Buying a property overseas

Buying property abroad is often an attractive proposition for investors, or for people looking for a holiday home or a place to retire to. But there are traps for the unwary too, just as there are when buying any property and the whole process is made more fraught by being done in a foreign country. You have foreign language and customs, laws you’re unfamiliar with and it’s more difficult to visit a property in Andalucia or Moldovia than to drive up to Wolverhampton and look the place over yourself. Here’s a few tips to help you walk through the minefield.

Step 1

First there’s finding a property and a destination country. That varies depending on your aims – investment, residence, part-time occupation. It also varies depending on whether you’re looking at a country that’s inside the EU or not. Inside the EU, EU laws apply and moving or buying is much easier. Outside the EU is much more complex and difficult. That doesn’t mean you shouldn’t do it, just be aware. Find a good estate agent by word-of-mouth or professional body recommendation. In England, the professional body in question is the National Association of Estate Agents and choosing a member means extra protection. Additionally, the agency is based in the UK, so they’re more accountable and you’ll be more familiar with dealing with them – and they’ll speak English. In France, it’s the FNAIM, the SNPI, or the UNPI. Check the law about estate agents in your destination country and go with one that can be trusted.

Step 2

The next step is to do your research carefully on both your destination country and your business model. For some overseas buyers, they don’t hope to make a penny from their retirement home or holiday cottage. Others are buying to add to or start a property portfolio and if this is you, look carefully at long term rental market strength, local economic performance and upkeep costs and make your own decisions about likely profit margins. Tall tales of huge incomes generated on dilapidated apartments in the middle of nowhere have caught more than one investor who didn’t think it through. On the same point, some people hope to buy a holiday home and let it when they’re not in it. But due to the nature of the short term let market, a holiday home will probably be empty more than it’s full. You can hope to make some money, perhaps cover upkeep and expenses, but don’t bet on making a profit.

Step 3

Dealing with mortgages and currency conversion is another turning point, where you can either save or cost yourself literally thousands. Shop around for better prices. It doesn’t matter when you’re buying your holiday money, but when you’re converting thousands of pounds a minor difference in rates can save you a small fortune. Similarly with mortgages, while interest rates for overseas mortgages are generally lower than for mortgages in the UK, lending criteria and loan-to-value regulations have been tightened up in a lot of places after the bursting of housing bubbles, and detailed documentation will be required to prove you can afford to buy.

Step 4

Seek expert asset advice from a lawyer who specializes in this area. Get help in writing wills binding under the laws of your destination country and in negotiating and finalizing contracts, from an independent lawyer who speaks your native language and the language of your destination country. It’s best if your lawyer is based there, as a lot of the work will have to be done there. If you’re buying off-plan, your lawyer should be experienced in negotiating a clear payment schedule and guarantees backed by a bank so that if the builders go bust you won’t lose out.

Step 5

If you’re planning to live abroad, work out your tax, healthcare and pension requirements. Some countries have very different healthcare arrangements and you might want private insurance. If you’re a Brit moving within the European Economic Area you can claim the UK state pension and it will rise annually. Otherwise it won’t. Many UK based pension schemes will pay only in sterling, or only into a UK bank account, leaving your future income at risk from currency fluctuations. This isn’t the sort of thing you want to find out about when it’s too late.

Step 6

Finally, in amongst the excitement and challenges of planning, figure out how your life will be after you successfully buy a property abroad. What kind of lifestyle can you afford in your destination country? How will you pay for it? If you’re only living there part-time or you’re buying to let, how much travelling will be involved? Are you prepared to learn the language? Being ready for this stage is more important to long term success than many people realise.

For further information – Ask the experts.