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10 tips for buying abroad
Over a million Brits now own a second home in Spain and France alone, and figures from the Office for National Statistics reveal that around 200,000 Britons go overseas each year with the intention of remaining for at least twelve months. It would appear that we Brits are becoming more passionate about investing abroad.
Did you know that average house prices in the UK have risen by 100% since the turn of the Millennium and mortgage lenders with friendly interest rates are actively encouraging the average British householder to turn their built up equity into real hard cash, more and more are buying abroad fuelling an overseas property boom.
It’s not just the British who are obsessed with seeking out their little corner of paradise. Many Northern Europeans and Americans are of the same frame of mind – looking overseas for investment real estate or for a holiday bolt hole.
If you’re considering buying a second home abroad or an investment property overseas, we have compiled these top 10 tips about buying property abroad.
1. Legal Advice
Never assume that you understand how exactly the entire house purchase process is going to work. The legal system will very rarely work in a way you are expecting it to. To be assured of the fact that your personal interests are being looked after and that you, your money and your property are secure, legal and legitimate it’s essential to seek independent legal representation in the country you’re buying property in.
Especially true of course if you’re buying property in a country where you do not speak the language. You will be putting your name and signature to contracts and legally binding documents. Remember, however pleasant and helpful the real estate agent or vendor are it’s in your own best interests to make sure you have a local lawyer who’s in your employ representing you.
2. Build Times
If you buy off plan, self-building or renovating abroad you need to factor a contingency into your overall time planning. Weather, seasonal pressures, holidays, availability of essential building materials – the factors that can adversely affect the build time of a house are many. The builder may confidently assure you that your property will be ready by a given date, but don’t be surprised when the completion date is delayed. It’s just ‘one of those things’.
3. Setting a Realistic Budget
Like time budgets also have a habit of spiraling out of control. It is usual to add an extra 10 – 20% on to any purchase price for fees and taxes; but actually you have to factor in the additional cost of visiting your property abroad during and after the build phase, extras like light fittings, curtains, kitchen and bathroom upgrades, the application for and connection of vital services, removal costs and/or the cost of furniture, satellite TV installation, air conditioning or heating installation, car rental. If you have a set budget limit it’s important to sit down and work backwards including all the potential extras and fees and then see exactly how much is left for your property purchase.
4. Ongoing Communication
If you’re buying a brand new property abroad – either off plan or during its build phase be sure you have some way of keeping in touch with the developer or managing agent. Get some commitment about how often you will be kept up to date with progress, whether they can email or send you regular visual updates and what level of ongoing communication you can expect for them. Buying property is a big commitment, financially and emotionally, it’s important you’re not left at home wondering how on earth your investment is coming along. Sort out your lines of communication before you sign on the dotted line and make sure you’re entirely comfortable with how the process will work.
5. Overseeing & Managing
If you self-build abroad or purchase to renovate you will need someone on site or near by to oversee and manage the build process. If you employ someone to manage the project you will need to be assured of their experience and qualifications, you also need to be comfortable with any language or cultural differences to ensure they will not affect the successful outcome of the project. Ask for references, look at other properties they have managed, ask to see qualifications. In terms of language and cultural differences you need to make sure not only that your words will be understood but also that they will be interpreted correctly. Employing the right project manager is very important.
6. What You See Versus What You Get
If you’re buying off plan or from a distance you need written confirmation that what you see is what you get. All too often agents will show you the top of the range property and finish when your budget is going to buy you something slightly different. You need every detail confirming from the size and location of the plot, the size of the property, dimensions of each room, detailed floor plans with the location of windows, doors and integral items (from air conditioners to kitchens), the finish on doors, walls, floors, bathrooms, kitchens, external areas etc. You might expect the quality to be on a par with what you have back home but you could be mistaken. If possible visit other sites that the particular developer or builder has already completed to see the standards to which he builds to, and have all important site completion details written in to the contract with a clause stating you do not hand over final monies until you are 100% satisfied. Don’t assume anything. People get caught out because they don’t ask the right questions at the right time.
7. Overseas Mortgages
If possible get any mortgage agreed in principal before the search begins. You need to know exactly how much money you are going to have before making any form of commitment to buy. Then, if you find a house you like make sure the purchase contract is conditional to you securing the finance you need. Consider local lenders, the rates just might be better than you can get back home, however if you use this option you will need to understand the implications of any difference in exchange rate.
8. Investment Potential
If you’re looking to buy investment property abroad make sure you research the property market of the country you are considering. Look at it from the points of view of stability, growth potential and the liquidity of the resale market, after all, it’s all very well having a property that has increased by 30% but if you can’t sell it? Look at independent research, do just believe the agent. If prices are increasing at a substantial rate, is it realistic to assume they will continue to do so? Decide how long you intend to own the property for before you buy.
9. Tax
Find out about both the local and overseas taxation liabilities relating to foreign property purchase, rental, resale and gains. As taxation issues and liabilities change on a country by country basis you have to make sure you do your own detailed research but expect to face purchase tax in the country you’re buying in, gains tax on profit when you sell, also expect to pay some form of income tax either ‘back home’ or in the country in which the property is located if you rent it out for an income.
10. Property Purchase via an Offshore Company
The option to establish an offshore company for the purchase of real estate abroad is an option available to most people, but whether it is an appropriate course of action to take depends on many factors. Such factors include where in the world you wish to purchase, the value of the property and the laws relating to foreign ownership of real estate in that country. By using an offshore company to buy abroad an individual can sometimes avoid or reduce their taxation liability, avoid certain expenses and even laws. But the applicability of this option is something that can only be determined on an individual, case by case basis. The cost associated with this option may make it impractical for an individual owning a single property.