PROP­ERTY

John Ste­pek pro­vides tips on what to bear in mind when ex­tend­ing your port­fo­lio over­seas

Business Traveller - - CONTENTS -

We’ve all done it – touched down in a par­tic­u­larly pleas­ant city or re­sort and fan­ta­sised about own­ing a home there. But day­dream­ing is one thing – if you want a prof­itable in­vest­ment prop­erty rather than a hol­i­day home, you have to be a lot more hard-headed. Here are some key points to bear in mind when in­vest­ing abroad.

LO­CA­TION, LO­CA­TION, LO­CA­TION

Where do you want to buy? An“upand-com­ing” des­ti­na­tion may of­fer more scope for cap­i­tal gains, but it’s also riskier – it might not “up and come” as promised, and the prop­erty-buy­ing process for for­eign­ers will be less es­tab­lished. A ma­ture des­ti­na­tion might not en­joy rapid price growth but rental de­mand should be more pre­dictable, and the buy­ing process should be smoother.

If buy­ing off-plan, be ex­tra care­ful. How fi­nan­cially sound is the de­vel­oper? What’s their track record on sim­i­lar projects? What hap­pens to your money if they go bust or the project over­runs?

Get to grips with the lo­cal rental mar­ket. Are you rent­ing to lo­cals or tourists? Dif­fer­ent rules will ap­ply to short-term hol­i­day lets and long-term te­nan­cies. If you are rent­ing to tourists, how long is the hol­i­day sea­son and how many weeks a year is the prop­erty likely to be va­cant? Is it close to the air­port and on an es­tab­lished, re­li­able route?

Also, con­sider the coun­try’s po­lit­i­cal cli­mate. How would you cope with un­ex­pected changes to tax­a­tion, or to laws gov­ern­ing im­mi­gra­tion and over­seas own­er­ship of prop­erty? Even po­lit­i­cally sta­ble, de­vel­oped coun­tries are not im­mune.

DO­ING THE DEAL

Prop­erty taxes and reg­u­la­tions vary widely from coun­try to coun­try, so make sure you un­der­stand and budget for these. Use an in­de­pen­dent lawyer and sur­veyor with a good track record. If you don’t speak the lan­guage flu­ently, hire a trans­la­tor who does, prefer­ably one with ex­pe­ri­ence of prop­erty deals.

In­vestors in pop­u­lar des­ti­na­tions should be able to find up-to-date guides about the pur­chase process. In most coun­tries, you’ll also be able to find ex­pats happy to share both vic­to­ries and hor­ror sto­ries. They may also be able to fill you in on the re­al­i­ties of the rental mar­ket, as well as lo­cal quirks.

MONEY, MONEY, MONEY

You can fund the pur­chase by re­mort­gag­ing your UK home, and buy­ing your over­seas prop­erty out­right. Al­ter­na­tively, there’s an over­seas mort­gage. One key is­sue to con­sider if tak­ing an over­seas mort­gage is cur­rency risk. For ex­am­ple, any­one with a ster­ling in­come who had bought a home with a euro or dol­lar-de­nom­i­nated mort­gage would have seen their mort­gage pay­ments soar af­ter Brexit, as the pound plunged in value.

John Ste­pek is ex­ec­u­tive edi­tor of MoneyWeek

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