. These are the three in particular, as they are the biggest and most trusted brands in the industry available in the United States.
The reliability and transparency of the money transfer provider are also risk factors for international real estate investors. Unfortunately, this branch of the money transfer industry is not well regulated. Therefore, many businesses are run by scammers who want to steal your money in one way or another. It could be outright theft, compromising your personal data, or charging you with hidden charges.
How much money do you save with money transfer companies?
Money transfer companies can be trusted that have achieved industry leader status. Hence, you don’t have to worry about these potential issues with them and can focus on choosing the best rates.
The rates and fees offered by money transfer companies are the main reason why investors prefer them over banks. To get an idea of ââwhat you’re wasting on a bank, consider that the average fee for an outgoing international transfer is around $ 40 and up. It’s not that bad, right?
But you should also take into account that by sending USD to another country, you will have to exchange the currency. This is a mandatory process over which you have no control. At this point, you will be entirely dependent on the exchange rate used by the banks. The increase in this rate may be 2% or more mid-market rate.
All things considered, a large international bank transfer can cost 3-7% in total.
However, money transfer companies often charge no fees or keep them very low. Plus, they use very weak markup. Plus, with many companies, you’ll get a discount for a large transfer. This means that you may be able to get a transfer at a rate close to the middle of the market and at no cost. This means that the transfer will cost you less than 1% in total.
That alone can make your real estate transaction much more attractive.
Why are money transfer companies so much cheaper?
Money transfer companies can offer much better rates than banks because they operate in a completely different way. First of all, they have much lower overheads. These companies are based online and have only a few small offices.
In addition, they are not as tightly regulated as the banks. This means that they are not subject to excessively high taxes. They also don’t have to invest heavily to get the documents and other things needed to get the money across the border.
It is very important to understand that unlike banks, there is no real cross-border transaction with money transfer companies. Instead, there are two domestic transfers. One is from your own account to the company account in your country. The other is from the company’s account to the recipient, all done in the recipient’s country. This simple and straightforward scheme keeps the transfer cheap but perfectly legal.
Also note that money transfer companies trade currencies wholesale and earn money on the volume they traded. That’s why they can keep the exchange rate mark-ups low and even offer the mid-market rate on occasion.
Grow your overseas real estate empire for maximum income
The year 2020 has been extremely difficult for investors and it has caused many people to reassess their strategies. There is no doubt that real estate investors need to prepare and improve their game in 2021. Investing in overseas properties is the best idea right now when minimizing risk is a must. Money transfer companies make buying property cheaper and safer all over the world.
Therefore, they don’t just give you a chance to buy better real estate because of the money you save. In addition, you can reduce currency risk by using hedging services.
There are many money transfer companies available today, so you need to choose carefully. Choose one that offers good rates, additional services (hedging, currency advice, etc.) and has a good reputation and high customer trust rating.