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IPWIC Index

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Risk versus Return

IPWIC has taken a very specific approach to quantifying all of our overseas property investments with a number based on a scoring index. This index is calculated by considering the following factors.

  • Political stability
  • Economy
  • Tourism / accessibility
  • Property Market
  • Taxes / Costs
  • Corruption
  • Risk

Every project promoted has undergone rigorous checks in order to ensure that the Investment Index is as accurate as possible. The index score on every project is accompanied by a full explanation of the result and it does follow that the lower the number the higher the risk, but the greater predicted return, and the higher the number, the lower the risk and lower predicted return.

Low Score

High risk investment with uncertainties in the market. These investments are often the ones in new emerging markets where predicted returns are high but entry level prices are low. Can be used for quick turn around strategies but as time goes by risk lessens.

Middle Score

Medium risk investment with medium return. These are the most attractive investment opportunities to most investors. Good Medium term investments

High Score

Low risk investments, usually is stable markets (eg spain) where predicted return is lower than other more emerging markets. Usually good long term investments.

The graph below demonstrates the relationship between risk and return.

Considerations

Political / Economic risks

  • Is there political stability?
  • How stable is the local economy?

Financial Risks

  • Are non resident mortgages available?
  • What are the interest rates on borrowing?
  • Are there currency risks?
  • What are the buying / transaction costs?
  • What taxes are payable? Is there a double taxation treaty with your country of residence?
  • What is your break even point? (ie at what rate does your revenue match your costs)

Environmental / Geographical Risks

  • Climate changes
  • Building restrictions and regulations
  • Hurricane / Earthquakes
  • Surrounding land usage

Market / Liquidity risks

  • How stable is the property market. (Cycle stage)
  • Will other markets have an effect on your chosen market?
  • How strong is the resale market (Exit Strategy). Will demand be as high as supply?
  • Is there likely to be over supply of properties after time?
  • Will there be a strong rental market?
  • Where is the origination of the demand for rental? Foreigners or Locals?

Legal Risks

  • Can you use an independent lawyer that speaks your language?
  • Is the purchase contract fair to all parties?
  • Is the purchase contract re-assignable allowing a "buy to flip" strategy?
  • What protection is available to the foreign investor? Are their bank guarantees or construction insurance?
  • What title guarantees are there?
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