Investment Properties Abroad - Factoring in Currency Risk

Purchasing investment properties abroad is an investment strategy that many people utilize at some point. The foreign real estate market can present you with great opportunity under the right circumstances. However, you will need to be aware of the currency risks that are associated with this type of investment.

Currency Risk

Investing in a foreign property can provide a regular source of rental income, as well as appreciation in the property value. However, when taking on this type of investment, you should consider how currency values contribute to your profit level. You might think that you are making a certain amount of money, but when you try to convert the foreign currency into your own domestic currency, it might be worth a lot less than you had calculated. This currency risk can result in not achieving significant gains from your investment. Therefore, investments that formerly seemed very attractive could lose some of their luster.

Investment Considerations

When investing in a foreign market, you will want to pay special attention to the exchange rate between the two currencies involved. You will want to wait until the exchange rate is in your favor before making any currency transactions.

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