TOP 12 OVERSEAS PROPERTY INVESTMENT TIPS
We have compiled this list of top twelve tips to help those people considering investing in overseas property. Often first time investors don’t consider everything they should and end up being caught out or making a poor investment choice but not if you buy through the Overseas Property Centre as we believe passionately in helping investors with as much information as possible to help them reach the best decision.
1. LOCATION, LOCATION, LOCATION
Buy front line, or as close as possible, to the main attraction such as the beach, the ski lift etc. Prices may be higher but you will achieve higher rental returns, higher capital growth and it will make it a lot quicker and easier to resell later on.2. LEVERAGE
Even if you only have £20,000 to £30,000 available to invest (average investment amounts), use the banks leverage (mortgaging) to increase your budget. Typically you can borrow 70-80% LTV (Loan To Value) with overseas property investments. Buying the right investment property should enable you to achieve annual rental profit, annual capital appreciation (typically 15% growth) and the rent will pay off your mortgage so the more you can leverage from the bank, the more short term and long term gains you will make. Why settle for 15% annual growth of a £20,000 investment (£3,000 per year+) when you could have 15% of a £100,000 investment (£15,000 per year+) by leveraging with the banks money?
3. BUYING TAXES
Be aware of property buying taxes in the particular country you are considering investing in. For example you need to pay 7% IVA in Spain on top of the purchase price, and 20% VAT in Bulgaria, although we usually sell off-plan property in Bulgaria inclusive of VAT.
4. EXCHANGE RATE
Remember you always buy overseas property in the local currency and exchange rates change all the time. Slight fluctuations in the Euro or Dollar to the Pound could lose OR save you hundreds or thousands of pounds. It is best to use the services of a currency exchange company to secure you the best rate – you can choose to fix this rate throughout the period of your payment plan (up to 2 years) so there are no surprises at each payment stage. They will secure better rates than your bank, won’t charge you any fees and won’t charge for transfers. Contact us for details of who we recommend.
5. FURNISHING
Once you have brought your overseas property you will need to furnish it in order to rent it out and/or use it yourself, so you will need to budget for this from the start and keep some money aside for this. Overseas Property Centre can help you acquire furniture packages.
6. LEGAL FEES
As with buying property in the UK, you will have to pay for legal fees – typically allow £250 to £500 for this. Sometimes developers offer to pay for the buyers legal fees.
7. VIEWING TRIP
It is imperative that you make a viewing trip to see the country and area where you are planning to invest. A viewing trip will not only allow you to view several properties over a few days, it will enable you to better appreciate the advantages and disadvantages of each property and you will be able to experience the area and local culture. Subsidised viewing trips are usually on offer for all destinations via Overseas Property Centre and if you do proceed with a purchase then the cost of the viewing trip is usually fully refunded back to you as our appreciation.
8. BEWARE OF GREAT CLAIMS
There are many claims by agents, especially online. Be cautious of claims of exceptionally high returns and high capital growth ‘promised’ or very low prices. There are many people out there just wanting a sale regardless of anything else. Low prices usually mean properties in a poor location (remember tip number 1), which they are desperate to try and off-load and which will struggle to rent out at all, even peak season. And whilst rental returns of 10% per annum are possible sometimes, 5-7% is more usual. Likewise capital growth can sometimes be high in some areas, but it is safer to assume around 15% growth per annum for most overseas locations.
9. PRICE PER m2
The important price to note when buying property overseas is the price per square metre. If a property is genuinely in a good position and of good quality then the price per m2 will be higher than one in a less favourable position which may be difficult to rent out.
10. SEASONAL DEMAND
The majority of overseas investment properties have a peak rental season such as winter or summer. Off peak your property could be empty for periods of time so don’t expect all year round rental although even ski resorts can have off-peak rental demand as many of the resorts are popular in the summer also. 18 to 26 weeks rental a year is typical and usually enough to give a good return. For investments with a strong year round rental demand consider winter sun locations such as the Caribbean (popular with Americans and Canadians) or Cape Verde (popular with Europeans), or city investments where you can rent to local professionals all year round. Closer to home winter sun locations like Cyprus, Greece & Crete, Turkey, Southern Spain & Portugal also offer good year round rental demand.
11. RENTING OUT YOUR PROPERTY
Some new developments offer guaranteed rental schemes. These give you peace of mind but don’t always offer you the best return and they usually won’t allow you to use your own property during peak season so take this into consideration. Many developments have on-site property management which you can make use of for a nominal fee and they can get many bookings for you also. If you market the property yourself we recommend holidaylettings.co.uk
12. ONGOING RUNNING COSTS
Remember you will have ongoing costs such as council or municipal tax, water and electricity charges, maintenance fees etc. Although these costs are usually low overall, you will need to take them into consideration when budgeting.
If you are want advice about buying overseas and specific information on all expected buying costs then contact Overseas Property Centre on 0800 781 0347.
back to top