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Soaring property prices and barely manageable taxes are making it increasingly difficult to invest in buy-to-let properties in Britain. As a response, landlords and potential homeowners alike are beginning to scout for other options, one being investments in properties abroad.
What you need to know
If you’re looking for a holiday home where you can stay when you go on vacation and rent out when you’re not there, consider tourist traffic. How popular is a destination and how often do tourist visits? While a property in one of the more popular tourist destinations will have better potential for rent, keep in mind all aspects of having property is such a location. You would also have to consider the holiday seasons and learn what periods are the busiest in whatever area you decide on. Of course you’re going to have to rule out the possibility of staying in the house during those periods if your primary purpose is to make money from renting it.
The next step is to decide whether you want to buy the property outright, pay in full, or if you’re going to finance it. If you decide to finance, you must find out if you qualify for a mortgage loan from a bank operating in whatever abroad country you’re purchasing your property on. Banks in the UK will hardly, if ever, give you a mortgage loan for property in another country, except perhaps if they have a branch in that country.
You may decide to rent your property through VRBO but this would cost you significant amounts of time and effort. Plus, you’ll require the services of a local rep to handle upkeep as well maintain your property and make repairs if the need arises. A better option may be to employ a local manager to both manage your property and help you find tenants. There are also utility bills to factor in, including electricity, water, landscaping, and pool cleaning if your property has a pool.
Buying in Europe
It’s possible for you to find a better mortgage deal in certain parts of the eurozone with a wide array of mortgage lenders providing much lower mortgage rates than you’ll find anywhere in the UK. Mind you, the Financial Conduct Authority’s reach does not include overseas mortgage brokers, meaning getting compensation won’t be easy in case of any mishaps. Another issue is fluctuations in the exchange rate will affect your repayments if you borrow in a foreign currency.
Also, in some countries, you’ll be required to pay a higher, possibly non-refundable deposit which could be as high as 40%. Wherever you decide to buy, it is essential to have a trusted lawyer or bonded estate agent to handle transactions and make payments on your behalf.
Buying outside of Europe
Again, remember that location is an extremely important factor when purchasing property for rental. If you’re looking to really get away from Europe, look into the vibrant new neighbourhood of Somerfield in Melbourne or other neighbourhoods in established suburbs with access to attractive facilities. As mentioned earlier, getting a UK bank to finance your mortgage may not work, but there’s the option of using an overseas lender with a specialist broker who will provide specific information such as the estate agents or lawyers to use in whichever country you’re buying.
Buying in the Caribbean
If you’re interested in buying property on islands such as Barbados, Dominican Republic, Costa Rica, Turks and Caicos, or any other Caribbean island, you must know that it might not necessarily be easier or cheaper than buying property at home. Depending on where you look, you may find property that is of great value when compared with the options you have at home, but of course, the definition of “great value” is entirely up to you. While islands like the Bahamas and Virgin Islands will be expensive, islands like Belize and Dominican Republic are generally less expensive and you will likely have more property options to choose from.
Bear in mind that property in the Caribbean would require higher levels of maintenance as a result of exposure to the hot sun, salt air, sea spray, and other environmental factors. Renting in the Caribbean could work out just fine, but you’ll have to investigate thoroughly and properly to understand the area, perhaps by renting a few times there.
Deciding whether it’s best to buy property overseas or wrestle it out here in the UK completely depends on you and your circumstances. Property is serious business and can be costly if not done right. The bottom line is to research extensively what the market looks like in any country you intend to buy property and take your time to make a decision—hopefully a profitable one!