You are an established investor in the UK property market and understand how to both buy and sell property within the home market. But now you’re ready to expand your portfolio: so, where to next? Overseas properties can pose a sound investment for real estate investors, but buying a property abroad can be very different to buying one in the UK. Here are some of the main questions you are likely to ask when considering investing in property overseas:
What Are the Benefits of Buying Property Abroad?
One of the main benefits of buying property abroad is that property prices can be much lower than in the UK in many countries, though there are obvious exceptions to this rule. Some of the other benefits of choosing to invest in property abroad include:
- The opportunity to own a holiday home in a country you enjoy spending time in. This is often a more financially sensible decision if you want to spend large chunks of time in a country, as owning your own home is more affordable than renting in the long term.
- To enter the buy-to-let sector. Thanks to the low property prices in many countries, mentioned above, the buy-to-let sector is more accessible to a wider range of investors. You will be able to invest in property and generate a steady income.
- To grow your initial investment. It may sound obvious, but if you wish to grow your income by investing overseas then the best way to do so is to identify overseas property hotspots where prices are currently low but are forecast to rise. Getting into these sectors at the right time is the perfect way to take advantage of this and grow your investment.
- Relocation. Finally, another reason you might choose to invest in property overseas or benefit from overseas real estate investment is if you wish to permanently or partially relocate to another country. This is a great way to set up and establish a new base.
Which Tax Rules and Legislations Will Apply?
It is difficult to answer the question ‘which tax rules and legislations will apply’ because these will be different for each country you choose to buy property in. What is important is that you don’t assume the legislations and rules that apply in the UK will apply overseas. Some countries, or even regions within countries, have laws that are very different from those you know in the UK. For this reason, you should engage an independent lawyer that is fluent-English speaking (unless you are fluent in the language of the country you wish to purchase property in) to ensure that you are fully aware of the legislations in the country you are buying property in, and the ramifications of your purchase. The lawyer that you choose to work with should be fully qualified in their home country and experienced in international transactions and the law of the country you’re dealing with. You are also advised to check they are registered with the Law Society in the UK and that they have professional indemnity insurance.
Do You Need to Secure Foreign Bank Accounts?
Whether or not you will need to secure a foreign bank account will be determined by how you intend to fund your foreign real estate investments. If you are making a cash payment or securing your property with a mortgage taken out from a UK bank then it is possible to conduct all of your transactions via your UK bank account. There are many UK mortgage providers that have offices in other countries overseas, particularly European countries with large expat communities such as Spain and France, and these mortgage providers are in a good position to help you to obtain a mortgage within the UK for a property overseas.
If your preferred option is to secure a mortgage within the country you wish to buy property in then you could also use an overseas mortgage provider. This may be particularly useful if you are already working alongside estate agents and legal advisors within your destination country. If you do secure a mortgage within your destination country though, you will need to secure a foreign bank account. The good news is that this process is incredibly easy.
What Additional Costs Are Involved?
When you are buying a property abroad you need to budget for much more than just the purchase price of your chosen property. Other costs that you should budget for include:
- Shipping costs if you wish to live in your property, furnish it from the UK, or otherwise move goods from the UK into your property.
- International bank transfer fees if you wish to purchase your property using funds from your UK bank account.
- Translator fees to translate any legal documents into a language that you can read and understand clearly.
- Additional legal fees for searches and contracts. In some countries, it is also a legal requirement that you have a will in place before you can purchase property.
- Community fees, refuse collection and drainage fees, and other local taxes payable by property owners in the country.
- Annual property tax.
- If the overseas property that you own generates an income, then you may also have to pay income taxes for your property.
What Should I Look Out For?
Investing in property overseas is a great way to generate an income and grow your investment assets, but it is not always a straightforward or unproblematic process. When you are considering investing in a property overseas, you should ask the following questions and ensure that you have fully researched the property that you wish to purchase. Some of the questions you should ask include:
- Are there any local issues you need to be aware of? What is the crime rate in the area? Does the area suffer from floods or droughts? These are all the things you should know before you invest in a property.
- Does the seller really own the title deeds to all the property/land they are selling? This is unfortunately a very common scam for investors looking to purchase property overseas, so you should have the deeds and ownership of the property checked by your legal representatives before you transfer any funds.
- Are there any outstanding bills or tax demands on the property? In many countries, if you own the property then these outstanding debts are automatically transferred to you.
Buying a property abroad is very different from buying a property in the UK, but if you take the time to consider your investment, and choose both your property and its location wisely, then it has the potential to be a high-growth and highly lucrative investment opportunity.
