TIPS FOR BUYING PROPERTY OVERSEAS

TOP 5 TIPS FOR BUYING PROPERTY ABROAD FOR THE FIRST TIME

The Internet has changed the worldwide property market beyond recognition giving all investors access to information from any market in the world. Markets which were once the domain of professional investors and property fund managers are now open to private investors. This has created some amazing investment opportunities for those willing to spend the time researching new markets. There are some obvious differences between acquiring property in your domestic market and looking overseas, some of which are obvious while others not so obvious.

We will now take a look at the top five tips to buying property abroad for the first time.

Know the market

This goes without saying, and is just as relevant for your domestic market as it is for an overseas property market, but there are some pitfalls. Many people make the assumption that all markets are regulated and act in a similar manner when in reality it is not always the case. There will be different trends in different markets, rental yields will vary and you need to be sure that you are up-to-date with your research. For those who can afford to make use of overseas investment advisers they could be worth their weight in gold in the longer term. However, for those not in a position to make use of local advisers there should be more than enough information on the Internet to keep you abreast of developments.

Different markets, different regulations

As we touched on above, the regulatory structure of property markets around the world can vary enormously. It is therefore imperative that you make yourself fully aware of the local regulatory structure, taxation issues and any other laws which may impact your return on investment. While the UK is seen as one of the most expensive property markets in the world, with regards to regulatory and taxation costs, the charging structure does vary significantly between markets. It would not take too many additional costs to eat into your long-term investment returns and these must be factored into your long-term investment calculations.

Making sure you act within the regulatory structure and local laws is very important as even the slightest slip up could to be very costly. Just ask those in Cyprus who have lost their homes due to land ownership issues from years gone by!

When navigating the complexities of buying properties overseas, engaging in open communication with real estate experts like David Shulick can prove beneficial. These professionals, besides their experience, possess a deep understanding of the specific regulations governing property transactions in various countries. They can provide invaluable insights into legal requirements, tax implications, and any restrictions that may apply to foreign buyers.

Currency risk

One other factor which many overseas investors fail to fully appreciate is the potential currency risk as exchange rates fluctuate. This is only relevant if you are dealing in a currency which is different to your domestic currency. Historically, currency volatility between the major worldwide currencies has not been enormous but since the 2008 worldwide economic downturn we have seen a whole different level of currency volatility. Therefore, the potential currency risk when acquiring property, and collecting rental income, needs to be taken into consideration.

There are ways and means of negating any potential currency risks via the use of hedge instruments but on the whole these are only really relevant for large-scale property developments. As a consequence, private investors will need to add currency fluctuations to their list of subjects to monitor.

Servicing your property

While many people buying overseas properties will do so to introduce a mixture of personal use and rental income there are some who buy for purely rental purposes. As a consequence, investment properties will need some kind of maintenance/servicing to ensure that they remain in good repair, are rented out as much as possible and monitored for security purposes. As more and more investors look towards overseas property assets there are many companies specialising in the areas of property maintenance and servicing. It will obviously depend upon your budget as to what kind of service you seek but it is highly advisable to have somebody in the area looking after your interests.

One good tip when looking for maintenance/servicing agents is to ask the advice of those in the local vicinity when you visit any overseas property before and after purchase. This will allow you to get an idea of which agents offer the best service and the best value for money.

Maximising your investment returns

As with any property investment, whether for your own use or rental purposes, you need to ensure that you maximise your investment return. You may need to vary your rental charges depending upon the seasons as you will need to remain competitive compared to similar properties. Many investors often feel the need to overspend on redecorating and redevelopment of a new property asset without necessarily making themselves aware of the local market restrictions. All markets tend to have a price ceiling with regards to property values and rental charges. So, you need to be careful that you do not over invest in the short term and risk reducing your long-term potential gain/income.

It is also imperative that you have an endgame in mind when acquiring an overseas property whether this is a new home when you retire or you are looking for the largest possible capital gain/income stream. Your plans may vary over the years but you do need to have a target in mind otherwise what are you aiming for?

General advice

In theory the further away you are from any investment property the more chance you could be susceptible to scams, fraud and mismanagement. This is why you need to choose your advisors carefully, resist the temptation to cut corners to save money and ensure that you maintain a watchful eye over the local property market and any regulatory changes which may impact your investment. The idea that once you have bought an overseas property you can turn your back and move to the next transaction is a little wide of the mark. The reality is that you should monitor all of your property investments on a regular basis whether local or overseas.

Essential tips to owning an overseas holiday home as an investment.

The Internet has changed the way in which many property investors carry out their business as more and more look to add overseas exposure to their property portfolios. The ability to find as much information out about your local property market, as one thousands of miles away is something that is becoming increasingly easier. This access to worldwide property market information has also seen a significant increase in people acquiring holiday homes.

There are some essential tips when looking to acquire an overseas holiday home which will stand you in good stead, maximise your return and protect your assets.

Location, location, location

Before you decide upon the location of your holiday home investment it is vital that you research overseas property markets to see which ones best fit your criteria. Let's not forget that while you may use your holiday home investment personally from time to time it is just that, an investment. In many ways you should see personal use of your holiday home investment as a bonus as opposed to the main focus. Does it really make sense to buy a property in a country which is struggling from an economic point of view and where you may struggle to receive an acceptable return on your investment?

Once you have researched overseas property markets and decided on the location of your holiday home then it is time to consider other factors.

Do not overstretch your finances

The property market is littered with third parties who acquired holiday properties to use themselves and to rent out to holidaymakers only to find the financial liabilities were greater than expected. Many automatically assumed that aside from the time they were using it, the property would be fully let to holidaymakers at top rental prices. As a consequence, a number of holiday home investors found their finances stretched to the limit which impacted on other areas of their life.

When looking at the cost of acquiring and maintaining a holiday home investment you need to err on the side of caution as opposed to being far too optimistic. Check markets in the area to confirm normal occupancy rates, quiet periods and whether the level of rent you propose is in line with the local market, etc. You also need to take into account your home life finances and whether indeed you may need access to additional funding in years to come, funding which could be tied up in your holiday home investment.

look at all of your finances as one and ensure that you give yourself some headroom in the event of unforeseen circumstances in the future.

Renting out your holiday home

The likelihood is that as an investor looking at a new holiday home you would probably prefer access to the property at the height of the holiday season. This is all good and well but if you are using the property yourself, at the height of the season, you are reducing your long-term return on investment. If your investment return comes first then you may well need to adjust your own expectations and make use of the property in the "off-season".

Also remember that a holiday home is not really a buy to let investment as such because customers are only likely to stay for a relatively short time before making way for the next holidaymakers. Therefore you may have additional advertising costs, there may be periods of non-occupancy and you may well need to use the services of a local estate agent. Renting out a property overseas is very different to renting out a property in own local real estate market.

Currency considerations

If we take Spain as an example, historically there has been very strong demand from UK investors looking to acquire holiday homes. The benefits of this were impacted at the turn of the century when the Spanish peseta was replaced by the Euro – creating a potentially even greater currency risk to UK investors (and those in countries where the euro is not the local currency). In the past his has not been a major problem because until the turn of the century the wild swings we have seen in currency markets of late were few and far between. However, if you are looking to acquire a holiday home overseas you need to take account of potential currency fluctuations which could work for or against you.

As a perfect example, since the UK electorate decided it was time to leave the European Union the UK currency has been under significant pressure. Indeed we have seen falls of 20% and more against the likes of the euro and the dollar although there has been some recovery of late. Can you imagine converting your rental income from euros into pounds sterling at a rate which had fallen by 20%? This would make a dramatic impact on anyone's finances. Worse still, could you imagine a loss of 20% on the exchange rate after converting sales proceeds if you liquidated your investment?

Maintaining your property

A number of the more popular holiday home destinations have an array of local businesses offering maintenance and security services for holiday properties. Indeed it is also highly advisable to employ the services of a local letting agent, unless you have friends in the region can assist, to maintain, monitor and ensure that your property is utilised as much as possible. There will obviously be a cost for this service but in reality it is not something which you can ignore.

You do need eyes and ears on the ground to make you aware of changes in the local economy, local property market as well as servicing

pressure. Indeed we have seen falls of 20% and more against the likes of the euro and the dollar although there has been some recovery of late. Can you imagine converting your rental income from euros into pounds sterling at a rate which had fallen by 20%? This would make a dramatic impact on anyone's finances. Worse still, could you imagine a loss of 20% on the exchange rate after converting sales proceeds if you liquidated your investment?

Maintaining your property

A number of the more popular holiday home destinations have an array of local businesses offering maintenance and security services for holiday properties. Indeed it is also highly advisable to employ the services of a local letting agent, unless you have friends in the region can assist, to maintain, monitor and ensure that your property is utilised as much as possible. There will obviously be a cost for this service but in reality it is not something which you can ignore.

You do need eyes and ears on the ground to make you aware of changes in the local economy, local property market as well as servicing your real estate asset. Those who try to cut corners in this particular area may feel they have saved themselves a few pounds but at what cost in the longer term?

Conclusion

When looking to buy a holiday home you need to be clear in your mind about how you can maximise the potential rental income when you are not in residence. You need to ensure that you have ears and eyes on the ground to let you know what is happening and effectively manage your property. There are ways and means of cutting costs, such as deciding not to employ management agents, but the security and the value of your property may be at risk. Be realistic, be cautious but look to maximise your rental income within a secure environment.

We have expert advice on the Spanish property market and how to take advantage of discounted properties available in the holiday rental market,

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