Mouseprice > Latest News > Articles > For property buyers > Buying a property abroad

Buying a property abroad

Contributed by Adam Samuel who writes for the Foreign Investment Property Blog.

Introducion and Podcasting

Endless media attention on the subject of second homes abroad and property renovation have certainly helped fuel people’s desires to buy Overseas Property. Many have bought in the established markets of Spain, Portugal, France and Cyprus over the past few years, but a new wave of buyers are entering the emerging markets as buy-to-sell or buy-to-let investors. This trend has been growing as domestic markets have priced out many first time buyers and individuals are turning to property as an alternative investment to stocks and shares.

Nubricks, the Overseas Property Blog, has a successful podcast series and has released a fly to let podcast that analyses the phenomenon of “Fly to Let”, a term coined to describe the process of buying real estate abroad to rent out. In the UK, many investors are looking to acquire real estate in Europe and further afield for two reasons. Firstly, investors are keen to tap into the rising value derived from Europe’s emerging EU countries, with the prospect of benefiting from capital gains, as the value of their real estate increases in line with improvements to infrastructure and developments. Secondly, to generate an secondary income from rental yield.

The first tactic includes a buying-off plan and flipping to make high returns. This is only practised successfully by a minority, as the fundamental key is monitoring the market to decide when to buy and sell. Buying to rent out however can prove to be an easier undertaking, offering the prospect of offsetting rental income against mortgage payments and costs, helping owners derive some value from their investment.

Investment property strategy

‘Buy to Let’ or ‘Fly to Let’ as it’s known when buying abroad can essentially be applied to two types of property markets. The first type of property is residential real estate in emerging markets. It is often limited to major cities, which have the infrastructure and business to attract transient ex-pat workers or affluent local residents seeking temporary accommodation. The second type of market is the holiday or vacation home market where real estate is bought to rent out to holidaymakers. Many view a vacation property as having a dual function in terms of lifestyle and investment.

Fly to Sell is the risky strategy and is generally seen as buying an off plan property with a view to flipping it either before or just after completion. Investors who use this strategy can reap the rewards, but timing is very important and a second buyer/investor is always needed to turn a profit.

Also, be sure to consider the following:

  1. Property Marketing – How are you going to attract your rental clients once you have bought? These days just giving a property to a local agent is not enough, you need to make sure that they are making the most of all the marketing channels available to them, especially the internet.
  2. Exit – What happens if there is a downturn in market, clients don’t want to rent or your circumstances change? You need that get out of jail card or at the very least have anticipated a variety of scenarios positive and negative.

Tips and Tricks to avoid disappointment

General

  1. Do your research; Use the internet, speak to fellow buyers/locals and don’t leave your brain on the plane!
  2. Plan marketing and exit strategies and make sure your expectations are realistic.
  3. Don’t get sucked into the hard sell take your time and walk away if you don’t like the tactics employed on you.

Legal and financial

  1. Many agents and developers will recommend a lawyer to you; always seek independent legal advice to make sure you are being represented in your interest.
  2. Always budget in 10% for costs of buying a property abroad, it varies from country to country but this is a standard figure to use.
  3. Inheritance law is complicated in foreign countries, so check where you stand before you sign on the dotted line.

Off Plan

  1. Check to see how long a developer/agent has been in operation
  2. If you like a development ask to go and see one that they have already completed
  3. Ask for the paperwork to say that they own the title on the land.
  4. Always check to see what obligations the vendor has and what rights you have, if a property is not finished on time.

Where to invest abroad

Property in Egypt touted as a very new emerging market has a small selection of places and properties to invest in.

Brazil investment property; in particular the northern coast has hit the Nubricks radar recently and has a steady increase in demand from investors.

Morocco Property is an up and coming investment destination and in particular Marrakech has an established tourism hub attracting potential clients for a buy to let property.

For more information on property abroad visit http://www.nubricks.com