Buyer’s Guide to Investing in an Overseas Property
We’ve all gone on holiday and dreamt of staying there forever. We imagine an idyllic lifestyle that’s more akin to paradise than normal life, and it makes it all the more difficult to return home at the end of the trip. Maybe you’ve gone so far as to check out the local properties market, cost of living or available job prospects, or you’ve researched how much a move abroad would cost or the best way to learn the language.
Taking that next step and deciding to actually do it – to move to your own slice of heaven – is a huge undertaking and can be quite daunting. While it can be very exciting and easy to get swept away with the dream, it’s important make a sound investment. Hopefully, the following tips will help you stay grounded.
1) Evaluate your Priorities
If you’re looking to treat yourself to a luxury property, then you’ll definitely want to live the lifestyle that comes with it. That perfect lifestyle is going to vary from person to person, though. The key is to determine what “perfect” means to you. It could be living in complete solitude in a traditional country home; having a luxury Paris property with an unbeatable view of the Eiffel Tower; or being able to walk from your property right down to the beach. Think about your interpretation of a dream home and life, then make a list of the details. A few helpful questions are:
- Are you most comfortable in a country or urban setting, or do you like an environment that’s somewhere in between?
- Do you love seeing the change of seasons or do you prefer warm and sunny weather year-round?
- Do you need a pool or to be close to the beach, or do you not care much about proximity to water?
- What activities, hobbies and sports do you want access to?
- What types of art and culture do you want a lot of exposure to?
2) Research the Destination’s Property Market
Your home market doesn’t necessarily reflect the real estate market at your chosen destination, so it’s important to research the property for that specific location. Here are a few questions to get you started:
- What is the outlook for the housing marketing in the destination country?
- What have rental prices and property sales been like over the past few years?
- Are there government regulations or taxes that could pose a problem?
These questions are difficult to answer on your own, especially if you have limited (or no) experience in the country.
However, this is where the specialist services of a buyer’s agent can be invaluable. Tim Swannie of Home Hunts, a luxury buyers’ agent in France explained, “A buyer’s agent will work on your behalf and will have an in-depth knowledge of the local housing market. As property experts, they will be able to guide you through the whole process from finding a selection of properties that closely meet your search criteria, to making an offer and guiding you through the conveyancing process”.
3) Understand the Exchange Rate
Buying property means that large amounts of money are going to be exchanged for the destination country’s currency. You’ll need to familiarize yourself with the local currency value as well as exchange rates. Keep track of exchange rates so that you can exchange your money when the rate is in your favor. When it comes to making payments throughout the buying process, the best option is to set up a local bank account in your new country so that transactions are smooth.
4) Consider the Tax Liability
Building on what we just talked about, it should be at the top of your list to learn the tax laws and legislation of your destination country. You have to know what costs you’ll be required to pay so that you can add these into your budget. Examples include:
- Inheritance tax
- Land tax (sometimes this is a condition of the mortgage)
- Title transfer tax
5) Have an Independent Property Valuation Conducted
A property valuation is a professional assessment of the property that’s conducted by a neutral party. The price of the property will be assessed, which includes the worth of the buildings, environment, land and any other features that could influence the property’s value. Buyers will sometimes skip this step because it’s logistically challenging to arrange it when you’re in another country. However, having a property valuation done is an integral part of any property transaction, and it’s even more important considering how far you’ll be moving for your new home.
6) Understand What’s Still Owed on the Property
The further you are from your property, the more difficult it is to develop a relationship with the agents and vendors you’ll be dealing with. When talking about the title and ownership, be extra cautious – if the sale is completed while there’s still debt on the property, that debt will be passed along to you. Also, if the developer has borrowed money to complete work on the house and that money hasn’t been repaid in full, you could be liable for repayment and associated charges.
7) Decide How you’ll Handle Time Away from Home
Unless you’re going to live in your new home full-time, you’ll need a plan for how to care for the home when you’re not there. You’ll want it ready to use whenever you return, and you’ll also want to make sure it’s safe during your time away. It’s possible to find a home that’s located in a managed community, which means that housekeeping, landscaping and other types of maintenance will be taken care of for you. Another option is to hire a handy man or management company who will handle maintenance and alert you to any problems that arise.
8) Handle the Language Barrier
If you’re going to be relocating to a country where they speak a foreign language, you’ll eventually need to become fluent in that language (and immersion is an excellent teacher). Since you won’t be able to get up to speed between now and when you buy your property, though, you’ll want to hire a professional, neutral translator who has knowledge of conveyancing. If you are using the services of a property buyer’s agent, they will be able to advise and guide you through the buying process.
Buying a home is undoubtedly a complex process, but purchases overseas property poses even more of a challenge. With the right plan and support behind you, you’ll be able to find the property of your dreams and live the idyllic lifestyle you’ve been dreaming of.
