Land is cheaper to purchase abroad in most countries than it is in the U.S. This has led some developers to seek out opportunities in places such as South America or the Caribbean where land is a fraction of the price as it is in many parts of the U.S.
This is especially true for oceanfront property. Prices are skyrocketing in the U.S. and much of the desirable coastal land in the country is already developed. Building housing or a resort on a breathtaking beach in an international locale is quite appealing for many developers.
While land may be more affordable abroad, it’s no easy feat to obtain funding. Borrowers may be scared off by the ultra-high interest rates from the banks in the country in which they’re purchasing land. In South American countries such as Peru, the going interest rate with a bank starts at around 15%. In Brazil, the cost is currently around 43%.
If a borrower wants to work with a lender based in the U.S., the options are limited to a precious few. But there are some. A savvy broker can help their clients by finding private lenders who have experience and a successful track record working abroad.
Economic factors
In a number of countries, dovetailing economic factors present prime development opportunities in several sectors. It’s overall cheaper to construct new buildings in countries with a lower cost of living. A high demand for affordable and well-located housing in locales such as Ecuador creates an opportunity for developers to build profitable townhomes, apartments, single-family housing and mixed-use communities.
Agricultural exports from countries like Brazil are a multi-billion-dollar industry that fuels the global economy. Brazil is also one of the top five producers for 34 of the world’s leading agricultural products, including sugar, beef and pork, soybeans and coffee beans. Brazil is the third largest exporter of agricultural products in the world, after the U.S. and the European Union. That takes a lot of land — and investment in industry-leading infrastructure like greenhouses and indoor farming.
Countries such as Argentina and Chile are taking the lead in fields like copper production, chemical products and automobile manufacturing. Similar to agriculture, this growing market needs the space and physical infrastructure to build products and warehousing to store and distribute those items. Therefore, commercial real estate deals in this sector are in high demand.
Difficult transactions
Despite the lucrative opportunities outside of the U.S., and the relatively unchanging nature of those challenges, nearly all American lenders are unwilling to consider the possibility. That’s because these deals are incredibly difficult to transact for a number of reasons.
Navigating a completely different set of laws takes significant time and investment. It’s the primary reason why international deals can take longer than domestic ones. Lenders who are not confident in the required paperwork, the process and where to go for which approvals risk making mistakes that could be costly for themselves and the borrower.
A big part of evaluating a deal is understanding how the property’s use will contribute to the economy and the local community. Without a firm grasp on the market factors that can sway change, lenders may not be able to confidently assess the who, what, why, and how of the project’s potential for success.
Lending on land is an unappealing proposition for nearly all lenders, no matter where in the world that property is located. That’s because the risk is simply too great when it comes to raw land. Anything can go wrong, and when things go wrong, lenders are less likely to recoup their investments. When combined with a different regulatory environment, language barriers and the inability to easily travel to see the property, international land deals are a non-starter.
Experienced lenders
Despite all the challenges, a very small number of lenders look for ways to say “yes” to international opportunities. If you’re eyeing a deal in Canada, South America, the Caribbean or somewhere else in the world in 2025, here are the qualities you need in a private lending partner.
The more hands-on knowledge a lender has in international markets, the faster a deal can close. That’s because experienced lenders have already been through the process — in some cases, multiple times — and know the processes they need to follow to get to closing. They’ll already have a checklist developed that guides borrowers through the application process. They’ll know the equivalents to titles and environmental reports in each country. That cuts down the timeline significantly and gets borrowers on the move faster.
A lender can claim they can close a deal abroad, but have they actually done so? The proof is in the pudding. Ask your potential partner about the deals they’ve closed in the country of interest. Conduct research on the company to see what they’ve published about their prior international successes.
A company with experts who understand the economic conditions of the area will outperform one exploring a country’s market for the first time. Through this understanding of the local market, lenders can better assess opportunities and know which questions to ask to properly assess the deal.
Predictable challenges
The silver lining of an international market is that the difficulties are predictable. The challenges that existed in international commercial real estate lending five years ago remain the same today. The factors impacting the ability to lend abroad have not radically shifted in many years, creating stable conditions for the few lenders willing to learn the ropes.
Borrowers should not overlook the international markets when exploring fresh deals in 2025 and beyond. While lending partners for these deals are few and far between, the most experienced of them have years of expertise, and millions of dollars in transactions, to show for their efforts. The international commercial real estate market is worth exploring if you have the right lending partner by your side.
