Risk is an inevitable part of any investment, and real estate is no exception. While it’s impossible to eliminate all potential pitfalls, understanding the key risks and knowing how to mitigate them can help protect your investment.

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Legal systems and regulations vary from country to country. Mistakes in the transaction process can result in significant financial losses – or even the complete loss of your investment.

Legal complexities can be among the most unexpected and serious challenges when buying property abroad – sometimes even leading to a complete asset loss. In Bali, for example, inexperienced investors sometimes purchase villas without verifying the necessary permits and documentation, including a construction permit, zoning certificate, and proof of tax compliance. If local authorities discover an unauthorized development, it can be demolished without compensation.

Chief Legal Officer, BIRDNECK Investments

Study local laws on ownership rights, land use, taxation, and other legal factors that could affect your property.

Make sure every term and condition aligns with your interests. If anything is unclear, seek legal advice. Always have documents translated into your native language for full understanding.

Ensure the seller has full legal authority to transfer ownership and that no legal disputes or restrictions apply to the property.

Find a lawyer specializing in real estate law in your target country and consult them on all legal aspects before making any commitments.

Real estate regulations can shift over time. Factor this into your investment strategy and be prepared to adapt to new requirements.

Beyond standard financial risks, investors may encounter unexpected factors that impact both capital and returns. Currency fluctuations, for example, can significantly increase mortgage payments or monthly expenses. Tax obligations also vary widely by country, sometimes leading to unpleasant financial surprises.

Some developers present attractive profit projections without factoring in tax expenses, making returns seem higher than they actually are. And that's just one factor that can dramatically extend the payback period. That’s why we regularly work with analysts who double-check developer financial models and build independent forecasts – accounting for taxes, maintenance costs, booking platform fees, and more.

R&D and Developer Relations, BIRDNECK Investments

Analyze current prices, supply and demand, and economic trends to make well-informed decisions and avoid buying at the wrong time.

Familiarize yourself with rental income and capital gains taxes and check if foreign investors qualify for any tax incentives.

Ensure you’re working with an expert who understands both the legal and financial landscape of your chosen market.

Factor in not only the purchase price but also taxes, transaction fees, maintenance, and potential renovation costs when calculating your total investment.

To minimize potential losses from exchange rate fluctuations, explore hedging strategies or fixed-rate financing options.

Avoid putting all your capital into a single property. Spreading investments across multiple assets reduces risk if one property underperforms.

Language barriers and cultural differences can hinder communication with locals, affecting property management, problem resolution, and access to critical information.

Speaking the local language isn’t enough — you also need to respect traditions. Our Balinese partners shared how they conduct purification ceremonies before construction. They invite priests to perform rituals and make offerings to ensure the land is blessed by higher powers.

Founder and International Investment Strategist at BIRDNECK Investments

Experts specializing in foreign investments often have experience navigating cultural and language differences, helping you avoid common pitfalls.

Cultural differences can impact business processes and partnerships. Respecting local customs and being open to adaptation will foster stronger relationships.

Armed conflicts, sanctions, and other geopolitical changes can negatively impact the value of your investment property, its liquidity, and even your ability to access it freely.

Diversification is everything. To protect your capital from «black swans», you need to spread it across different countries and business models. If you have a limited budget, consider fractional ownership in properties across various countries. Additionally, a well-balanced portfolio should always include both conservative assets and riskier but high-yield investments. You can find a real example of an investment portfolio diversified across different jurisdictions and business models here—this is an actual case from one of our Club members.

Founder and International Investment Strategist at BIRDNECK Investments

Consider how you would act in a crisis situation. Find international partners specializing in overseas investments—they usually have experience working with different cultures and languages, helping you avoid many potential mistakes.

Some insurance companies offer policies that cover losses related to political events or legislative changes, providing an extra layer of protection for your investment.

BIRDNECK Share

Remote property management is a challenging task for any investor, especially when it involves repairs, regular maintenance, or renting out the property.

Our team selects investment properties that provide 100% passive income, meaning we only work with projects that have a reliable property management company.

For example, in our project in Peru, the contract with the management company states that they handle weekly property maintenance and carry out minor repairs as needed. The agreement also includes provisions for crisis situations. For instance, the management company has the right to file a police report and impose fines if a tenant causes damage to an investor’s property.

There is even a contingency plan for pandemics, ensuring that during such periods, maintenance costs are reduced to the minimum necessary to keep the property in good condition. Only with such management companies can you create a true passive income stream rather than a source of constant stress and headaches.

Chief Legal Officer, BIRDNECK Investments

Rely on reviews from other investors.

Clearly define their responsibilities, deadlines, and payment terms. Ensure the contract covers essential aspects such as maintenance, staff issues, and regular performance reports.

Keep track of their activities and performance to stay informed and respond quickly to any issues.

Consider self-management, hiring a local company, or partnering with other investors. Each option has its pros and cons, depending on your resources and goals.

This will help prevent rental downtime due to unforeseen maintenance issues.

Investment risks are inevitable, so learning to manage them is essential. To avoid dealing with countless details on your own, book a personal consultation with BIRDNECK share. Discuss your investment strategy with an expert in international real estate.