By Don R. Campbell
Cutting Edge Research Inc.
Intro – Rule #1 – Rule #2
Remember, when buying outside of Canada, you are always at the whim of the currency markets, so make sure that you investigate that side of the equation. Find out how the currency performs. Ask these questions as a start:
If it is not the US dollar, is the country’s currency pegged to the US dollar?
If it is pegged to the US dollar, do you believe that their dollar will strengthen?
If the US dollar moves downwards, so will your net worth. Investigate if there are plans in the works to change to a floating currency or adjust to their internal conversion rate?
If it is floating – Is the local economy strong enough to support the current level of the currency? What do you expect the currency to do against the Canadian dollar during the time you own your property?
In both cases, how will the fluctuations affect your cash flow (rent collected in Canadian equivalent dollars) and the willingness of potential to travel to that country?
Can your investment value or potential income drop dramatically when their currency fluctuates?
These are questions that you MUST ask before going into a US or foreign currency market. Just another detail on your list of due diligence actions.