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Welcome to our guide to buying property overseas.
It’s around this time of year, with winter well and truly descending upon us, and daylight-saving time rearing its ugly head, that many of us, those that can afford it, consider the possibility of either relocating overseas, or acquiring a property overseas.
Wouldn’t it be just great to know that, faced with a particularly grim weekends’ weather, we can simply jump on the Eurostar or into the family car, or onto a direct flight to France, Spain, Portugal, Italy, or even Croatia, Bulgaria, Montenegro, Albania…or even further afield?
A ski-chalet in the Swiss Alps. A beachside villa in Sitges. A small finca in the Balearics. It’s not as much of a pipe dream as you might think.
All you have to do is to break the process down into small steps, set targets, timeframes, price limits, and devote a decent chunk of time to researching – or better still, visiting – the places where you’d most like to purchase a second home.
So, here’s a ten-step guide to help you get a feel for what the process might feel like. You can either go step, by step, by step, or dip in and select the sections that are most relevant to you.
The idea is that by the time you have read this, you should at the very least know whether acquiring a property abroad is something that would suit you, your lifestyle, and your family, what some of the pitfalls to be aware of are, and whether searching for your dream property overseas is something that will energise you and help you take a big step towards achieving the lifestyle of your dreams!
We may play devil’s advocate at times, but after reading through this gruelling test of your mettle, you will be a lot closer to knowing if overseas property ownership is for you, and if so, how to go about getting that dream property.
1/ Is this really for me?
You may have recently attended a dinner party with some old friends and discovered they are now the proud owners of a cottage in the Normandy countryside, or that they have invested in a Florida beach-house, or even begun making payments towards a new-build near the beach in Bulgaria.
Of course, you and your partner, if you have one (not to mention your kids, if you have them!), will doubtless have an opinion on this, but it’s important not to be swayed by what others are doing. They may tell you it’s the best thing they ever did when in reality they are struggling to meet the monthly payments, don’t speak the language, and rarely find the time to make the trip to their newly acquired property.
They may be at a crucial juncture in the negotiations and especially worried, warning you never to do it, when in the end it turns out to be just a bump in the road and they go on to enjoy every minute of being overseas property owners.
So, the first crucial piece of advice we can give you is: don’t go by what others’ say – you’ll rarely get the full story.
Instead, ask yourself: what is my attitude towards risk? How much can I afford to lose if something does go wrong. How genuine is my desire to escape for the weekend – is it just a fleeting five minutes on my Friday night commute, or is it a hearty yearning for a new chapter in life?
Maybe you could start by making a list of all the pros and cons. What excites you the most about buying property overseas? What excites you the least? Are you prepared to travel 5-10 times to the location you have chosen and stay in a cheap hotel whilst you negotiate the finer points of the deal? How involved does your partner want to get? How about your family?
Do you have pets, do they enjoy traveling, and if not is there someone at home who can look after them when you are away? May you have to spend more weekends away at your parents as they become more elderly, meaning you have less time to get away?
The more you think, the more difficulties you may identity with buying property overseas, but at the same time you may begin to see more and more opportunities that a place abroad may unlock for you, and your family.
So, take a deep breath, sit down, either alone if you are an independent type, or in the company of your nearest and dearest, and really try to tease out the possibilities of foreign property ownership.
Don’t rush this process, really take your time. And finally, you will have your answer to the question “is this genuinely for me?”
2/ Can I afford it?
Doing the sums when thinking about buying a property overseas, it’s very important you are realistic. It’s easy to get carried away and find an extra 5 thousand in savings that you don’t really have, or to believe that you will strike a more generous mortgage deal than anybody else.
So, it’s best to be conservative in the initial stages, especially if you are not a risk-taking property entrepreneur, who may wish to play by other rules. If you want to remain financially secure and protect what you have, then you will want to have a considerable financial buffer in place.
When acquiring an overseas property, it’s possible that you could end up spending as much as 20% of the value of the entire property on fees, taxes, advisors, travel etc.
Remember that an overseas property may not be for life, but it is certainly not for Christmas either! Once you have agreed to buy, you are going all in. It may be extremely tricky to re-sell a property once you have purchased; it may be hard to pay the mortgage rates if the exchange rate turns against you (don’t forget about Brexit!), and then there are costs such as maintenance charges, management fees and repairs – easily dismissed beforehand, but all too real when the property is secured and the bills start rolling in.
Open up a new spreadsheet in excel, or sit down with a maths exercise book – whichever you prefer – and make a list of every cost you can think of, no matter how ridiculous it might seem – because accidents do happen. Below are a few costs to start you off. And plan at least five years ahead. What might happen to you in that time? Is your salary likely to increase or decrease? What will happen to your savings? Are there any other major expenses you are likely to incur in that period? School or university fees, repairs or changes to your current property – even, dare we say it, funeral costs?
Nothing will ruin the allure of buying a property abroad more than realising too late that it is financially unsustainable. Equally, it will be extremely satisfying to know that you have a beautiful property abroad because you did exactly the right kind of financial planning and preparation in advance.
Costs associated with buying property abroad – a list to start you off:
- Travel to and from property
- Lawyer’s fees
- Property tax
- Fixtures and fittings
- Essential maintenance
- Foreign exchange fees
- Insurance – property and contents
- Property management
- Wear and Tear
- Local council tax
- Residents’ association
- Ground rent
It may seem like a bit of a no-brainer. After all, you may initially have decided to look into buying a property overseas after falling in love with a particular country or region.
But once you begin to look in earnest, that may change. You will discover places that you were unaware of. Barcelona is great, but what about Sitges, just up the coast? You had your heart set on Italy, but for half the price you could get twice the space in Montenegro or Albania.
Or, by the third of fourth visit, the place you had in mind may begin to lose its allure.
So, again, even if you have your heart set on a particular location – perhaps you have friends who are buying there, or it has always been your dream to retire in a particular place, it never hurts to do separate search – just in case you are missing something.
A wider search may help you to uncover more facts about the overseas property trade. The prices you are being quoted seem unreasonably high given property a few miles down the coast is much cheaper, or the rural village you had your eye is one of many, some of which have much better transport links.
Remember, all research is valuable, and although at first you may become intoxicated with the many different, well-publicised options on offer, eventually you should find your final choice reinforced by your research, and you can feel more confident than ever about buying there.
Finally, it may sound like a cliché, but it’s a cliché because it’s true. The overseas property market is well policed, and endlessly analysed, even the remotest destinations, and generally, some property is expensive or popular for a reason, and some property is unpopular and inexpensive for a reason.
Take Marbella, for example. Its popular because it delivers all of the things it says it will. It’s warm all year round, its sociable, the locals are friendly, the amenities are excellent, the language barrier is not an issue. You know what you are going to get, and some people will be prepared to pay a small premium for that knowledge.
If you are buying in an island in the Caribbean you know little about, by way of example, you may find a real bargain, but what you may not know is the state of relations between locals and ex-pats, the reliability of the weather, the exchange rate, crime rates, what the neighbours are like etc. etc.
Again, it all comes down to your risk / reward profile. We are certainly not saying taking a risk will inevitably lead to disaster, merely that there is a higher chance that it will. Alternatively, you may strike gold.
Take your time, do your research – there are very few secrets out there in today’s market – and be realistic about what genuinely matters to you, and how much excess you are prepared to pay to secure those things.
4/ What is the primary purpose of the property?
Knowing this will help with every aspect of your decision whether or not to make an investment. There are several options.
Retirement home – but are you ready to say goodbye to the hustle and bustle of working life, or will you start to miss it just a few weeks after you have signed on the dotted line and purchased your pipe and slippers?
Holiday Home – a great idea, but can you afford the luxury? You could of course choose to rent it out when you are not there, but that will most likely be in the low season, as you will want to be there yourself in high season, so expect lower rental yields. Perhaps you can rent to friends and family, but remember, this can be an unreliable source of income, as plans change and people cancel. You also need to bear in mind the cost of maintaining the flat while you are away. Wear and tear can be expensive, and depressing to confront when you return after a long spell away.
Investment opportunity – the secret of sourcing a good investment property, is not to imagine how you would feel living there (unless you are trend-setting kind of person who people love to follow), but to think about the kids of people you want to attract. For example:
- Business people: expect a high turnover of renters, as many people relocate abroad for a year or less. People relocating for business will expect all mod cons, convenient travel options, modern facilities and it’s important to decide whether you want to cater for families, couples, or singles abroad.
- Retirees: this is likely to be long term, with a possible sale opportunity. Retirees are likely to be quite particular in terms of their requirements, and they may even want to change and redesign aspects of the property. There may be special requirements, too, such as no stairs, disabled access, amenities within walking distance if they no longer drive. When considering all of the requirements for housing a retired couple, it may be time to make another comprehensive list.
- Just for you: if this is entirely your pet project and you intend to be the sole occupant(s), then make sure it has everything you need. Are there things that you just won’t compromise on, like outdoor space, a terrace, a garage, a pool, a guest room? Remember, a compromise may seem ok in principle, but you will be stuck with it once you have agreed to a sale, and you don’t want to have any regrets.
Development property – if you see potential for development, then you must check if you have the right to apply for planning permission. Also, can you source local builders? Do you have a local connection who can negotiate on your behalf? Have you decided on a budget, and made enquiries as to cost? Is the property habitable in its current state in case there are delays in development?
We’re sure that you will have a firm idea of how you wish to use a property abroad if you are seriously thinking about making an investment, but remember, once you have made up your mind, you will have to stick to the plan. Take the time to understand the scale of the project you have in mind. Do it beforehand, or, as tehy say, “forever hold your peace.”
Further reading: How Can I Secure A Mortgage On An Overseas Property? An Overview By The Money Cloud
This is another area where you may have to compromise. If you are looking for a property to use as a weekend getaway, how long are you prepared to spend travelling to and from the property?
The prices of overseas property are heavily dictated by travel times and travel convenience. If your property takes one hour to reach down a rarely used dirt track, and you are obliged to use a hire car after you have already flown, it can eat into the time you have to enjoy it, and become a frustrating burden.
On the other hand, a few hours longer travel time; if you can spare the time; may enable to find a larger property, in more traditional surroundings.
Try to imagine travelling to the property 10 years from now, by which time you may find the journey more fatiguing. Always check to see if there are plans to develop the transport around the area. Is the state planning to build a motorway that goes right past your front door? And what will that do to the sell-on price of your home.
Travel and accessibility are key things to consider and research before taking the plunge, and a little insider knowledge goes a long way – all the more reason to befriend a local.
There are rumours afoot that post-Brexit, airlines may be forced to cancel regular flights to many European destinations, which could be bad news for overseas property owners. We have already seen this happen with Monarch Airways.
Remember, it’s all very well owning the property of your dreams, but if you can’t get there, it may well remain only the property “of your dreams”.
6. Facilities and amenities
“Getting away from it all” may sound tempting, but equally don’t forget how inconvenient it can be when you have to jump in the car or walk 5 miles to the nearest shop when you realise you have forgotten to top up on milk.
Try to reason out exactly what amenities and facilities you can’t do without. Let’s say you are moving to La Manga in Spain and want to play golf every week. A quick check on google maps will tell you whether your proposed property is situated close to the clubs, or an hours travel away.
Do you need schooling facilities? Do you want to be within walking distance of a beach? If you like to be sociable and eat out, are there well reviewed local restaurants nearby, and are they open in the off-season?
Do you have special requirements? You need to be near medical facilities, for example, or you have pets (or children) that need a place to exercise. Is there a post office nearby?
These are the kinds of things it’s all too easy to forget about in the excitement of finding that dream home abroad, which is why it does not do any harm to have a checklist. You may find that you have to compromise, and that is not always a bad thing, but some things may be deal-breakers, and it is best to keep these considerations front of mind at all time.
further reading: I’m Moving Abroad – Should I Open A Local Bank Account?
7/ Local community
Are you somebody who simply has to be involved in local activities and events? Are you a culture vulture, who needs to know they can get their fix of museums, arts, or country fairs wherever they are? Do you enjoy propping up the bar at your local on a Friday night?
It’s fair to say that the local community can make a or break a property. When you visit a property you have earmarked as a potential purchase, it’s worth taking the time to spend a few days on location. Stay at a local B&B, go to a local restaurant; stop people in the street for a chat.
There are many horror stories doing the rounds about nightmarish locals in far flung locations. By and large these are apocryphal, and should not put you off, but there are plenty of checks you can do beforehand. Checking the local crime statistics, for example. Is there a police station nearby? What do the current owners make of the local community. Is there a residents association.
Or perhaps you prefer not to be disturbed, in which case buying on the high street in a bustling market town may not be the best option.
As always, take the time to build up an idea of your expectations, and don’t shy away from investigating whether they can be met.
8/ Resale Value – On The Up, or On The Turn?
It’s tempting to think “I don’t care about re-sale value, it’s the perfect property for me so that’s that!”
But remember, it isn’t all about you. One day, your children may inherit your property. Will you be leaving them with a right headache?
You may be desperate to buy in an “up and coming” area for the vibe and the potential re-sale value, or you may want to find somewhere that will always stay the same – just how you like it.
Either way, as always, a little research goes a long way. Are there any planned developments that may drastically alter the atmosphere – a new resort, a theme park, an influx of people from elsewhere?
You may want this, or you may not, but one thing is for certain – either way, you are unlikely to be able to stop it.
Is the local area reliant on a certain industry – farming, a nearby factory, or tourism?
A large number of factors will dictate the ultimate re-sale value of a property, and this may concern you, or it may not. Some regions are more volatile than others, and again it all comes down to risk reward. Juts make sure you do your homework so you know exactly what those risks, and those rewards, are.
further reading: 10 Of The Hottest Destinations To Buy Property Overseas
Yes, everything seems to come down to Brexit these days! There’s no getting away from it, Brexit is going to change a lot of things, not least buying property abroad, and not just in Europe.
There is the fluctuating exchange rate making it hard to know what the size of your monthly or annual payments will look like. There is the treatment of Brits living abroad – will they still be able to remain abroad indefinitely? There is travel to and from the country – will it be as simple and convenient as it is now in a few years’ time?
There are implications for those who wish to continue to work when they relocate abroad. Will they be able to obtain the right permits or participate in local markets?
Clearly, those of us thinking about buying overseas will be watching every development closely, and hoping for a “soft”, rather than a “hard” Brexit.
But what if you are buying outside Europe? Firstly, beware a rise in demand for non-European properties as Europe becomes logistically as hard to buy property in as Thailand, Florida or South Africa.
Secondly, know that more than ever, you will be subject to the vagaries of local rules and regulations – you must learn what they are – and not protest them – that is one sure-fire way to get off on the wrong foot with you new neighbours – unless they disagree with them too!
If you plan to buy abroad, and you aren’t already, pay close attention to Brexit. It may be yawn inducing at times, but it is hugely significant. It doesn’t help that the upshot of Brexit may be bad blood between Brits and the rest of Europe, which complicates property purchases no end.
It may be necessary to run your very own PR campaign and to restore the reputation of brits abroad as you battle to secure your dream property.
10 / Dealing with Foreign Currency and fluctuations
Now this one area where we truly are the experts, and can help you no end!
Paying for property abroad is inevitably going to involve moving money from one currency into another.
The vast majority of us let our banks handle these kinds of transactions, and that is a big error! Here’s why.
Although it seems convenient to just move your money from your bank account into the receivers’ bank account, the reality is that you will pay through the nose for this service. Banks are not natural currency dealers, and as such they charge high fees, and quote you uncompetitive exchange rates that frankly, they ought to be ashamed of.
No matter how much pressure is put on banks, however, they refuse to change. For one thing they can’t – their older legacy systems simply aren’t capable of processing overseas money transactions efficiently or cheaply, and that is not likely to change any time soon. For another, because consumers are generally ignorant of how much money they could save by using a dedicated broker, they use their bank, who simply charge them their hefty fees and say no more about it.
Fortunately, you can use a service like The Money Cloud to calculate exactly how much you could save.
Once you are ready to make a transfer, visit our site and select how much you would like to transfer, and into what currency. Hit “go”, and The Money Cloud will provide you with a selection of rates quoted by our carefully curated selection of authorised brokers.
We will also tell you how much you are saving versus completing the same transaction through your bank. And trust us, you may well be surprised. With the savings you will make, you may just find you have found the extra budget to decorate, repaint, or even solar panel the roof!
The other great thing about The Money Cloud is that we will put you in touch with brokers who won’t just perform transactions on your behalf, charging up to 85% less fees than your bank, and offering the most competitive exchange rates on the market, these brokers offer all kinds of services that your bank doesn’t, that will make your overseas property purchase much more financially palatable.
For example, say you need to make your mortgage payments every month – a broker will arrange this on your behalf. Or, say you need to transfer a large lump sum in advance of a sale. A broker will be able to select the optimum time to make that transfer, based on their expert knowledge of the foreign exchange markets.
The personalised service that the broker provides really makes the difference, with savings likely to be 5 figures on a mid-market transaction.
So hence our final piece of advice. Once you have worked through the above 9 things to consider, or even at the beginning of the process, make sure you are working with a skilled broker, and personally checking the rates to make sure that you are getting the best deal you can.
The banks may thank you if you leave it up to them, but as they say, “act in haste, repent at leisure.”
We wish you all the very best with your overseas property hunt.