Whether we can truly afford it or not, us Britons are still actively searching for information about buying property abroad – and whether all this internet searching is more about fuelling a dream rather than funding a solid plan with solid information, we have yet to see – and see we will when figures about international home ownership and emigration from the UK are released in the coming months.
But because interest is keen and buyers do seem to be coming out of the woodwork and sniffing out a bargain abroad, we thought we’d share with you five key tips to help you if you decide to buy a property abroad.
Sort Out Money Matters First
Whilst this may sound dull and obvious, it doesn’t mean that all buyers do sort out their budget and their fiscal matters properly ahead of making an offer on their dream home overseas. And yet, if you don’t have the money sewn up from the start you risk your entire dream becoming unravelled before your very eyes.
Even before you begin looking at what your budget will afford you where, you need to set your budget! How much can you afford in the way of a deposit, how much can you raise in the form of a mortgage, what can you afford to repay monthly, how much rental income will you perhaps need from your property to make it affordable? You have to crunch your numbers and make sure they are realistic. Assuming you’ll make 8% p.a. in the form of rental income is not necessarily realistic or sensible. Assuming you can afford the £100,000 mortgage you can raise when you also have a mortgage on your primary residence and we are in a recession is also not necessarily sensible.
Make sure you are 100% comfortable with money matters and that what you are assuming and factoring in are sensible assumptions before you progress.
Do The Leg Work Before You Buy
You need to spend time in your chosen nation – or indeed, you need to spend time choosing a nation – before you decide to buy anything at all. Firstly decide what you’re buying the property for – is it for you, for friends and family, for long-term lets or for holiday income? Once you know what you’re buying for you can think about where to buy to match the requirements of your target audience. I.e., if you’re just buying a second home for yourself that you can easily afford and don’t need to earn an income from, you can be a little more ‘reckless’ in what you choose perhaps. Whereas if you want to let out to the mainstream tourism market you need a certain type of property in a certain type of country, i.e., an accessible and desirable property in a country that is popular with tourists!
You need to think about the accessibility of the property – from an airport, a ferry port, main roads, a supermarket and basic infrastructure. You also need to look at the nation’s suitability for a foreign investment. Is the government stable, are the currency and the economy stable, are you welcome as a foreign national, can you earn an income or enjoy capital appreciation without massive taxation?
Do all your leg-work before you even begin looking at specific properties. You need to know that where you’re looking is 100% right for what you want to buy, and then you need to know exactly which type of property is right for your reasons for purchase.
Don’t Gamble Fly to Let Dreams on EasyJet and Ryanair
The creation of the cheap flight airline industry gave birth to a new type of property investment opportunity. The random and remote airports used by the likes of Ryanair opened up brand new property hotspots and buyers flooded in without a second thought. However, with the recent news that Ryanair are slashing routes this winter and with the fact that a number of other cheap flight operator have gone out of business, don’t gamble with your fly to let property investment dreams and base all your buying decisions on there being a budget airport nearby forever.
Think About the Hidden Costs and Obligations
The asking price is not the end of the costs you will have to pay up front for your dream home in the sun. For a start there will be lawyers and agents’ fees, then there will be taxes when you buy, taxes for ownership, taxes on any rental income and even taxes if you sell up and make a profit. If you decide that you want to make money from your property and let it out you will also have to pay someone to clean and maintain it when you’re not there – and if you have a swimming pool is will cost you a small fortune in servicing every single month of the year.
Know about and think about the hidden costs and on going financial obligations and outlays up front before you even get involved with overseas property. You have to be sure you know what you’re letting yourself in for otherwise you will find your bank account haemorrhaging money and there will be no quick and easy way out.
Have an Exit Strategy
Having a way out of ownership of a property abroad before you even commit to buying a home overseas may seem a little over the top, however you need to think about a way out as well as your way in to the market.
In the UK at the moment house prices are still falling and buyers are still finding it hard to raise the mortgage they need to buy – therefore it is a very difficult market. If you were in such a situation abroad and yet you really needed to sell to release the equity in your home, what would you do? Well, ideally you wouldn’t be in a position where you were so desperate for the money in the property! I.e., you would have got your finances right from the start, (see point 1 above!). So what options have you got? If you buy a home for yourself you could rent it out if you needed to make an income from it, if not, could you leave it boarded up and empty until you could afford to run it again? Would you be willing to sell it at a loss just to off-load it if the worst came to the worst?
Now that we are in a recession in the UK our worst financial fears are being recognised – we are having to face the fact that people lose their jobs, their income, their wealth, way of life and sometimes even their homes. If you keep this in the back of your mind and have a worst and best case scenario for exiting the market abroad should you want or need to, you have the final base covered and you can get on with the enjoyable job of finding a perfect place in the sun.
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