Best Investments for Expats Who Want to Avoid Property

Broad global equity ETFs, high-quality bonds and accessible savings are practical alternatives for expats who want to build wealth without buying property.

Equity funds can provide long-term growth, bonds can help manage future spending, and cash can cover relocation costs without forcing an investment sale.

Unlike property, a portfolio of widely traded securities can usually be sold in smaller amounts. If you need $10,000 for a housing deposit overseas, you may be able to raise it by selling part of your investments. A rental apartment generally has to be sold as a whole.

However, avoiding property also means giving up certain advantages, particularly the ability to use mortgage financing to control an asset worth considerably more than your initial investment.

The question is how to build a portfolio that can grow over time while providing the income, liquidity and flexibility needed for life abroad.

Key Takeaways

• Diversified equity funds can build wealth without tying up capital in one property.
• Bonds can help cover future expenses through scheduled interest and repayments.
• Skipping property means forgoing mortgage leverage, which magnifies gains and losses and adds repayment obligations.
• Listed investments can be easier to adjust or transfer abroad, subject to taxes, account rules and market conditions.

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The information in this article is for general guidance only. It does not constitute financial, legal, or tax advice, and is not a recommendation or solicitation to invest. Some facts may have changed since the time of writing.

What are the best alternatives to buying investment property?

Global equity ETFs, diversified funds and bonds are among the most practical alternatives to buying investment property. They can provide growth, income and liquidity without requiring direct real estate ownership.

The appropriate combination should reflect what you originally wanted property to accomplish.

Someone considering a rental apartment for monthly income has a different objective from someone hoping to benefit from property appreciation over twenty years.

No single investment replicates every feature of property.

A rental property combines ownership of a physical asset, potential capital appreciation, rental income and sometimes borrowing.

A portfolio of listed investments separates these functions, allowing investors to choose how much exposure they want to growth, income and capital preservation.

Are global ETFs a good alternative to buying property?

A broad global equity ETF can spread long-term capital across hundreds or thousands of businesses, reducing dependence on one building, tenant or local economy.

An investor who buys a rental property may have a substantial amount of capital tied to one address. A global equity fund can provide exposure to companies operating across multiple industries and countries.

That diversification does not prevent losses, particularly during widespread market downturns. However, it reduces the reliance on a single property's performance.

Check what the fund actually holds. Adding a US equity ETF and a technology ETF to a global tracker can increase exposure to the same large companies.

Fund domicile matters too, because two ETFs tracking the same index can have different tax and reporting consequences for the same investor.

How do you compare ETF returns with property returns?

Compare the return on the cash invested, accounting for costs and cash flows on each side.

For a mortgaged rental, include the deposit, purchase costs, rent, repairs, debt payments and eventual sale proceeds after repaying the remaining loan. Borrowing magnifies gains and losses on the investor's initial equity.

For an ETF portfolio, include contributions, reinvested distributions, fees, taxes and changes in market value.

To illustrate compounding, $100,000 growing at a steady hypothetical 6% a year with returns reinvested would reach approximately:

These figures exclude fees, taxes and inflation. They also assume no additional contributions or withdrawals.

Actual investment returns fluctuate, and losses can coincide with a planned withdrawal.

Can regular ETF investing help expats build wealth?

Regular ETF contributions can increase the amount accumulated over time without requiring the large upfront commitment associated with buying property.

An expat investing part of their monthly income can purchase additional fund units over several years. Reinvested dividends can also contribute to future growth.

For example, an investor starting with $20,000 and contributing $500 monthly would have contributed $80,000 in total after ten years.

At a hypothetical 6% annual return, assuming monthly compounding and contributions at the end of each month, the portfolio would grow to approximately $118,900 before fees and taxes.

This is an illustration, not a forecast. Market returns will not arrive at a steady rate, and the portfolio could lose value.

Regular investing also does not eliminate the risk of buying before a market decline. Its main advantage is that wealth accumulation can continue through manageable contributions without requiring a property purchase.

Can dividend ETFs replace rental income?

Dividend ETFs can provide recurring cash payments, although the amount can vary as companies change their dividends.

Check the fund's payout schedule, the currency you receive and any tax withheld.

A $100,000 dividend portfolio distributing 3% would pay $3,000 a year before investor-level taxes and charges, assuming the payout holds.

A $100,000 rental generating $5,000 in gross rent would have $2,000 left before tax if vacancies and running costs absorbed $3,000.

These illustrative cash figures leave out changes in asset values and assume the rental was purchased without a mortgage.

Dividend payments are also different from rental income in several respects. A company can reduce or suspend its dividend, while an individual landlord may experience vacancies, repairs or late payments.

Neither income source is guaranteed.

Investors should compare total returns, including changes in investment value, instead of focusing exclusively on the amount distributed.

Are monthly income funds a good alternative to rent?

A monthly income fund can align with monthly bills, but its distribution may come from dividends, interest, realized gains or a return of investors' capital.

A fund can distribute 7% over a year and still post a negative total return.

Monthly distributions can be convenient for an expat paying regular living expenses, but the frequency of payments says little about the investment's underlying performance.

Read the distribution policy and check the fund's performance after fees before relying on the payout.

Are bonds better than rental property for regular income?

High-quality bonds can be more suitable than rental property for investors who prioritize defined payment terms, limited administration and predictable maturity dates.

A conventional fixed-rate bond sets interest payments and a maturity date, subject to the issuer meeting its obligations.

A conventional bond fund can pay distributions while its share price fluctuates, and it generally has no date at which investors get back their original investment.

For expats who want predictable payments, high-quality individual bonds held to maturity can serve a different purpose from rental property.

They do not require tenants, property maintenance or local property management.

However, selling a bond early can crystallize a loss, particularly after interest rates rise. Inflation can erode the buying power of fixed payments, and exchange rate movements can reduce what the proceeds cover in another country.

Corporate bonds introduce the additional risk that the issuing company may experience financial difficulties or default.

Bonds can support a portfolio's income and spending requirements without necessarily replacing the long-term growth potential of equities.

Can a bond ladder help cover expat expenses?

A bond ladder can spread repayments across several dates.

For example, an expat expecting to pay school fees in each of the next three years could hold high-quality bonds maturing ahead of those bills in the currency the school charges.

The maturing principal helps pay the bill, while the coupons represent the interest earned.

A similar approach can be used for planned relocation expenses or other costs with reasonably predictable payment dates.

The investor still needs to consider issuer risk, the availability of suitable bonds and the possibility that the expenses change.

Should expats invest in REITs if they want to avoid property?

Listed real estate investment trusts (REITs) can suit investors who want property exposure without buying and managing a building. They are less suitable for investors who want to avoid the property sector altogether.

They provide access to portfolios of income-producing real estate through securities traded on an exchange.

Returns still respond to rents, vacancies, borrowing costs and property values. An office REIT and a logistics REIT can face very different leasing conditions.

Publicly traded REITs can usually be sold through a broker, while non-traded REITs can be much harder to exit.

REITs also do not eliminate exposure to property market downturns. Rising interest rates can affect borrowing costs and valuations, while weaker demand can reduce rental income.

For someone whose objective is simply to avoid being a landlord, REITs may be worth considering.

For someone who wants no property-related investment exposure, they are not a complete solution.

Broad equity funds may also contain property companies or REITs. Investors seeking to exclude the sector entirely need to inspect fund holdings and index rules.

How can expats build a portfolio without buying property?

A property-free investment portfolio can combine equities for long-term growth, bonds for income and planned repayments, and cash for expenses that may arise sooner.

Set aside money for expenses you can already see coming, then decide how much of the remaining capital can stay invested through a downturn.

These illustrative allocations show how three different goals can change the mix.

These allocations are examples, not recommendations for every investor.

For someone planning a move, start with the expected cost of flights, temporary accommodation and a housing deposit.

The cash amount should follow that budget, even if it comes to more than 40% of the portfolio.

For an investor with a longer time horizon, regular contributions and reinvested returns can increase the portfolio over time.

However, a portfolio intended to fund retirement in several decades will have different requirements from one intended to finance a property deposit within two years.

Reviewing the allocation after major changes in residence, employment or spending plans can help keep the investments aligned with their intended purpose.

Can expats keep their investments when they move abroad?

Sometimes. A provider may let an existing client keep an account after relocating but limit new purchases or require certain holdings to be transferred.

Ask what happens for the country you expect to move to, which assets can transfer without being sold, and what transfer or currency conversion charges apply.

An internationally accessible brokerage account can offer flexibility, but holding globally diversified funds does not automatically make the account portable.

A move can also change how dividends, interest and gains are taxed or reported.

For US taxpayers, some foreign funds may be classified as passive foreign investment companies, which can trigger US tax and Form 8621 reporting requirements.

Check the account rules and the treatment of the holdings separately.

What do expats give up by avoiding property investment?

Avoiding property means giving up the opportunity to use a mortgage to control an asset worth considerably more than the investor's initial capital.

For example, an investor with $100,000 could invest that amount in a diversified portfolio or use it as a 25% deposit on a $400,000 property, excluding purchase costs.

If the property appreciates by 10%, its value increases by $40,000.

That represents 40% of the initial $100,000 deposit before financing costs, taxes, maintenance and other expenses.

A 10% gain on an unleveraged $100,000 investment portfolio, by comparison, produces $10,000.

However, leverage also magnifies losses.

A 10% fall in the property's value would reduce its value by $40,000, equivalent to 40% of the initial deposit, before costs and assuming the mortgage principal remains unchanged.

Property investors must also meet mortgage payments during vacancies or periods of declining rental income.

Interest charges, transaction costs and restrictions on borrowing can reduce the financial advantage of leverage.

Expats who avoid property financing lose access to this particular source of amplified returns, but they also avoid the corresponding mortgage obligations and concentration in a single physical asset.

Borrowing against a securities portfolio may be possible through margin lending or securities-backed loans, although these introduce their own risks, including margin calls and forced sales.

Property can additionally provide a future home or accommodation for family members. Those benefits may have value beyond investment returns.

Is avoiding property a better strategy for expats who move frequently?

Avoiding direct property ownership can make financial arrangements easier for expats who relocate frequently, particularly when they do not want to manage assets from another country.

Selling a house can take months, involve significant transaction costs and require local legal or tax procedures.

Listed securities can generally be traded more quickly during normal market conditions.

However, investment liquidity and account portability are different issues.

A fund may be readily tradable while the brokerage provider restricts services after the account holder moves.

What mistakes should expats avoid when investing without property?

Replacing property with financial investments does not automatically produce a well-diversified or low-cost portfolio.

Several mistakes can weaken the strategy.

• Holding too much cash indefinitely. Cash can be appropriate for emergencies and planned spending, but inflation may erode its purchasing power over long periods.
• Buying funds that hold the same companies. Several ETFs may appear diversified while concentrating exposure in the same markets or sectors.
• Chasing high income yields. A high distribution rate can conceal capital losses, credit risk or unsustainable payouts.
• Choosing illiquid alternatives to replace property. Private equity, private credit and some structured investments can tie up capital for years. Avoiding property makes little sense if the main objective is liquidity and the replacement investment imposes similarly restrictive terms.
• Ignoring account restrictions. An investment account that works today may not continue offering the same services after relocation.
• Overpaying for portfolio management. Advice, custody, platform and fund charges can accumulate. Compare total annual costs with the services and investment access received.

The purpose of avoiding property is to improve the portfolio's suitability, not simply to replace one set of complications with another.

Conclusion

One way to judge a portfolio built without property is to ask what you’d have to change if your plans changed.

If a move comes forward by two years, can you pay for it without interrupting your retirement investing? If you need less income once you settle, can you reinvest the surplus?

That’s where a portfolio can earn its place in an expat’s finances. You can adjust how you fund one goal while leaving the money set aside for other goals invested.

FAQs

Can expats retire without owning property?

Yes. Pensions and investment withdrawals can fund retirement while you rent.

Include rent increases, deposits and the cost of another move in your retirement budget, especially if you may change countries.

Can expats start investing without a property-sized deposit?

Yes. Some brokers let you start with the cost of one ETF share, and some offer fractional shares.

Check trading and currency conversion charges, which can take a larger percentage of each contribution when you invest small amounts.

Is it safer to invest in ETFs than property?

Neither investment is automatically safer.

Broad equity ETFs provide diversification across companies and can be sold relatively easily, but their market values can fall substantially.

Property may generate rental income and provide a physical asset, although ownership introduces concentration, maintenance, financing and liquidity risks.

The relevant risks differ, so investors should compare them against their financial objectives and ability to absorb losses.

Can expats earn passive income without rental property?

Yes. Bonds, dividend-paying funds, deposits and other financial investments can generate income without direct landlord responsibilities.

Payment amounts, capital values, taxation and liquidity vary by investment, so income should be assessed after costs and alongside the risk of losses.

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