Ten Top Tips for Buying Abroad

This article by Just Do Property on September 24th, 2013 provides some helpful tips to investors who thought of buying property abroad.

1.    Give Your Dream Region The Twice Over: Visit a region at least twice, in the high season and during the off-peak months, to get a feel for attractions to keep you coming back for more.  Get an ‘insider view’ from UK property owners in the region – or research back home through rental websites such as www.homeaway.co.uk.

2.     Remove The Rose Tinted Glasses: In reality, few properties are flexible enough to sustain your long-term needs and interests. The lakeside retreat that’s perfect for a childless couple may prove too hazardous for a toddler, while teenagers may love a lively beach resort, but you may find it too crowded in retirement. Before you commit, think about the alternatives, as sometimes renting is more rewarding than buying.

3.     Old Or New – Decide What Works For You: An older house for the long term is attractive due to scarcity value and character, but can be a drain on resources, so you might be better off culling your period fantasy and settling for a younger, lower-maintenance model. New builds have advantages such as quality construction, energy efficiency, and contemporary styling, but bear in mind the higher price per square foot than the equivalent resale home of similar size.

4.     Check The Price Is Right: Has the property been quoted in ‘local’ or ‘foreign’ pricing? Many countries maintain a ‘two-tier’ system and for good reason. With new build property UK agents can earn hefty commissions for marketing overseas projects, with those fees recouped in price mark ups. But you won’t know about it until you start speaking to trusted local agents, visiting properties and seeing what else is on offer. A further ‘hidden’ profit margin unlikely to be flagged up in the sales pitch, is resort fees. Often listed as administration or transaction costs, this charge can be over and above the annual maintenance fees set by the resort for your property. If the figure seems artificially high compared to other developments – challenge the developer.

5.     Get Clued Up On Currencies: Avoid playing currency roulette by either tapping into existing savings or taking out a second mortgage on your UK property, but bear in mind currency conversion costs for deposits. Those changing pounds to foreign currency have two main options: a high street bank, or specialist brokers such as www.currencysolutions.com  www.halofinancial.com or www.caxtonfx.com. Brokers invariably offer a better deal: more competitive rates, lower (if any) transfer fees and no commission charges.

6.     Make Your Bolthole Pay Its Way: If you’re only spending a few weeks a year at your property, it makes sense to get some rental mileage out of it, to help pay towards its upkeep. Second home rental income is subject to UK income tax based on your marginal rate. You can, however, claim for certain expenses such as repairs, utility bills, insurance and letting admin fees and if you have a second home mortgage, you can also claim relief against the interest paid on the loan.

7.     Take Guaranteed Returns With A Pinch Of Salt: To woo buyers, developers often offer guaranteed rental returns (GRR) of say 5-7% per annum for a three-year period. Some developers finance this GRR offer by striking deals with tour operators to block book a quota of apartments for the season. Others will simply add a sneaky 5% to the asking price and return the money to the buyer in the form of ‘guaranteed’ rent. Even if their flat lies empty for that year, it won’t have cost the developer a penny.

8.     After The Honeymoon Period – Longer-term Rental Strategies: Think ahead to when any ‘guaranteed period’ ends, particularly if buying in an up-and-coming area where competition may be stiff. If regular rental income is a priority, consider merging with a hotel brand as they’ll work hard to bring the clients in. The contract may however impose restrictions on your own use of the property in peak seasons.

9.     Plan Your Exit Strategy: Savvy investors always plan their escape route when buying a holiday home.  Make sure what you buy has a unique advantage over the competition, such as a fabulous view, or beachfront access. Research historical price trends but also look to an area’s future too, before committing to any purchase. Think of it as working in reverse – then you can enjoy the journey.

10.  Get a feel for how buoyant your resale market is: Count the number of distinct buyer groups. If you’ve three or more, including local, national, and overseas, you’ve got a healthy base to work from. As long as you aren’t overly reliant on one single investment stream, you won’t be left exposed if it dries up.

Article Source: http://www.propertysecrets.net/blogs/just_do_property/ten_top_tips_for_buying_abroad/post-1157.html