For some, overseas property investment provides some hard-to-turn-down benefits such as greater claims to capital growth and increased rental yields than buy-to-let property in the UK. Making it a very lucrative opportunity, as well as providing investors with the added advantage of having their very own holiday home that they can visit. If the right decisions are made at the right times, overseas property investment can offer huge financial rewards.
But, before you can pursue your goals of owning a property abroad, there are several things that you will need to bear in mind, such as taxes surrounding property ownership, foreign laws, rent charges and more. So, let’s take a look a some of these things in more detail.
Location, location, location
For newcomers to the property investment game, the location of where their investment will be made is often the first thing to think about. To make your investment a successful one, you’re going to have to think long-term. Many experts will reiterate the fact that certain locations have the reputation of being property hotspots, where if timed properly, you will be able to snatch a bargain when prices have fallen. However, it is advised to invest your money in more established markets that offer longer-term benefits and sustained returns.
General overseas property investment considerations
When looking for the perfect property to invest in, there are a number of things that you will definitely need to think about. These include if your property will be used as a holiday home. If it will be rented out. If the cost of living will change over time and if certain foreign ownership laws will be involved.
If you’re choosing to rent your property out as a holiday home, you’ll need to ensure the property is easily accessible with good local amenities and is located in a popular area with local tourists. Be sure to take holiday seasons into account as many tourist destinations shut down and become quieter during ‘out of season’ months.
Be sure to look into properties of a similar nature in the surrounding area to get an idea and taste of what the general rate in the market is. Despite global property price trends occurring, it is important to know how property markets in specific locations are performing and they themselves can go through peaks and troughs. Take time to learn how many weeks per year similar properties are occupied, to give you an idea of what to expect if and when you decide to proceed with your overseas property investment.
It can be difficult to find the right financing option when buying an overseas property, especially since some countries might not offer financing options at all. In some parts of the world, banks cannot accept a foreign asset as a security loan, so you may not be able to get a standard mortgage from your domestic bank the way you would for a local property purchase. Other international regulations may prohibit banks from even initiating the process with a client regarding a mortgage if the client is based in another country. So, what’s the best way to get a mortgage for your overseas property investment?
Whilst traditional bank financing might not be an option for overseas assets like it is for domestic property purchases, developer financing may be available when there aren’t any other options. Other payment methods may be available such as using retirement funds or pulling equity from your primary residence in your home country. You may also qualify for personal or business loans that you can use to pay for your overseas property down payment. A number of UK banks offer mortgages for international borrowers if you are able to maintain a minimum bank balance at a designated threshold.
The amount of tax that you will be required to pay on your overseas property investment needs to be factored into your decision-making process. Some countries impose property taxes, others do not. Some countries may also levy taxes if you leave your property vacant for a certain amount of time in the year. If planning to rent, you may be required to declare that rental income to your home country and the country where your property is located. Unless there are double taxation agreements in place, you could find some issues with tax in two separate countries. When preparing to sell your property, you’ll need to be aware of both domestic and foreign taxes on capital gains. Foreign taxes are complicated and consequences can be steep for failing to declare assets that wouldn’t otherwise be taxed.
When buying an overseas property to make a profit, there is no need to relocate permanently. Meaning your property may well be empty for a significant amount of time. As a result, you will need to think about maintenance and security. One of the best ways to do this is to employ a local property management firm that can make regular visits to check on the premises and conduct the relevant duties to keep the property in a good condition. Despite this requiring some additional investment, it can help to save huge amounts of money and safeguard your assets.
Overseas property investment resources
A vital part of investing successfully and safely in overseas property is finding and taking appropriate advice from the right people. An overseas property management firm is a great start but ultimately is just one cog in the machine. To ensure you get the most out of your investment, you’ll need to tap into a variety of different areas, gathering the expertise from various professionals. Such as:
- Financial planning & tax advisor
- Independent legal advisor
- International accountant
- Currency transfer specialist
By securing the services of these different resources, you will be able to identify and prevent potential money-losing situations during your overseas property investment journey, especially when it comes to sending money overseas. Universal Partners FX can help you get more for your money when the time comes for you to transfer funds abroad with our bank-beating exchange rates, zero transactions fees and 24/7 expert support.
Our simple-to-use online platform allows you to send your funds swiftly to a chosen recipient in a secure manner. Whether it’s a one-off or a regular payment, we can you to save money by avoiding high street bank transaction fees and poor exchange rates. Simply sign up for a personal or business account with us today to get started on your overseas property investment. Click below to learn more about how our foreign exchange services can help when buying a property overseas.Buying a Property Overseas >