When investing in a residential rental property in the United States, you have a good idea who your future buyer will be. You'll sell, when the time comes, to someone looking to live in that neighborhood or to another investor shopping for a rental property in that area. Either way, the buyer likely will be someone living within a couple dozen miles.

When buying for cash flow in another country, especially a short-term rental unit, the location and the type of property play big roles in determining who your potential future buyer will be. Typically, your potential future buyer pool will include other foreign investors. However, the more you can expand that pool, the greater your chances for maximum return.

The Spanish costas are a good example of a market that has relied on foreign buyers and investors entirely. In 2008, when real estate markets across the globe collapsed, those along Spain's Mediterranean coast fell faster and harder than any others. There were three reasons for this—the amount of leverage in play, overbuilding, and the fact that the majority of buyers on this coast were foreign.

Prices fell, too, at the time, in Barcelona, but not nearly as far nor for as long as they did along the costas. The three factors that spelled disaster on the coast helped to insulate values in Barcelona. The percentage of leveraged investment properties was lower, the volume of overconstruction was less, and the market didn't rely on foreign money.

Even along the costas, owners of well-positioned properties of interest saw their values recover quicker than owners of cookie-cutter units in the massive oceanside complexes where dozens and hundreds of identical properties came onto the market from distressed sellers overnight.

We remembered stories we'd heard about the collapse of Spain's coastal markets when shopping for an investment in Portugal in 2015. Local real estate agents convinced us to consider apartments in resort complexes. The rental returns on these showed well on spreadsheets. Projections showed that we could have netted 8% on almost every unit we viewed. We reminded ourselves, though, that the rental return was just one criterion to consider. What about when we wanted to use the property ourselves? And what about when the time came to sell?

Kathleen prioritizes character and charm in any purchase. In this case, though, even Lief had to agree that these hundreds of all-the-same resort condos rubbed me the wrong way. And we both worried we'd never be able to find our apartment in one of these complexes of hundreds of lookalike units.

Of greater concern to me was the thought of competing with hundreds of other sellers of exactly the same product should another market downfall mean many owners become sellers at once. Even in a good market, how would we compete for a sale with whatever other units were available at the same time other than on price?

Touring several resort complexes reminded us we're not resort complex types. We focused instead on the center of the coastal town of Lagos, where we found a one-of-a-kind townhouse on a winding pedestrian-only cobblestoned street with a rooftop terrace with a view of the ocean. Standing on that roof we knew we'd look forward to every chance to return to stay in the property ourselves and with our children. And we also knew that, when we decided to sell, we'd have something with intrinsic value to offer that would compete handily with anything else available at the time, boom market or bust.

That nature of the property meant an expanded future resale market. The townhouse was ideal for a short-term rental but comfortable for full-time living, too. It would be attractive to another foreign investor but also to an expat wanting to retire on this coast or to a local living and working in the city. When, four years after the purchase, we decided to cash out of what we perceived to be a market at a top, our buyer was a retired couple from Sweden that planned to use the property part of the year and rent it out otherwise.

In some markets, you'll have no choice but to resell to a foreigner. Ambergris Caye, Belize, is a good example. Most of the construction on this island is geared toward the tourist and expat retiree markets. Beachfront condos aren't in the budget for a typical Belizean local. The economies you need to pay attention to if you invest in a cash flow property on Ambergris are in North America.

When the United States falls into recession, fewer properties are sold on Ambergris Caye. When U.S. markets are booming, more real estate is sold on this little Isla Bonita. The local Belize economy is irrelevant. Same goes for rental returns. Most rentals are to North Americans and some European tourists.

Buy right in a market like Ambergris, and you can see good rental yields until the economy slows in the countries your tourist renters hail from. And, when your occupancy stats fall, so will your ability to sell the asset quickly or at a decent price.

Paris, on the other hand, is a market where you're lucky to earn better than a 5% net rental yield from a rental, but you'll always be able to resell your property. Prices move up and down in Paris. Like anywhere, the market cycles. Still, you'll always find a buyer. The potential future buyer pool in this city is as wide as it gets and includes other investors, foreigners wanting their own pieds-à-terre in the City of Light, and local French buyers.

The point is that it's critical to size up your future potential buyer pool in advance of a purchase. However, some opportunities are predicated on an expectation that that pool is going to expand for some specific reason.

In the early 2000s, a developer we knew in Canada subdivided a rural oceanfront parcel into large estate lots and offered them for sale to investor buyers based on a path-of-progress pitch. He postulated that, because country properties in the far northeastern United States, in Vermont and Maine, known for attracting wealthy weekend-home buyers out of Boston, Connecticut, and New York, had become too expensive, those buyers would begin looking at Nova Scotia, Canada, to satisfy their country estate appetites once the ferry route between Bay Harbor, Maine, and Yarmouth, Nova Scotia, reopened, as, he said, it was soon to do.

But the path-of-progress play didn't play out. The ferry did not reopen as expected, the United States went into recession, and Nova Scotia has a lot of raw coastal land. Even as we write, that ferry isn't operating due to renovation work at the Bar Harbor terminal.

The nonfunctioning ferry left investors in this development, including me, with the local market as the only viable potential buyer pool. Nova Scotia has a population density comparable to that of Maine, and Maine has the lowest population density of any state in the United States. In other words, not a big potential buyer pool for estate parcels to build vacation homes.