Shopping for an overseas property for sale
Thinking of buying an overseas property? Whether you're making a permanent overseas move, shopping for an investment property, or just looking for an overseas holiday home, there are many factors to consider before purchasing your first international property.
Barry Lea, Deputy Regional Chief Executive of Lloyds TSB Offshore Banking Asia, has some well-honed advice for those who are thinking of investing overseas for the first time
1. Bide your time
Some people may be tempted to buy properties that are not too attractive and are at the low end of the scale, just to be able to say that they have an overseas home. It’s better to save as much as you can, and then buy something that’s more of a sure-fire investment, and much more marketable if and when you come to sell.
2. See for yourself
You should at least be familiar with the country and the area where you want to purchase, but ideally you need to check out the site instead of relying completely on what you are told by the agent or vendor. It also pays to make enquiries at the other end to make sure that there is no pricing differential.
3. Choose wisely
Differentiate between cold investment factors and more emotional-type factors. If you are going for maximum return, the property you choose could be very different from one that you would want to live in with your family. Exercising a designer’s fantasy on a property that is intended for letting may not be wise, as you have to please the prospective tenant, not yourself.
4. Look to the future
Find out what is likely to be built close to your property. In beach resorts, for example, once residential development has begun, it will often continue for years, meaning your uninterrupted sea views may be superseded by another building in a year’s time. Buy next to land that is protected against development if you can.
5. Avoid dangling carrots
Sometimes people get excited over freebies but there’s no such thing as a free lunch, and incentives are invariably factored into the pricing. Focus on the property itself instead of the so-called giveaways. Similarly, a rental guarantee can be very attractive but you need to ask yourself if the property can be let independently.
6. Take a long-term view
People who buy overseas property should be in it for the long haul, as property values and currencies will of course ebb and flow. The average life of a loan on an investment property is around five years. Calling currency movements over a five-year term is extremely difficult, let alone over 10, 20 or 30 years, so be prepared to wait before you sell.
7. Be canny about currency
It is wise to match the currency of your assets and the currency of liability. That doesn’t necessarily mean matching the currency of your property (fixed asset) with the currency of your loan. There may be an argument for borrowing in the currency of your income if you aren’t looking to service the loan out of income from the property, or repay it from the proceeds of the property’s sale.
8. Avoid the lowest interest rate
If the interest rate on a loan appears too good to be true, then it probably is. It is not sufficient to take, for example, a claim that a loan would cost 6 percent per annum as an accurate statement of bottom line cost. There are a variety of ways to calculate interest and it’s difficult to make meaningful comparisons of the real cost of lending. Always check what the actual repayment figure will be over a given term.
9. Check for hidden costs
Before you commit to a purchase, it’s important to be fully aware of the legal process and all the costs involved, some of which you may not have accounted for in your budget. Be prepared to research this area so you know exactly what your financial responsibilities are to your new home. Talk to your solicitor or lawyer.
10. Make a detailed offer
Once you’ve found your dream home, make your offer in writing if possible (of course, subject to contract). This should include the price, deposit amount, when you’re prepared to pay it, expected completion date and what you understand to be included in the price (for example, furniture and fittings). Confirm that all machinery equipment and installations are in working order.
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