Investing in overseas property – A beginner’s guide
We’ve all been there. We get home from a foreign holiday and instantly dream of being back there.
The thought of owning our own property there may even cross our mind.
Investing in an overseas property not only provides you with your own place in the sun, it can also provide you an income by letting it out for the rest of the year.
But where do you start when deciding where to invest in overseas property? Here’s some of my top tips.
Take a long-term view when investing in overseas property
Before investing in overseas property it’s important to be clear about whether this is a holiday home, providing somewhere to go on family holidays, is it purely an investment, or its both?
If it’s the latter, an overseas property must work for you and your potential rental customers.
While there are many up-and-coming property hotspots, perhaps in areas with low property prices and vaunted potential, it’s wise to buy in established destinations.
It’s important for the property to be in an accessible location, close to airports and other transport links. Crucially, you will want to choose a property in an area popular with tourists, preferably with a holiday season that’s all year round.
It’s usually easier to get a mortgage for an overseas property if it’s in a popular tourist area.
Does it make financial sense?
When chasing your dream of owning a property overseas, it’s easy to get carried away and lose sight of the financial objectives. I always say to clients think with your head, not your heart.
You will need to research the going rent for similar properties in the area you’ve chosen. This will help you understand the returns you can make and how many weeks per year the property can realistically be occupied for.
You will also need to factor in any costs for upgrades, maintenance and cleaning when investing in overseas property.
Ask the taxing questions
You will have to pay tax on the rental income you receive, so take professional advice on how owning an overseas property will affect your tax position. It’s important to get advice from a local specialist too as they will know the specific tax rules in the country you’re are buying in.
You may will be able to reduce your taxable profits by offsetting some expenses from your rental income, but again get the proper advice on this.
Finding customers for your overseas property
Managing an overseas property by yourself can be difficult, especially if you’re here in the UK and have work and family commitments.
It can therefore be a good idea to hire a local estate agent to market the property and manage it on your behalf. However, you will need to factor in how the agent’s fees will impact your income from the property. Dedicated holiday lettings websites are an increasingly cost-effective way of finding customers.
Consider the practical implications
If you’re going to be dealing with agents, vendors and other suppliers overseas it’s important to consider how easy it will be to communicate with them. That’s the reason why established tourist areas and English-speaking regions often make the best places to invest in overseas property.
Other considerations may be financial and legal. For example, will you need to open an overseas bank account? How can you safeguard your property when you’re not there? Is there a clear exit strategy if you decide to sell?
While there are many things to consider, owning a property overseas can be one of the most rewarding life experiences, offering you the perfect place to escape on holiday.
Authored by Melvin Lunn
Melvin has over 20 years’ experience in global property sales and investment. For more information on investment in an overseas property contact him 03333 034 767.
The above article is written as a guide only and does not constitute financial advice. Professional advice should be taken before entering into any property investment or financial agreement.
