Investing in foreign real estate is often seen as an easy way to preserve capital and generate passive income. However, in practice, it is precisely in these deals that investors most often face losses—due to legal nuances, inflated expectations of returns, and mistakes in choosing a location.
Countries like Thailand, Indonesia, and Portugal can indeed be profitable, but only with a sound approach and an understanding of the risks.
However, the reality is more complex. Investments in Thailand, Indonesia, and Portugal can indeed be profitable, but only with an understanding of the risks. Without this, even a promising market can lead to financial losses or capital being tied up.
To ensure that investments in overseas real estate are well-informed, it is important to consider not only the advantages but also the real limitations of each market.
Legal Restrictions: The Main Risk for Foreign Investors
The first thing an investor encounters when entering a foreign market is the legal structure of ownership. This is where the gap between expectations and reality most often arises, especially for those accustomed to a straightforward property ownership system in their home country.
In Thailand, foreigners are indeed prohibited from owning land directly. In practice, several models are used. The most straightforward is purchasing an apartment in a condominium, where foreigners are permitted to own up to 49% of the building’s floor area. This is a relatively transparent and common arrangement.
However, when buying a villa, the situation becomes more complicated. The most common approach is a long-term land lease (for example, a 30-year lease with renewal options) or a corporate structure. In practice, this means that the investor owns not the land as an asset, but the right to use it. A common mistake is to view such a purchase as classic property ownership.
A typical example: an investor buys a villa in Phuket without fully understanding the contract structure. A few years later, they face the need to renew the lease or encounter difficulties when reselling, because the legal model was chosen incorrectly from the start.
In Indonesia, including Bali, the main format is leasehold (long-term lease). The term can be 25–30 years with the possibility of renewal. But the key point is that renewal terms are not always guaranteed in advance and may depend on the landowner or market conditions.
For example, an investor buys a villa with a remaining lease term of 20 years. Formally, the property is cheaper, but in 10–15 years its liquidity may drop sharply if the renewal is not legally secured. This also affects the resale value.
In Portugal, the situation is more familiar: foreigners can own property directly. However, there are other nuances here that are often underestimated. These include taxes (including the annual IMI and rental income tax), maintenance costs, and regulatory changes.
For example, in recent years, Portugal has tightened regulations on short-term rentals (AL licenses), which has affected returns in popular tourist areas.
Thus, the main risk is not the country itself, but a misunderstanding of the legal framework. A mistake at this stage can affect the entire investment cycle: from purchase to resale.
The risk of inflated yield expectations
One of the most common myths is the expectation of a “guaranteed” yield. Many investors rely on developers’ marketing promises without considering the actual revenue structure.
In Thailand, especially in resort regions, returns can indeed be high during the high season. For example, in Phuket, a villa can generate significant income during the winter months when tourist traffic is at its peak.
But it is important to consider seasonality. During the low season, occupancy rates may drop, and income may fall. If an investor focuses only on “peak” figures, their expectations will not match reality.
In Bali, the situation is slightly different. The rental market is growing, but competition is growing along with it. In popular areas, a large number of new villas are added each year.
Example: An investor buys a villa in Canggu, targeting a 12–15% return. But a year later, several new projects open nearby, and without professional management, occupancy rates drop. As a result, the actual return ends up closer to 7–9%.
In Portugal, returns are typically lower—often in the 4–7% range—but they are more stable. However, another risk factor comes into play here: regulation. Restrictions on short-term rentals can significantly impact income, especially in Lisbon and Porto.
This is precisely why it is important to consider not the “promised” yield, but the actual yield: taking into account taxes, management costs, vacancies, and seasonality.
Location: An Underestimated Risk Factor
Location is a factor that directly influences an investment’s liquidity, profitability, and stability. Yet it is precisely this factor that is most often underestimated.
Even within a single market, the differences can be stark. For example, on Phuket, the west coast (Bang Tao, Kamala) is traditionally more liquid than less developed areas. This is due to infrastructure, beaches, and international demand.
In Bali, the difference between areas is even more pronounced. Canggu and Uluwatu attract a large number of renters, but competition is high there. In less developed areas, you can buy cheaper, but demand may be limited.
Example: an investor buys a villa in a remote location at an attractive price. However, the lack of infrastructure and low tourist traffic mean that the property sits vacant for most of the year.
The situation is similar in Portugal. Lisbon and Porto offer high liquidity, while less popular regions require a longer investment horizon.
Choosing the wrong location is one of the most costly mistakes. It affects everything at once: returns, liquidity, and the ability to exit the investment.
Property Management: The Hidden Factor in Yield
Many investors view real estate as a passive asset. In practice, it is a managed business, especially in resort regions.
In Thailand and Indonesia, management plays a critical role. It includes property marketing, pricing, tenant relations, cleaning, maintenance, and communication.
A simple example: two identical villas in the same area can yield different returns. One has professional management and high occupancy, while the other experiences vacancies due to poor marketing.
Without a management company, the investor faces a number of problems: low occupancy, ineffective pricing, deteriorating reviews, and a drop in ratings on rental platforms.
In Portugal, management also plays an important role, especially in the short-term rental segment, where the level of service directly affects returns.
Thus, real estate investment is not just about purchasing an asset, but about building an operational model.
Currency and Macroeconomic Risks
Investing abroad always involves currency fluctuations. Income may be generated in one currency, while expenses are incurred in another. This creates an additional layer of risk.
For example, rental income may be in euros or dollars, while the investor evaluates profits in the local currency. When exchange rates change, real returns can either increase or decrease.
Additionally, the market is influenced by the global economy. Tourism, interest rates, geopolitics, and travel restrictions directly impact demand.
Example: A decline in tourist traffic in resort regions can temporarily reduce property occupancy rates. This is particularly sensitive for markets where returns are heavily dependent on short-term rentals.
Therefore, investing in Thailand, Indonesia, and Portugal requires an understanding not only of the local market but also of the global context.
Liquidity Risks
Liquidity is the ability to sell a property quickly without a significant loss in value. And it is precisely this factor that is often underestimated.
Properties in popular locations with a clear concept and high-quality infrastructure sell faster. This applies, for example, to liquid areas in Phuket or sought-after zones in Bali.
But projects without a clear concept, in weak locations, or with inflated prices can remain on the market for months or even years.
Example: An investor buys a property “at a bargain price,” but when it comes time to sell, they find that there are too many similar offers on the market. As a result, they have to lower the price or wait for a buyer.
Liquidity is especially important in a changing market. The ability to exit an investment becomes just as important as the initial entry.
Why Risks Are Not a Problem, but a Tool
Despite all the factors listed above, investing in foreign real estate remains attractive. Risks alone do not make an investment bad—they make it one that requires analysis.
Understanding risks allows investors to make informed decisions: choose liquid locations, objectively assess returns, avoid legal pitfalls, and build a long-term strategy.
It is precisely this approach that distinguishes a systematic investor from those who make decisions based on emotions and marketing promises.
How to Minimize Investment Risks in Thailand, Indonesia, and Portugal
Investing in overseas real estate is not risk-free, but the risks can be managed. The difference between a successful investment and a problematic asset most often lies not in the country, but in the investor’s approach.
The first and most crucial step is understanding the legal structure of the transaction. It is important not just to “buy a property,” but to clearly understand how ownership is formalized, what restrictions exist, and what the resale process will look like. Working with trusted lawyers and specialists in the local market helps avoid common pitfalls, especially in countries like Thailand and Indonesia, where ownership structures differ from what investors are accustomed to.
The second key factor is choosing the right location. Investors must consider not only the entry price but also liquidity, infrastructure, and demand. For example, destinations such as Phuket or Bali have already established a stable market, while less developed regions may require a longer investment horizon.
The third element is a realistic assessment of returns. It is important to consider not only potential income but also expenses: taxes, maintenance, management, and downtime. Real estate investments work effectively when calculations are based on conservative scenarios rather than maximum expectations.
Special attention should be paid to property management. A professional management company can significantly increase returns through proper positioning, pricing, and service. Without this, even high-quality real estate can yield poor results.
It is also important to consider currency diversification and macroeconomic factors. Overseas investments are always part of a broader strategy and should complement the portfolio, not replace it entirely.
Ultimately, successful investments in Thailand, Indonesia, and Portugal are built on three principles: analysis, strategy, and support.
It is precisely this approach that allows risks to be transformed from a source of uncertainty into a decision-making tool—and to leverage the potential of international real estate as effectively as possible.
