Investing in Real Estate Overseas: A Guide to Maximizing Profits and Mitigating Risks with Reental

The world of foreign investment can seem like a mysterious territory, full of uncertainty and fears. The idea of putting your money in property in a distant country can be overwhelming and full of unanswered questions.

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What unknown risks might be waiting around the corner? How can you know if you're making the right decisions in a real estate market that you don't know well? Fear of the unknown can paralyze you and prevent you from taking advantage of opportunities that exist beyond your borders.

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But we're here to help you overcome those fears and turn them into exciting opportunities. You'll discover intelligent strategies and useful information that will allow you not only to understand and mitigate risks, but also to make the most of the earning potential in foreign markets.

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Reental: Growing and Diversifying Investments

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Reental continues to grow at the speed of light, with more than 50 properties acquired thanks to the investments of all Reentels. As you may know, our vision is the democratization of real estate investment, which is why we work every day to continue growing.

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We came to the conclusion that, in order to achieve our objectives, it is essential to expand our horizons beyond the borders of Spain. At Reental, we understand that in the investment world, diversification is the key to strengthening our portfolios and, even more importantly, to protecting ourselves from economic crises that may arise in our country of origin.

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That's why we've embarked on an exciting journey in search of properties in different nations. This strategy gives us the ability to mitigate the impacts of indigenous crises and keep our assets safe and growing.

For example, we have taken the tokenization of properties in US dollars to a new level, offering you diversified investment opportunities in a variety of markets and sectors.

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The Value of Diversification in Real Estate Investments

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While we know that there is an exchange rate risk, what matters here is to be able to cover and reduce risks in your portfolio. Aim more to diversify simply because of the market itself, than in terms of profitability. Diversifying by market is essential, and strategies are deployed here for mitigate risks and maximize profits.

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1. Diversification by Market: Behavior of the Price per Square Meter

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One of the key approaches to diversification is to observe the behavior of the price per square meter in different real estate markets. Compare how prices have behaved in locations such as Florida versus Spain.

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To better understand the importance of diversification by market, let's look at some significant data.

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According to the real estate market report of Zillow, the average price per square meter in Florida in September 2019 was $238. By September 2020, the average price per square meter had increased to $252, representing an increase of 5.9%. By September 2021, the average price per square meter had increased even more to $276, representing an increase of 9.5%. This steady growth suggests that Miami is a booming real estate market and that investment in this area could be a solid strategy.

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Valencia, Spain, is another market that has experienced an increase in the price per square meter.

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According to the price report of Idealist, the average price per square meter in Valencia in August 2022 was 1,366 €/m2, representing an increase of 7.2% compared to August 2021. In addition, the average price per square meter in Valencia has increased by 12.5% compared to August 2020. These data show that, even in more established markets such as the Spanish one, there are still investment opportunities.

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Malaga, another Spanish city, also presents a growth scenario in the real estate market. According to an article by The Confidential, the price per square meter in Malaga in 2023 is 2,440 euros, 9.1% more than the previous year and almost 30% more than in 2018. This constant growth reinforces the idea that diversifying by market can be beneficial for investors.

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2. Market Liquidity in the United States and Mexico

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Liquidity is a critical factor when considering investments abroad. The real estate markets in the United States and Mexico offer significantly high levels of liquidity compared to others. The ease of buying and selling properties is a valuable asset, meaning you can adjust your portfolio more quickly if necessary.

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In Mexico, the mortgage market has experienced significant developments in recent years. According to a report by Forbes, 2022 was positive in terms of mortgage loans in Mexico, where there was an average interest rate of 9.55%, representing an increase of 30 basis points compared to 2021. In addition, in 2021, banks granted 155,000 mortgage loans, and for the whole of 2022 it is estimated that the placement was 153,000. By 2023, growth in mortgage placement is expected to continue, indicating a solid and growing mortgage market in Mexico.

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On the other hand, according to a report by BBVA Research, although the number of mortgage loans granted in 2022 in Mexico decreased by 8.9% compared to 2021, the total amount granted is still significant. Commercial banks placed mortgage loans for almost 300 billion pesos in 2022, 70% more than public institutions. These data indicate that the mortgage market in Mexico remains attractive to investors, despite fluctuations in the number of loans granted.

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This information further highlights the liquidity and attractiveness of the Mexican real estate market for investors, which could be considered when diversifying investments abroad..

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3. Investing Above the Average Exchange Rate

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Investing above the average exchange rate is an advanced strategy that offers significant benefits. By doing so, you reduce the loss margin and increase the profit percentage if the exchange rate decreases. Monitoring and taking advantage of opportune moments in the foreign exchange market is essential to this strategy.

If you notice that the current exchange rate is below the historical average, it could be an opportunity to invest. The historical average of the exchange rate for the last 10 years was 1 euro = 1.20 dollars, and the average for the last 5 years was 1 euro = 1.18 dollars.

Take advantage of the Exchange Rate: Imagine that, a few years ago, you researched investing in a property in a foreign country with a growing economy. At that time, the exchange rate was 1 euro = 1.15 dollars, and the historical average for the last 10 years was 1 euro = 1.20 dollars.

Over the years, you watched the EUR/USD exchange rate fluctuate. While it's true that an increase in the exchange rate could affect the value of your investment in euros, it's also important to note that it would have a positive impact in terms of U.S. dollars. This means that, although the value of your investment in euros may decrease, the value in dollars could increase, offering an advantage in the diversification of your assets.

4. Focus on Market Diversification

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By distributing your investments, you are less exposed to the volatility of a single market or exchange rate. This helps balance risks and opportunities in your portfolio.

Investing in different currencies and markets allows you to take advantage of both moments of strength and weakness in exchange rates. The United States, with its solid and established market, and Mexico, with its economic growth and favorable credit policies, offer unique opportunities for investors.

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5. Miami: An Attractive Investment Destination

Miami has a constantly growing economy supported by diverse industries, including tourism, technology, finance and construction. Its strategic location on the east coast of the United States makes it a key entry point for international trade. In addition, the city has excellent schools, low unemployment and crime rates, and landlord-friendly leasing laws.

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Miami is a prominent example of an attractive market for investors. In addition to the above points, this American city offers numerous advantages. Property prices have continued to rise over time, providing the possibility of a good long-term return on investment.

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The housing boom of Florida is now worth more than New York (3.8 trillion dollars compared to 3.7 trillion dollars), and Miami's housing boom has pushed it to be among the five major metropolitan areas in the United States. UU. (with a housing stock valued at +1 trillion dollars, residential homes in the Miami metropolitan area increased by 8.6% and Key Biscayne 3/2, more than 22%), while the value of residential properties in San Francisco has fallen by 8.8% since last year.

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6. Mexico: Growth and Profitability Potential

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Mexico is a country that has demonstrated sustained economic growth in recent years. According to a report from the ECLAC, Mexico has achieved an average economic growth of 2.5% in the last five years. This economic growth is a solid indicator of the country's stability and its attractiveness to investors.

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Mexico's real estate market offers significant return potential. Its focus on the rental oriented to vacation accommodation makes it especially promising for long-term investment. La Demand for vacation accommodation in Mexico continues to grow, which presents opportunities for real estate investors. Responsible and sustainable tourism is a trend in Mexico, which has led to an increase in the supply of vacation accommodation in rural areas and local communities. This opens the door to investments in properties aimed at meeting this growing demand.

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In addition, the post-pandemic economic recovery in Mexico has boosted the presence of Mexican investors in the U.S. real estate market. This geographical expansion and diversification of investments is a key strategy for mitigating risks and maximizing profits, as mentioned above.

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The business environment in Mexico is also favorable for investors. The country has implemented policies that attract foreign investors and promote economic growth. According to a report from the OECD, Mexico has improved its business environment and has implemented structural reforms to improve competitiveness. This creates an environment conducive to making sound and profitable investments.

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As for Mexico's overall economic growth, according to a report from the World Bank, the country's GDP has experienced an average growth of 2.3 per cent over the past 10 years.

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On the other hand, the IMF increases its growth outlook for 2023 with a prosperous outlook for the coming years. In addition, the housing sector has played an important role in the Mexican economy, representing a 5.7% share of the national GDP in 2021, according to a report from the INEGI.

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In terms of housing prices, data support investment in the Mexican market. According to an article by The Economist, the price of homes marketed with a mortgage loan increased by 7.9% during the first half of 2022 compared to the same period in 2021, according to records from the Federal Mortgage Society (SHF). El SHF Index House Prices also showed significant appreciation in the first half of 2021 and the second quarter of 2021. These indicators highlight the potential for profits in the Mexican real estate market.

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Bonostruck → Average Historical Exchange Rate (Eur/Usd)

• Historical: The average annual exchange rate of the euro to the U.S. dollar from 1999 to 2022 was $1.07 per euro
  
  
• Last 10 years: The historical average of the EUR/USD exchange rate for the last 10 years was 1 euro = 1.20 dollars
  
  
• Last 5 years: The average EUR/USD exchange rate for the last 5 years was 1 euro = 1.18 dollars
  
  
• Last year: The EUR/USD exchange rate has fluctuated over the past year, but according to historical data from Investing.com, the average exchange rate in July 2023 was $1.1053 per euro

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In conclusion, investing in real estate abroad can be highly profitable if risks are effectively addressed. Portfolio diversification, consideration of market liquidity and intelligent investment in exchange rates are essential strategies. Miami and Mexico stand out as attractive investment destinations that offer unique opportunities to maximize profits.

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At Reental, we are proud to provide access to these exceptional investment opportunities in the international real estate market. Our real estate projects in the United States and Mexico are designed to allow you to take full advantage of these exciting markets. We invite you to join our platform and continue to enjoy the expansion and growth of your investment portfolio.

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