What real estate to buy for investments in 2025: strategies, formats, and actual profitability

Interest in foreign real estate is rapidly growing. Citizens are expanding the boundaries of their portfolios by investing in residential and commercial properties in Europe, Asia, the UAE, and Latin America. The reasons are clear — stability, profitability, capital protection. However, attractiveness does not exclude dangers. Risks of investing in foreign real estate exist at every stage — from choosing a country to owning the asset. The market promises high returns but requires precise navigation. Without a systematic approach, capital can turn into frozen problems. The task is to understand the structure of threats, explain the mechanics of their emergence, and develop a scheme for minimizing them.

Legal risks of investing in foreign real estate

Risks of investing in foreign real estate often manifest themselves during the transaction process. In some countries, there is no centralized registry system, documents are stored fragmentarily, registration is declarative rather than verificatory. This creates the risk of double sales, arrests, and restrictions on rights.

Issues with documents and titles

Insufficient verification levels, lack of notarization, outdated cadastral data are common sources of legal conflicts. The formal owner may not have actual rights, and part of the property may be in dispute. To avoid risks when buying property abroad, start with checking the title, analyzing ownership history, and verifying registration validity.

Currency risks: income depreciation and exchange rate volatility

Risks of investing in foreign real estate include currency fluctuations. Even with stable rent, income in local currency depreciates when converted into the investor’s main accounting currency. A loss of 10–15% arises solely from exchange rate dynamics. Some countries impose conversion fees, transfer taxes, and require a mandatory local bank account. This creates additional losses, reducing the overall investment profitability.

Political risks: influence of authorities and unstable environment

In some countries, authorities suddenly impose moratoriums on transactions with foreigners, tighten registration conditions, cancel residency permits through investments. Political risks turn a simple investment into a non-performing asset. This is especially true for developing regions where the political course often changes independently of economic stability logic.

Geopolitics and international relations

Risks of investing in foreign real estate intensify with the imposition of sanctions, asset freezes, restrictions on bank transfers. Conflicts between countries, regional crises, worsening diplomatic relations all affect the liquidity and manageability of the asset.

Technical condition and hidden defects

Risks of investing in foreign real estate are exacerbated during the assessment of the actual condition of the property. Visual impressions often create an illusion of quality, while the internal engineering component reveals critical deviations. Such situations often occur in the secondary market and when buying under-construction housing with minimal readiness.

Lack of reliable expertise

Official documents in a foreign transaction do not always provide a complete picture of the real technical condition. Sellers often do not provide an independent assessment of the structure, wear and tear, safety. Technical defects are hidden under cosmetic repairs, fresh finishes, and marketing brochures.

Most common risks:

• wear of engineering networks (water supply, sewage, electrical);

• lack of waterproofing and traces of past flooding;

• mold behind wall panels;

• cracks in load-bearing structures;

• improper ventilation and insulation;

• presence of unauthorized alterations.

A buyer who does not order a technical inspection takes on the obligation to rectify these defects. In some countries, especially with low control over the construction sector, this can result in costly reconstruction or loss of investment attractiveness.

Overstated characteristics and developer manipulations

On the primary market, risks of investing in foreign real estate are exacerbated by the inability to assess the property “live.” Developers actively use visualizations, 3D models, photo editing, where reality takes a back seat. Information in brochures is rarely accompanied by legally binding guarantees.

Common distortions:

• overstating square footage by including balconies, terraces, walls;

• indicating infrastructure that does not actually exist;

• substitution of concepts: “sea view” may mean a patch of blue between buildings;

• promises of profitability without calculating maintenance costs, taxes, management;

• concealment of mandatory payments — from utility connections to annual association fees.

Legal documents in foreign languages, lack of accurate translation, and nuances of local legislation make the situation even more vulnerable. The buyer may not realize that they acquired something different from what they thought — in terms of area, quality, layout.

Secondary market: area of special attention

Acquiring secondary real estate requires particularly careful technical inspection. The seller may not have full information on the current state of the property or may consciously conceal defects.

Special risks:

• lack of technical passport or non-compliance of the property with the plan;

• violations of construction norms and standards in the country;

• unregistered extensions, terraces, attics;

• unauthorized engineering works;

• structures without proper thermal and sound insulation.

The lack of unified state control (often observed in countries with a rapidly growing market) leads to a high probability of purchasing legally “problematic” real estate. Such property may later become unsellable or unsuitable for rental.

Practice of reducing risks in foreign real estate investment

The task is not just to acquire a property but to preserve capital, ensure profitability, and eliminate legal, technical, and political pitfalls. Clear actions will help build a foundation.

Step-by-step strategy:

1. Legal due diligence of the property. Check ownership rights, encumbrances, data accuracy in the registry. Use the services of a licensed lawyer in the country of acquisition. Verify the identity of the seller or developer.

2. Financial modeling of the transaction. Prepare income and expense forecasts. Consider taxes, currency conversion, maintenance fees, management fees. Apply scenario analysis: optimistic, base, stress test.

3. Technical audit of the property. Engage an independent engineer or architect. Check wear and tear, layout, compliance with the project, possibility of reconstruction. Document the findings in a report, attach it to the contract.

4. Selection of a verified broker or representative. Sign a contract with an agent, specify the commission, responsibilities, limits of authority. Check accreditation, license, reputation in the professional environment.

5. Tax system verification. Calculate purchase tax, ownership tax, capital gains, rent. Explore tax deductions or preferences for foreign investors.

6. Assessment of the country’s political risks. Analyze legislative initiatives, local authorities’ positions on foreigners, geopolitical factors. Avoid unstable regions with high levels of government regulation.

7. Opening a bank account and monitoring transfers. Use only official channels. Coordinate currency conversion, tax reporting, investment registration. Check the right to repatriate profits.

8. Registration of the transaction in the state register. Ensure that the contract is officially registered, ownership has transferred into full control. Obtain all documents confirming ownership rights.

9. Contracting for management. Formalize a contract with a management company. Specify terms, responsibilities, reporting system, sanctions for non-performance. Establish regular audits.

   

10. Systematic documentation check. Engage a notary registered in the country. Verify seller’s passport data, cadastral numbers, legal grounds for ownership.

Conclusion

Risks of investing in foreign real estate cannot be completely eliminated but can be managed with a well-structured system. A savvy investor does not avoid dangers but acts one step ahead. Priority lies in verification, transparency, and planning. Each stage requires clear calculation and a professional approach. Only then does an investment become an asset rather than a burden.

Economic instability forces investors to seek more reliable ways to preserve and increase capital. In times when financial market volatility and uncertainty are at their peak, assets with real physical value come to the forefront. Real estate — is one of the most attractive and proven options because it is considered a reliable asset. Its strength lies in its ability to withstand inflation, provide regular passive income, and maintain its value even in the most turbulent times.

In this article, we will examine in detail why real estate investments are considered strategically important and what specific advantages they offer in times of crisis.

Why is real estate a reliable asset?

Real estate is a reliable asset due to its ability to maintain value during external turbulence. In 2008, when the US stock market dropped by 38%, residential property prices fell on average by 19%, but by 2012 they had already started to rise again. In the UK, the buy-to-let sector showed a 9% annual yield increase despite the global downturn.

Financial instruments lose liquidity, while apartments, houses, studios, and commercial properties continue to generate rental income. Even during a pandemic, rental demand did not disappear — it changed: subleasing, short-term rentals, flexible formats remained in demand.

Yield and predictability of real estate as an asset

Profit consists of two elements: capital growth and rental income. In Europe, the average annual yield of residential properties ranges from 3 to 6%. In Berlin — 3.2%, in Lisbon — up to 5.5%, in Budapest — 6.1%.

With a smart approach, the asset shows a stable income higher than deposits and comparable to conservative funds. Against the backdrop of inflation, real estate protects capital. Rental rates are indexed, and the price per square meter grows along with consumer prices.

Risks of investing in real estate — what can be managed

Risks of real estate investments exist but can be controlled. Legal due diligence of the property, location analysis, asset type diversification reduce the risk of decline.

The real estate market demonstrates less volatility than the stock market. The MSCI IPD Global Annual Property Fund index showed a standard deviation of 5.6% over 10 years, while the S&P 500 showed over 15%.

Why is strategy more important than capital?

A novice investor uses different entry paths. The flip-resale strategy is suitable for active markets. Buy-to-let works as a long-term model, providing monthly cash flow. Value-add is applied when renovating outdated properties and capitalizing on them later.

Financial leverage enhances income. With an LTV of 70%, a 10% increase in property value yields a profit on invested funds of over 30%, through the use of borrowed capital.

Why is it very important to consider the geographical location of properties?

Real estate as a safe asset is manifested through international diversification. In Austria, owner rights protection is combined with high liquidity, in Georgia — simplified registration. In the UAE, tax-free rental income.

A room in Paris brings 4.1% income, a studio in Tbilisi — up to 8%, an apartment in Dubai — 6.5% with high liquidity. The model works in both developed and developing economies.

What is important for a novice investor to consider?

The first step to successful investments is understanding the factors influencing the income and stability of the asset. A novice investor analyzes not only the price but also the prospects of the property in the long term.

Before starting to invest in real estate, it is important to consider:

• the level of profitability in the region (e.g., Latvia — 5%, Czech Republic — 4.2%);
  
• infrastructure and transport accessibility of the property;
  
• housing status: apartments, studios, flats, commercial;
  
• market regulations (taxes, rental restrictions, licensing);
  
• potential location growth (new roads, universities, business clusters);
  
• seasonality of rental demand (resort areas, student cities);
  
• probability of vacancy (up to 15% in Eastern European countries).
  

This comprehensive assessment helps avoid common mistakes and choose an investment with a predictable outcome. The deeper the analysis, the higher the chance of stable income and capital preservation. Such due diligence reduces risk and increases investment efficiency.

How to deal with inflation?

Residential and commercial properties serve as a reliable hedge for capital. They can redistribute the impact of inflation in favor of the investor. Unlike money losing purchasing power, square meters appreciate, especially with limited supply.

In Germany, the housing price index from 2010 to 2023 increased by over 65%. Over the same period in the US — almost 75%, with the inflation index around 32%. Similar dynamics are observed in Turkey, Spain, Poland.

Inflation increases construction costs, and therefore the final price of properties. In long-term rentals, index adjustments can be included, compensating for rising consumer prices.

Real estate — a cornerstone for financial growth

The benefits of real estate investments go beyond income and stability. This asset integrates into any financial strategy: from capital accumulation to retirement planning.

Properties become collateral for other transactions, form an active part of the balance sheet, strengthen positions when obtaining financing. Using bank credit secured by real estate reduces the cost of borrowed funds, opening up opportunities for scaling.

The peculiarity lies in the fact that the asset generates income and a platform for other investments. Thus, ownership is a reliable asset not only by itself but also as a cornerstone for financial growth.

Is real estate a reliable asset?

Yes. An asset capable of surviving fluctuations, regulating risks, protecting capital, and generating income. This instrument has proven its reliability in crises, coped with inflation, and adapted to consumer changes. Investments are of interest to both beginners and experienced investors. It is not just a way to earn money but also a part of a stable portfolio.