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Investing into real estate by proxy

JustAnotherNomad

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Oct 18, 2019
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My question is inspired by @dziter ’s post here:

I have been thinking about how you can get a mortgage at decent interest rates to invest into real estate in a country without being resident.
Usually, it is either very difficult to get access to financing for non-residents or the interest rates are high. And on top of it, you usually need to have a lot capital to start with. But of course what’s interesting about real estate is the leverage you can get through a mortgage, especially at low interest rates.

My suggestion in the above thread was to loan money to relatives. But they would need to have a solid income, otherwise they would not be able to get a loan, or the interest rates would again be higher. If your parents are retired, their income might be quite low.
Anybody have any other ideas?
Could it make sense to simply hire your parents through your offshore company? Or to have your parents set up a local company that has a contract with your offshore company, and then have that local company hire your parents? Then they would have an income. Sure they would have to pay tax as residents, but maybe that could be offset by lower interest rates? They would also certainly have deductible expenses for buying real estate in their own name. Once they have bought the real estate, you could also fire them again or close the company.
Would something like that work? Or is it just a big risk because it would create ties to your home country/increase the risk of an audit?
 
In the UK you can use a proxy who has to be a resident to buy the property and use many different avenues to both have security and control.

As this is not on the MTG I cant go into much detail what you have said is viable but it needs to be done with diligence.

You are better to use a proxy than family members because of the link.
 
in case of UK, without considering many other aspects at this point, one major problem would be taxes including one stamp duty land tax (SDLT) applicable on acquisition. There was a lot going on during the last few years introducing various regulations to reduce foreign investment in real estate..

True but you have to pay some form of that regardless of what country you buy in.
The current tax incentive has dramatically reduced SDLT in the UK to boost the market.

There are many legal ways of doing it and making it work including tax mitigation.
 
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I have been thinking about how you can get a mortgage at decent interest rates to invest into real estate in a country without being resident.

Simply work with an international bank resident in your of income that has a branch in your country of investment to obtain a lombard loan. You can get 12 month loan rates as low as 1.5-2% from a brokerage or private bank. You then rollover the loan principle each year and just be paying the interest. However if you don't have the assets i.e a portfolio of investments to back any loan then a cross border mortgage will not have favorable conditions.
 
Simply work with an international bank resident in your of income that has a branch in your country of investment to obtain a lombard loan. You can get 12 month loan rates as low as 1.5-2% from a brokerage or private bank. You then rollover the loan principle each year and just be paying the interest. However if you don't have the assets i.e a portfolio of investments to back any loan then a cross border mortgage will not have favorable conditions.

Yeah, that’s the thing. I was thinking about getting leverage. If you can’t get a loan of more than your net worth, it’s not that exciting to invest into real estate.
Unless maybe if you could use the first property as collateral for the next one?
 
Very interesting! Can you give some more details regarding what is more difficult in Spain?
It is more difficult to obtain a high LTV on quality properties in Spain now. Can still get 100% but not so great quality stock. Can get 70% loans max there on resales. 100% is still achievable in Portugal on bank repos, 75% on normal sales. Interest rate at 1.5% is pretty good, even less on some banks spreads.
 
Isn’t it more of a vacation home market on the Algarve? Isn’t that more risk? What about expected appreciation? What do you think about investing in the outskirts of Lisbon, for example? Or in Porto (which seems cheaper than Lisbon)?

What about Spain? I think there are some tax benefits once you own multiple properties?
 
Isn’t it more of a vacation home market on the Algarve? Isn’t that more risk? What about expected appreciation? What do you think about investing in the outskirts of Lisbon, for example? Or in Porto (which seems cheaper than Lisbon)?

What about Spain? I think there are some tax benefits once you own multiple properties?
Yes, the Algarve is more vacation, but there is also a great long term rental market there. Prices have not appreciated on the Algarve quite considerably over the last 5 yrs, and it hasn't depreciated in the current climate. You also have the NHR regime in Portugal that we can work with. Depends how far from the outskirts of Lisbon you want to invest...both Lisbon and Porto have appreciated madly.
 

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