Buying any property can be a complicated process, but when you’re purchasing overseas, it can be easy to forget one of the necessary steps to ensure your investment is sound.
We have eight essential tips that you should follow in order to make the buying process as positive as possible.
- Your budget
Deciding how much you have to spend on a property will affect where and what you buy. It is vital that you know what your budget is before you start searching – you don’t want to be left disappointed.
Don’t simply take note of the sale price – purchase costs could add up to 14% of the advertised price in parts of Spain.
If you need a mortgage in order to buy overseas, research how easy it will be for you to be granted a loan. Conti, an overseas mortgage specialist, suggests seeking mortgage advice when you know which country you’d like to buy in, but before you start a detailed search.
It is a possibility to get a mortgage offer in principle to prevent a delay when you do find a home.
- Where and what to buy
Your budget will have a huge influence on where and what you can buy. However, you must consider what you will use the property for and whether it is wise to buy in your favourite holiday resort.
If you are purchasing a full-time overseas home, don’t confuse an ideal holiday location with somewhere you want to move to. If you plan to spend time at the property out of season, visit the area out of season before you buy. Visit at different times of year if you can to determine how the area changes through the seasons.
If you intend to buy and move out there when you retire, ask yourself whether the property will be suitable for you in five to ten years.
If you’re seeking a hassle-free investment, a new build property on a managed complex or resort may be perfect for you. There are many options for people who can’t use the home for long periods throughout the year, such as shared ownership.
- The location
Once you have decided on a specific area or town, or even development, you must choose your property with care.
If you are retiring abroad, consider what amenities you may need nearby, particularly healthcare services. If one of you cannot drive, ensure there are good transport links around.
Also, remember to think about airport transfer time – if you plan to rent out the property, or even just wish to have family come to stay, it is important that they can get to the property easily and quickly.
In town or city locations, consider noise levels and proximity to bars and restaurants. If you’re buying in a beach resort, think about how close the property is to the sea.
One of the advantages of buying a new build is that you can often choose a plot or position of property – corners are very popular.
When you’ve found a property, think about how much you are willing to pay for it and whether it is priced fairly compared to similar properties in the same area.
Property portals are a good starting point, but remember that advertised prices are sometimes nowhere near the achieved prices. The same can be said of rent prices.
A good estate agent should help you determine how much the property is worth based on how long it has been on the market, the position of the vendor and recent comparable prices.
Equally, an agent should help you with your position as a buyer – in some countries, an offer that is made too fast or too low can work against you.
- Ongoing costs
Before you commit to a property, you must understand how much it will cost to run – you may find that you can’t afford to keep it.
If you will own two homes, remember that this means two lots of council tax, double the bills and an extra home insurance policy. Also, remember that your overseas property insurance may be higher if the home isn’t occupied for long periods.
Some overseas homeowners have found that they require rental income to break even on running costs.
Many holiday home owners rent out their properties as a smart financial move – in some countries, such as Austria, it is compulsory in tourist resorts. Therefore, it is important that you pick somewhere attractive to renters.
If you purchase a period property, you must be prepared for regular repairs and have an emergency fund in place for if something major goes wrong. If you buy a rural home, you may need to pay someone to look after the garden or land.
Private pools are desirable for homeowners and tourists alike, but they can be expensive to run.
Alongside upkeep costs, you will need a good holiday home insurance policy in place to protect your investment.
- Independent legal advice
You must use an independent lawyer when buying a property. Even if the agent suggests you don’t need one, it is important that you have someone who will look after your interests, and it is your right.
Many problems that face overseas property buyers can be avoided with this step. Find a lawyer that is not associated with your agent or developer and who will conduct due diligence on your behalf.
This includes checking whether a property is owned by who is offering it for sale, whether it has any debts or liens attached to it, if it comes with all the relevant planning permissions and whether it sits on its plot of land legally.
Using a foreign currency exchange broker when transferring sums of money overseas is also vital. It will definitely save you money too, usually around 4% when compared to bank rates.
Rates are competitive and comparable, but you should find a broker that you are comfortable with – similarly to choosing an estate agent and lawyer.
Your broker will advise you on when to transfer funds to take advantage of currency fluctuations for both your property purchase and ongoing costs.
- Tax and residency
When you invest in an overseas property, you are adding tax implications. Smart buyers should seek tax-planning advice right away, considering how they will buy the property – whose name it is in – and whether it makes sense to leverage. Your inheritance tax may be affected by whose name is on the title deeds – specialist tax planners will help you with this.
In some countries, you will need to complete a yearly tax return whether you make an income from the property or not.
If you plan on spending half of the year in your overseas property, decide in which country you will be a tax resident – this has implications for how your income will be taxed.
Follow all of these tips for a safe and successful overseas property purchase, and remember to enjoy it!