MY VIEWS ABOUT OVERSEAS PROPERTY INVESTMENT
Buying investment property abroad is becoming increasingly popular these days. This is not only because of status upgrade but because of the affordable prices on investment opportunities available.Making an investment in property abroad is becoming more attractive as the internal economy and stocks and shares are not providing the return they once did and the future of pension funds is becoming more uncertain. People are increasingly looking to property investment abroad as a means of providing a stable income and economic return as well as a place for holidays and possible retirement.
In the past, some countries were traditionally the favourite locations for property investment abroad but with the expansion of the EU alongside the expansion of budget airline networks into new countries are now attracting more property investors abroad.Property investment abroad is now not only for the rich and famous but are being brought by the ordinary person on the street. An increasing amount of people are realizing that investment in property abroad can provide not only great holidays but a steady income and security too. Property has always been recognized 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. The most profitable countries in the past may not be the best countries for process of buying now. Consider the long term projections for the economy and the strength and fluctuation of the relevant currency. Each of these steps will take a substantial amount of time if done properly, an overseas property investment is not something that should be rushed into without due consideration.
However, 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. Here, am going to try and address some of these issues and introduce the different types of investment available today, advising which types of investor they suit best.
The first issue to consider when buying a property investment abroad is which country to invest in and what type of property is desired. Many people find a property to invest in whilst they are abroad visiting the country. Each country has a different buying process and it is important to research the market fully before committing to a property investment abroad. Some countries have some of the cheapest home buying costs, prospective buyers abroad may not be aware of all potential costs. Check carefully what local taxes are payable and if buying an apartment abroad, a service charge is usually applied, local bills for utilities will usually need to be paid in a local currency. A local bank account can be set up to avoid paying handling charges for every transaction. Other costs are legal fees which are a lot higher in some countries than the other as well as regional and occupancy taxes. For example in Spain property valuations cost about £100 and loans must be signed by the public notary, which can be expensive. When buying an investment property abroad taxes and legal costs generally amount to 10% of the property price and higher in some countries. Therefore, it is important to employ a good native solicitor when buying an investment property in a non English speaking country. He/She will be able to fully understand all paperwork including terms and conditions, which should avoid any costly mistakes and being tied down to an unsuitable or undesirable mortgage on the investment property abroad. Beware that in many countries the solicitor is able to work for the buyer and the seller, so make sure any advice received is independent.
Further to the above, tax laws can differ between countries and a will may need to be made in the country of the property investment abroad. If the desired property investment abroad will be made available for renting, the income will have to be declared to the tax office. Most countries have a reciprocal tax agreement to stop double taxation on overseas properties, but it is important to research this as an oversight could be costly. Once the location has been researched and the finances organized, be it an off plan apartment or a ski apartment, it is important to choose a property investment abroad that can be enjoyed as well as being a stable financial investment, this is very important. Also, what the law says about taxation should you want to resell the property, you need to know all these.
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.
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 you need the service of an expert. 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 adviser
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.
•Currency transfer specialist
So often overlooked, the way that you choose to send money between the countries wherever you reside and a foreign bank account really can cost you a lot of money unnecessarily. A currency expert will offer you better exchange rates and has ways to protect you from exchange rate fluctuation by forward buying currency.
•Independent legal adviser.
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.
Get a bank guarantee
when planning to buy a new overseas property investment, insist that the developer or agent offers a guarantee that the construction work will be completed as agreed. Possibly insist you'll have to pay into an escrow account, that way, should the company run into financial difficulties or even become bankrupt, any money you have already invested should be able to be reclaimed.
Purchasing an overseas property investment through an offshore company.
Buying through an offshore company to avoid certain taxes, expenses and laws is sometimes an option open to an individual interested in purchasing abroad. This may be advantageous depending on the country in question. Seeking advice from a local agent is not advisable as incorrect advice may be given if it is based solely on the local situation. Specialist companies who advise on an individual basis offer the safest and most comprehensive service.
Signing a preliminary contract & deposits
Once a price for the overseas real estate has been agreed, some form of preliminary contract is usually signed. This effectively reserves the overseas real estate and takes it off the open market. Make sure you understand what you are signing and that you agree to all the conditions therein. A deposit will usually be required at this point to secure the overseas real estate. If there are certain contractual conditions, the deposit should not be paid directly to the vendor as it may be hard to recover it in the event that those conditions are not met.
Preliminary Contract to Completion
Between the signing of a preliminary contract and completion a number of things can happen to affect the buying process. For example the results of surveys and applying for the right to buy in the country of the overseas real estate, putting together the finance and obtaining the right permissions. The initial contract may have a set completion date, especially if a resale or completed overseas real estate is being bought, all searches, surveys and architect reports need to be in place and the finance agreement finalized before this date is reached.
Completion
Upon completion, the vendor and purchaser of the overseas real estate will be required to sign some form of contract in front of a lawyer or notary. This hands ownership over to the purchaser - or his mortgage company. Deeds will be transferred for the real estate and the final balance will be due. If 'off plan' overseas real estate or a completed new property is being bought, it can be advantageous to find out if deferment of a percentage of the money is possible until you are completely satisfied with the build quality and finish of your overseas real estate. In some countries the withholding of this amount is standard practice, in other countries it is not. Sometimes the solicitor can withhold money as an independent intermediary. It is worthwhile asking for this deferment as it can be a good negotiating tool if something is not working properly.
On a relax mood to conclude my write up, sinking hard cash into an overseas property always comes with risks. Yet there are a number of destinations where investing now looks far more attractive than 12 months ago. Some markets that nosedived for example, Spain shows signs of bottoming out, and offer good value again. In other parts of the world, such as the Caribbean, United States, Dubai overseas buyers are being targeted with significant tax incentives, citizenship among other benefits. Here are few hot spots where investors in all price brackets can find good value in 2016.
Barcelona, Spain
A city perceived as a magnet for beautiful people will always buck national trends. This probably explains why Barcelona is looking a better bet than the still struggling Costas. A recent report shows that sales turnover is up by 250 per cent on a year ago. The Spanish government is wooing overseas buyers, and this could be the perfect time to invest in a buy-to-let property in a landmark European city.
French Riviera
The French property market was in the doldrums, but has been given a welcome fillip by the recent 25 per cent cut in capital gains tax. This has induced many high-end sellers to offload their properties, while the going is good. "The top end of the market will certainly continue to flourish.
Dubai
Once regarded as the quintessential boom-and-bust destination, Dubai may well have turned the corner. Property prices rose by more than 30 per cent in recent time, after what agents are euphemistically calling a "hiatus". You either love or hate Dubai, but there seem to be enough hard-headed Middle Eastern buyers viewing it as a safe refuge from the turbulence of the Arab Spring to induce cautious optimism.
The Algarve, Portugal
The Portuguese market has been almost as precarious as the Spanish sector in recent years. Take the long-term view, however, and it is hard to argue against such a beautiful location with a well established British presence, whether homeowners or holidaymakers. "You can find a pretty three-bedroom villa with a pool for around £300,000.00.
Barbados
As if the prospect of owning property in the jewel of the Caribbean were not enough, the Barbados government is dangling new carrots in front of high-net-worth individuals. It has already introduced new Special Entry Permit laws and is considering offering Economic Citizenship to overseas buyers. Not surprisingly, the top end of the property market is buoyant. I would want to rest my view for now, should have any comment, suggestion(s), question and what a view. kindly send an e-mail via sternakin02@gmail.com.
