Why bricks and mortar abroad?
Property has always been recognised as one of the most fruitful forms of investment. In its traditional form, property offers a long-term, low risk investment, such as private buy-to-lets. However, in today’s faster, more financially sophisticated world, more refined opportunities suited to short or mid-term investors have evolved.
Without doubt, newer schemes mean transacting property has become more liquid, and the amount of money required to tap into a property investment these days can
be comparatively minimal. Thanks to air travel and the internet, the world has become a small place, so that many of the newer investment options you see promoted today are found in all corners of the globe. For many of you, an apartment or villa on a managed resort that brings in fixed rental income; gives you a week’s annual usage; and will rise in value; might tick all the boxes. But if you’re a bit more adventurous, there has never been such a wide choice of investments: from off-plan residential projects in an Istanbul suburb; to an aparthotel in France, or social housing schemes in Brazil; to land plots in Australia.
Key to investing abroad successfully is understanding precisely what you want to achieve from your investment, being comfortable with your risk level, doing thorough due diligence, managing expectations and taking the necessary precautions to protect your own interests. In the following pages we address all of these things and introduce the different types of investment available today, advising which types of investor they suit best.
Choosing the right investment
You may be investing abroad for your pension, or to complement other more traditional pension plans already in place. We all know how poor interest rates are at the moment and annuity rates are equally dismal, so it might be that you’ve decided – and are able – to channel all or some of your existing pension pot into an overseas property investment. You may be investing for another source of regular income, or perhaps you’ve come into some inheritance and would rather invest the money, or part of the money, in something more exciting and – hopefully – more profitable than a financial product offered by a bank or fund manager?
Like your reasons for investing, everyone’s budget will be different too, as will how risk averse you are; how hands-on you want to be; what length of investment term you want; what sort of exit strategy you need; and how much you are prepared to borrow – if anything. Crucially, you need to decide what type of return you are aiming for: capital appreciation from a property’s value increasing over time, regular income from rent, or perhaps a combination of both. What type of investment you opt for will be determined by your approach to all of these factors.
To get started in choosing the right investment, download the Overseas Property Investor Guide.
Maximising your return
The best investments are in markets where sustainable demand will always outstrip supply. Look for markets where there is evidence of demand from any combination of locals, international residents and tourists. Before starting your hunt, it’s worth knowing how to assess and compare the projected value of different investments. This will involve doing some sums, so here are four key calculations you should get to know, with explanations for each. (Not all will apply to every type of investment and where a sales price is listed, you can use the projected sales price or look at comparable properties):
- Below market value:
- Capital growth:
Sales price (before any sales costs)
Purchase price (before any purchase costs) - Return on investment:
Profit €60,000
Capital e.g. €80,000 x 100 = 75 percent ROI - Profitability:
Sales price – Sales costs
Purchase price + Purchase costs
True market value – Purchase price
True market value
Valuable resources for investors
Integral to investing safely and successfully is finding and taking appropriate advice from the right people – in addition to your property agent or investment consultant. You need a reliable team of experts who can oversee your purchase and set it up in the most beneficial and tax efficient way, according to your personal circumstances and requirements. You should certainly have in your team the following experts:
- Financial planning and tax advisor
- Currency transfer specialist
So often overlooked, the way that you choose to send money between the UK (or wherever you reside) and a foreign bank account really can cost you a lot of money unnecessarily. A currency specialist, such as our recommended partner, Smart Currency Exchange, will offer you better exchange rates and has ways to protect you from exchange rate fluctuation by forward buying currency. - Independent legal advisor
When buying property anywhere in the world, it is highly advisable to employ an independent lawyer to check that your personal interests are protected at each stage of the buying process – even after you have purchased. If buying abroad through a locally based firm, your lawyer will ideally be up to speed with the local laws and buying processes, and be bi-lingual. - Property management company
For buyers whose property isn’t sold as part of a rental scheme, finding a reliable and efficient local property management company is crucial to the success of the investment. Management companies will offer a whole range of services, from simple key-holding; to a more extensive service that includes managing your lets; finding new tenants; and receiving rent on your behalf.
Have you thought about how investing abroad could affect your worldwide estate and tax obligations? Speaking to financial planning experts before you purchase could save you money and hassle, especially if buying for a pension.
For more information on any of the resources you might need when investing in overseas property, download the Overseas Property Investor Guide.
Guides provided courtesy of The Overseas Guides Company
The Overseas Guides Company (OGC) is the UK’s leading educational resource for anyone interested in moving overseas and/or buying a property abroad. They offer free, informational guides to Britons buying property in over 15 different countries. The aim of the OGC is to help buyers to understand their options and plan a comprehensive buying strategy. Not only is it important to know what questions to ask, it’s important to ask the right people! Find out what questions you should be asking by downloading your guide to buying an overseas investment property.
The Overseas Guides Company has helped thousands of readers to reduce risks, save money and avoid wasting time. The guides and the website content including weekly video, articles and journals that are written by experienced, knowledgeable writers based both in the UK and overseas giving the most in-depth information available.
Collect your free Overseas Property Investor Guide today!
*The information shown is provided in good faith, but Rightmove accepts no liability whatsoever for any inaccuracies or omissions in any of the information shown in this newsletter. You should take professional advice before committing yourself to any transaction. Rightmove does not give investment, mortgage or financial advice, and is not authorised to do so. Any opinions expressed are those of Rightmove, but must not be relied upon.