What to consider when investing or buying overseas

Many people just ‘fall’ into buying property abroad. Either they go to a show and like the look of the fancy developer photos and get sucked in by the patter of the clever salesmen (usually ex time share sales people!) or they go on holiday, meet someone in a bar, get invited to a ‘free’ event and with little due diligence hand over tens of thousands of pounds. Don’t let this happen to YOU!

Before you buy or invest in a holiday type home, firstly make sure it is what you want. A £100,000 goes a long way to hiring a holiday home over the next 30 years, without the hassle of dealing with currency fluctuations, managing property from a distance, maintenance costs and complicated tax laws. Many people who buy a holiday home rarely make money, the best case to expect is to break even on your investment.

So before you hand over any cheques:-

1. Make sure your purchase delivers what you want. Cheap holidays abroad or if investing, what you want from it. If it’s income – how much? If it’s capital growth – how much and by when?

2. Don’t be fooled by marketing brochures. They will only give you the ‘good news’. What they won’t tell you is what else will be built in front or behind your property, nor will they declare the finances of all the companies involved and whether they are about to go bust!

3. Just because an area has increased in price today, doesn’t mean it will by the time you come to sell. Think of those who have invested on the coast in Bulgaria. Many can’t even sell for half the price they bought them for!

4. Ensure the prices you are being charged are the same as a local would pay. Many places (Cape Verde for example) were hailed as the next ‘Caribbean’. Properties were therefore already being sold at similar levels to ones you could buy property in the Caribbean for!

5. Don’t buying anything overseas until you have visited the country, secured independent valuations from people NOT connected to the company you are looking to buy from.

6. Work out your costs from start to finish. What are the purchase fees? What will it cost you sell it? What tax will you pay? Are there different inheritance laws? What are the predictions from foreign currency experts on the exchange rate versus £ now and in the future? If you don’t have time to work these out or don’t know how, ask a professional or don’t buy!

7. Make sure you have two solicitors – a local solicitor AND an international solicitor. That’s how the professional investors buy, because they know it’s a false economy not to.

8. If buying the property requires you to use the developer's legal and/or finance company run away as fast as you can, as it suggests a lack of transparency and makes it easier for disreputable companies to fleece you blind. You HAVE been warned!

9. Weigh up the risk of investing abroad versus investing at home. Force yourself to write down the pros and cons of investing abroad/the country you are looking at.

10. Make sure you work with currency specialist, never buy through your bank, it’ll cost you a fortune!

Finally you need to be aware you avoid all the mistakes other investors overseas have made who have lost money in the likes of Bulgaria, Spain and many other countries, for example:-

Spain, key issues included

• People buying properties ‘overlooking’ the sea, then new ones were built in front and obscured the view.
• Builders took people’s money and went bust – taking deposits with them.
• Properties were built on land without the proper authority and the buyers weren’t given the right paperwork to make the property legal.
• People bought properties off plan in areas that were then flooded with competing properties built at the same time or coming onto the market cheaper.
• Those that wanted to sell after five or more years found the market was too competitive and the new builds brought their property’s price down.

Bulgaria, key issues included

• From a coastal perspective, too many properties were built to cope with demand.
• It was often cheaper to stay in a hotel locally than to rent an apartment.
• No local demand, only overseas.

Cape Verdi, key issues included

• Island sold as ‘the next Caribbean’ but properties were sold at built in ‘Caribbean prices’ for example £60,000 for a one bed coastal flat which would buy you a three bed locals house in a village. In St Lucia, 5-10 minute drive from the coast would buy you a three bed property in a good area that could also be rented to locals or people on long holidays/working away.