Investment Options: Foreign Real Estate

Photo by Luke Ma

When people think about real estate as an investment, most think of buying and renting out a condo or single-family home in their neighborhood. The rental properties that happen to be within an hour’s drive from where you live is but a tiny fraction of the world’s real estate. The real estate universe is far larger than the condos and homes in your city, your state, or even your country.

Just like you shouldn’t limit your portfolio to stocks in the US, you should consider the global market when investing in real estate. The easiest way for most investors to include foreign real estate in their portfolio is through REITs (also, see options for US REITs). REITs are stocks that own and rent out real estate properties of all kinds, such as apartments, shopping malls, and office buildings.

Although investing in residential, commercial or industrial properties in other countries seems exotic, there are a number of low-cost, diversified funds that make this very similar to investing in more traditional asset classes.

And as with other asset classes, I prefer index funds and ETFs that hold dozens or hundreds of REITs instead of buying individual REITs directly — keeping costs low and diversifying as much as possible. Especially with foreign real estate, buying individual REITs or individual properties is impractical for the average investor.

Here are some of my basic requirements when selecting an investment for any asset class:

  • Asset class purity. How well does it represent the asset class I’m looking for?
  • Cost. Besides the expense ratio, the turnover ratio is another factor to consider, as trading incurs transaction costs and capital gains taxes.
  • Fund management. ETFs and index funds come and go, so stick with managers with a track record of managing these types of investments.

The following is a list of notable funds that track foreign real estate the traditional way. For most investors, this is the place to start.

Source: Morningstar, as of 3/30/2015
Name Ticker Fund Size ($MM) Net Expense Ratio Note
Vanguard Global ex-US Real Estate VNQI 3,045 0.24% Lowest cost, broadest coverage, highest EM exposure, also available as index funds
SPDR Dow Jones International Rel Est RWX 5,093 0.59% Largest, most traded
iShares International Dev Rel Est IFGL 968 0.48% Lowest EM exposure, similar to RWX

The selection of next generation or smart beta funds for foreign real estate is quite limited. The only notable fund available to the public is one from WisdomTree.

Source: Morningstar, as of 3/30/2015
Name Ticker Fund Size ($MM) Net Expense Ratio Note
WisdomTree Global ex-US Real Estate DRW 122 0.58% Dividend weighted


  • Fund size of at least $100MM
  • Net expense ratio of 0.75% or less
  • Turnover of less than 50%
  • At least 100 holdings
  • Available to the public without an advisor

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