What to Consider When Investing in Real Estate Abroad?
Lukas Alijosius, Head of Business Development at Röntgen
For several years now, real estate investment abroad has drawn the interest of Lithuanians as a way to manage geopolitical risks and, in some cases, achieve higher returns. While "greener grass" can indeed be found elsewhere, Lukas Alijosius, Head of Business Development at the crowdfunding platform Röntgen, highlights the key areas where investors need to remain exceptionally vigilant.
Lithuanians' affinity for real estate is evidenced by the fact that Lithuania has the highest homeownership rate in the EU, reaching approximately 87%. Furthermore, the share of non-performing mortgages in Lithuania is at a record low of just 0.7%, indicating that Lithuanians take exceptional care of this particular asset class.
While official, systematized data on Lithuanian residents' foreign real estate investments is unavailable, Alijosius told attendees at the Financial Freedom Forum in Vilnius that interest is significant. This trend is driven by factors such as geopolitical risk management, exposure to new asset classes, and, in certain instances, higher interest rates. Lithuanians invest in foreign real estate both directly (as rental property) and through crowdfunding platforms, bonds, or other financial instruments.
"Lithuanians feel they understand real estate; they love it and care for it. However, every new housing market brings numerous unknowns, differences, and local specifics. Simply put, a similar property in Lithuania and another EU country does not automatically mean similar profitability, taxation, processes, timelines, or countless other nuances and risks. One of the greatest risks is making an investment decision without understanding the specifics of the foreign market and the particular property," said Alijosius.
Among the most striking examples, he mentions Spain, a highly popular destination among investors. In its major cities, the phenomena of "squatters" or legal tenants who suddenly stop paying rent are prevalent. After spending just one night in an apartment, evicting such individuals through the courts can take years and result in massive losses. While other international nuances may not be as dramatic, failing to account for them can significantly impact final returns or the overall investor experience.
Different Cities and Regions
According to Alijosius, larger countries often exhibit even more pronounced regional or city-specific market differences. These can hide both risks and opportunities.
"For example, across Finland in 2022-23, real estate prices fell by an average of 12%, and the number of transactions halved, with recovery only beginning to take shape this year. However, major cities were primarily 'responsible' for these figures. Conversely, in the Lapland region, vacation housing flourished after the pandemic, with local municipalities encouraging tourism and investment by simplifying bureaucratic procedures," explains the Röntgen representative, whose platform offered investment opportunities in Finland this year.
He also cites Italy, where national market growth has been passive in recent years, except for a few coastal tourist hotspots and major cities. Rome and Milan currently face a shortage of tens of thousands of homes, but since there are virtually no plots left for new construction, the focus has shifted to property conversions and splitting large old apartments into smaller units - processes with their own unique complexities.
"Therefore, it is crucial in every case to evaluate national, local, and segment-specific subtleties. National averages and trends do not necessarily reflect a specific city or region; even when captivated by 'hotspots,' it is essential to understand the broader context," says Alijosius.
Tax Surprises
Until at least 2026, Lithuania maintains a relatively simple and, in a European context, moderate tax regime for real estate investment via personal income tax or business certificates. This can create the impression that other countries will be similarly "friendly." However, they typically operate under different rules and rates, introducing double taxation risks and requiring additional time to manage them.
"Furthermore, parts of Europe have extremely high property transfer or notary fees, which can exceed 10% of the property value, as well as mortgage setup fees. For instance, prices on Italian listing portals are often quoted excluding these taxes. Consequently, the actual final cost of the investment will be noticeably higher, impacting the investment math," Alijosius explains.
He notes that in Europe, income from rental properties or earnings through financial instruments is often taxed "at the source" (i.e., in the jurisdiction of the asset, not the investor). Local tax rates are usually no lower than in Lithuania, and the investor may need to coordinate with the tax authorities of both countries to utilize double taxation avoidance treaties.
While these issues can be resolved by consulting tax professionals who understand the specific market, investors often overlook these nuances in their initial calculations. When investing through platforms, the operator should understand foreign specifics and assist investors, though it is vital to verify the operator's reliability, experience, and reputation.
Different Legal Systems
Beyond taxes, foreign real estate investors will encounter entirely different legal frameworks regarding mortgages, foreclosures, tenant relations, and many other details. Returning to the Spanish "squatter" example: even the country's constitution balances the protection of private property against the human right to housing, which can occasionally cause significant problems for owners.
"In Italy, one may encounter 'anti-usury' protections that prevent a debtor from being charged an interest rate higher than that set by the central bank for a specific type of contract. In Poland, registering a real estate mortgage takes an exceptionally long time, during which it has very limited legal power. In Finland, mortgages are registered without a notary, simplifying the process, but in many foreign countries, a mortgage does not automatically prohibit the transfer of the pledged property. It is impossible to list every nuance and quirk, but that is my main message: real estate in Lithuania and abroad is not the same," Alijosius asserts.
For those interested in foreign real estate, he recommends remaining vigilant and not oversimplifying opportunities down to just the listing price and projected return.
"Differences require a deep understanding and thorough analysis. Without this, you risk, at the very least, falling short of your initial impressions and expectations," says the Röntgen Head of Business Development.
What to Consider When Investing in Real Estate Abroad?
Lukas Alijosius, Head of Business Development at Röntgen
For several years now, real estate investment abroad has drawn the interest of Lithuanians as a way to manage geopolitical risks and, in some cases, achieve higher returns. While "greener grass" can indeed be found elsewhere, Lukas Alijosius, Head of Business Development at the crowdfunding platform Röntgen, highlights the key areas where investors need to remain exceptionally vigilant.
Lithuanians' affinity for real estate is evidenced by the fact that Lithuania has the highest homeownership rate in the EU, reaching approximately 87%. Furthermore, the share of non-performing mortgages in Lithuania is at a record low of just 0.7%, indicating that Lithuanians take exceptional care of this particular asset class.
While official, systematized data on Lithuanian residents' foreign real estate investments is unavailable, Alijosius told attendees at the Financial Freedom Forum in Vilnius that interest is significant. This trend is driven by factors such as geopolitical risk management, exposure to new asset classes, and, in certain instances, higher interest rates. Lithuanians invest in foreign real estate both directly (as rental property) and through crowdfunding platforms, bonds, or other financial instruments.
"Lithuanians feel they understand real estate; they love it and care for it. However, every new housing market brings numerous unknowns, differences, and local specifics. Simply put, a similar property in Lithuania and another EU country does not automatically mean similar profitability, taxation, processes, timelines, or countless other nuances and risks. One of the greatest risks is making an investment decision without understanding the specifics of the foreign market and the particular property," said Alijosius.
Among the most striking examples, he mentions Spain, a highly popular destination among investors. In its major cities, the phenomena of "squatters" or legal tenants who suddenly stop paying rent are prevalent. After spending just one night in an apartment, evicting such individuals through the courts can take years and result in massive losses. While other international nuances may not be as dramatic, failing to account for them can significantly impact final returns or the overall investor experience.
Different Cities and Regions
According to Alijosius, larger countries often exhibit even more pronounced regional or city-specific market differences. These can hide both risks and opportunities.
"For example, across Finland in 2022-23, real estate prices fell by an average of 12%, and the number of transactions halved, with recovery only beginning to take shape this year. However, major cities were primarily 'responsible' for these figures. Conversely, in the Lapland region, vacation housing flourished after the pandemic, with local municipalities encouraging tourism and investment by simplifying bureaucratic procedures," explains the Röntgen representative, whose platform offered investment opportunities in Finland this year.
He also cites Italy, where national market growth has been passive in recent years, except for a few coastal tourist hotspots and major cities. Rome and Milan currently face a shortage of tens of thousands of homes, but since there are virtually no plots left for new construction, the focus has shifted to property conversions and splitting large old apartments into smaller units - processes with their own unique complexities.
"Therefore, it is crucial in every case to evaluate national, local, and segment-specific subtleties. National averages and trends do not necessarily reflect a specific city or region; even when captivated by 'hotspots,' it is essential to understand the broader context," says Alijosius.
Tax Surprises
Until at least 2026, Lithuania maintains a relatively simple and, in a European context, moderate tax regime for real estate investment via personal income tax or business certificates. This can create the impression that other countries will be similarly "friendly." However, they typically operate under different rules and rates, introducing double taxation risks and requiring additional time to manage them.
"Furthermore, parts of Europe have extremely high property transfer or notary fees, which can exceed 10% of the property value, as well as mortgage setup fees. For instance, prices on Italian listing portals are often quoted excluding these taxes. Consequently, the actual final cost of the investment will be noticeably higher, impacting the investment math," Alijosius explains.
He notes that in Europe, income from rental properties or earnings through financial instruments is often taxed "at the source" (i.e., in the jurisdiction of the asset, not the investor). Local tax rates are usually no lower than in Lithuania, and the investor may need to coordinate with the tax authorities of both countries to utilize double taxation avoidance treaties.
While these issues can be resolved by consulting tax professionals who understand the specific market, investors often overlook these nuances in their initial calculations. When investing through platforms, the operator should understand foreign specifics and assist investors, though it is vital to verify the operator's reliability, experience, and reputation.
Different Legal Systems
Beyond taxes, foreign real estate investors will encounter entirely different legal frameworks regarding mortgages, foreclosures, tenant relations, and many other details. Returning to the Spanish "squatter" example: even the country's constitution balances the protection of private property against the human right to housing, which can occasionally cause significant problems for owners.
"In Italy, one may encounter 'anti-usury' protections that prevent a debtor from being charged an interest rate higher than that set by the central bank for a specific type of contract. In Poland, registering a real estate mortgage takes an exceptionally long time, during which it has very limited legal power. In Finland, mortgages are registered without a notary, simplifying the process, but in many foreign countries, a mortgage does not automatically prohibit the transfer of the pledged property. It is impossible to list every nuance and quirk, but that is my main message: real estate in Lithuania and abroad is not the same," Alijosius asserts.
For those interested in foreign real estate, he recommends remaining vigilant and not oversimplifying opportunities down to just the listing price and projected return.
"Differences require a deep understanding and thorough analysis. Without this, you risk, at the very least, falling short of your initial impressions and expectations," says the Röntgen Head of Business Development.
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"Trečia diena" UAB, which operates the Röntgen platform, is a licensed crowdfunding platform. The platform is governed by the EU Crowdfunding Regulation and is supervised by the Bank of Lithuania in accordance with the law.