The Right Frame of Mind for Overseas Property

The Right Frame of Mind for Overseas Property

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Overseas Property Mall Buyers Guide SeriesIf buying a new home for yourself, you probably need an offer on your old home before the estate agents take you seriously as a prospective purchaser. The logical sequence is to concentrate on the selling before tackling the buying. If you find your dream before your sale is more or less ‘in the bag’, you’re likely to be sorely disappointed.

However, if you’re looking to invest in property overseas, it’s highly likely that the property itself will loom too large in your thinking at too early a stage, whether the vision is triggered by something you see in the property pages of the press or the word-of-mouth stimuli of friends and acquaintances. In reality, you need to do the boring homework first of all in order to keep your feet on the ground when your reach the stage of considering individual properties.

Henry Davis of International Property (www.internationalproperty.ie) stresses the need to do your homework before you go into the market. Interestingly, the cornerstone of his approach is investigating that rental incomes are sufficient to make an investment worthwhile. For example, he recommends talking to lettings agents as a way of finding out which properties are easy to let.

In fact it may be important to keep an even more open mind to the type of investment that will be suitable for you. Even if you want to take the risk of investing in your own property (as opposed to investment trusts or property companies), might you not prefer to invest in undeveloped land instead of having the hassles of lettings. To make an informed decision on this you may need to do a little research to find out about the rights of tenants in the different countries you are considering.

Another serious consideration when considering rental income is that management charges and resort fees may mean that perfectly good properties are never going to pay their way in purely rental terms but need to be assessed in terms of capital appreciation also.

Other groundwork that you may need to cover includes calculating how much time (and money) you can afford to spend visiting your target location, finding out what you can about transport infrastructure improvements that may affect the value of investments. You will need to find out if, in the countries, you’re interested in, there is legal distinction between locals and others when it comes to buying property (as obtains in the Channel Islands) or if your reliance on English means that, informally, you’re automatically excluded from the best deals.

A further key area for research is the choice of lender to finance your investment. In this you may need to decide if, for instance, the advantages of low rates of interests in your home country outweigh the risks of borrowing in a different currency from the one you’re investing in. Probably not a problem for residents in the UK but it might be a consideration if you live in the Euro zone.

Once you have decided on a location or to help you choose between competing candidates, you could do worse than invest in books like Charles Davey’s ‘The Complete Guide to Buying Property in France: Buying, Renting, Letting and Selling‘. Guides like these can be looked to provide some advice on subjects such as tax regimes. You’re going to need to be wise to double taxation treaties, capital gains tax and stamp duties.

Right at the start you need to work out how much you want to invest, what risk profile you wish to have, how long the investment is going to be for, how much time you have to devote to it. It’s probably wise to mature your plans over months, making good use of the time by following the news about different overseas property markets while you refine your ideas. Finally, remember that other property investors are often very open in sharing what they’ve learned on the internet.