International REI: The Importance of Money Transfer Companies | Think Realty | A Real Estate of Mind
Investing Strategies

International REI: The Importance of Money Transfer Companies

International-Note-Investing

Many property investors might not think about it but money transfer companies could have a major impact on their revenue. Every investor who wants to actually make good money knows that portfolio diversification is crucial for success. The more variety there is to your portfolio, the safer you are, especially in difficult times of global economic turmoil. Real estate investors are safer by default, because property is a more stress-resistant asset compared to stocks or bonds. However, there are some risks in real estate investment as well. Diversifying your real estate portfolio can help here as well. And for maximum impact, you need to invest in properties abroad. 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 might be the number one reason to invest in real estate abroad. However, it’s far from being the only one. The best thing about international real estate investment is that you get to enjoy all these benefits at the same time if your strategy is good.

Other important advantages of investing in real estate abroad include:

  • Higher returns.
    Quite often the yield you get from a property overseas will exceed domestic investments. This can be not only because the prices and demand are better in some other countries. But in some cases, you also get to save money through taxes.
  • Tax benefits.
    Taxation is a very complicated issue for international real estate investors. Therefore, you’ll need professional help to manage your taxes in each individual country. However, even with this extra cost, you might be able to get a better ROI abroad due to the differences in tax laws.
  • Avoiding issues with demand.
    If you invest in rental real estate, you are heavily dependent on the economy, which greatly affects demand. To clarify, you might face some issues domestically if your country isn’t doing all that well at the moment. However, there are many places in the world where this isn’t an issue, even now during the COVID-19 pandemic. Several real estate markets in the world remain hot in spite of the circumstances. If you invest in those now, you might be able to reduce your losses overall.

Of course, there is a matter that overseas real estate investment can be rather expensive. However, money transfer companies help resolve this issue greatly. They allow you to cut the costs of every transfer. This means that you can save up to 5-7% on bank fees and currency exchange rates alone.

International Real Estate Investment: Risks and Costs

One major issue with international real estate investment is that buying and selling property abroad is risky. The problem here is that these transactions usually involve foreign currency exchange (FX). As such, they are dependent on the FX rate, which isn’t stable on a good day. Right now, in particular, FX markets are extremely volatile because of the global economic crisis. This means that as an investor, you are at a higher risk than usual.

It’s because of these risks and high costs of cross-border bank money transfers that money transfer companies are becoming more popular. Note that these businesses differ quite a bit. This means that each of them has its own pros and cons for investors, in particular. But you might be happy to know that when you need to transfer money to pay for a piece of real estate, there are top 3 companies for that. They are Moneycorp, OFX, and TransferWise. It’s these three in particular because they are the biggest and most trustworthy brands in the industry that are available in the US.

Trustworthiness 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 of the businesses there are run by frauds that want to steal your money in some way. This can be outright stealing, compromising your personal data, or springing hidden fees on you.

How Much Money Do You Save with Money Transfer Companies?

Money transfer companies that have secured the status of industry leaders can be trusted. Therefore, you don’t have to worry about these potential problems 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 some idea of how much you waste with a bank consider that the average fee for an outgoing international transfer is around $40+. That’s not so bad, right?

But you also need to consider that by sending USD to another country you’ll need to exchange the currency. This is a mandatory process that you have no control over. At this point, you’ll depend completely on the FX rate used by banks. The markup on this rate can be 2% and higher than the mid-market rate.

All things considered, a large international bank wire transfer can cost 3-7% overall.

However, money transfer companies often charge no fees at all or keep them very low. Moreover, they use a very low markup. Also, with many companies you’ll get a discount for a large transfer. This means you might be able to get a transfer at a near mid-market rate and with no fee. This means that the transfer will cost you under 1% in total.

This alone can make your real estate deal much more attractive.

Why Money Transfer Companies Are So Much Cheaper?

Money transfer companies can offer rates that are so much better than banks because they operate in a completely different manner. First of all, they have much lower overhead costs. These businesses are online-based and only have a few small offices.

Also, they aren’t as strictly regulated as banks. This means that they aren’t subject to exceedingly high taxes. They also don’t have to invest heavily in getting the paperwork and other things necessary to get money across the border.

It’s very important to understand that unlike when you are using banks, there is no actually a cross-border transaction with money transfer companies. Instead, there are two domestic transfers. One is from your own account to the company’s 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 allows to keep the transfer cheap yet perfectly legal.

Also, note that money transfer companies trade currencies wholesale and make money off the volume they traded. This is why they can keep FX rate markups low, and even offer the mid-market rate on occasion.

Expand Your Real Estate Empire Overseas for Maximum Revenue

The year 2020 was extremely difficult for investors and it made many people reevaluate their strategies. There is no doubt that real estate investors need to prepare and up their game in 2021. Investing in properties abroad is the best idea right now when minimizing risks is a must. Money transfer companies make it cheaper and safer to buy properties all over the world.

Therefore, they do not only give you a chance to purchase a better piece of real estate due to the money you save. Also, you get to reduce currency risks by using hedging services.

There are many money transfer companies available today, so you need to choose carefully. Pick the one that offers good rates, additional services (hedging, currency guidance, etc.) and has a good reputation and high customer trustworthiness rating.