Basic Guide to Buying Property Abroad In The Recession
The most recent downturn in the global stock market has singed a lot of investors' fingers. And with millions lost, more investors have turned their backs on the roller-coaster stock markets soughting alternatives.
Interestingly, one of the very causes of the current 'bust' is being re-evaluated. Real estate investing is increasing in demand for those who have the money to afford it, as property prices have dramatically decreased around the world over the past year.
Personally, I know very little about buying property, so I decided to do a bit of basic research. This guide is by no means meant to be comprehensive nor advanced, but for those who are wondering if they can cash in to the increasing ventures in real estate, here is a compilation of tips I found that might help you in determining where you should consider investing.
Know where to invest. Just because you have a favorite travel destination does not automatically make it the most sensible candidate. But you already know that. If you're looking to rent out a place and make decent money doing so, you can't beat vacation rentals. The key points you therefore should consider include the following:
1. Is it a popular tourist destination? A quick glance at travel websites including Thomas Cook, Thomson and Virgin Holidays will offer you insights on a destinations' popularity with tourists, often a good source of income for rentals.
2. Is it easy to get to? Have a look and see where airlines fly. Airlines often chart popular destinations based on passenger demand, an indication of accessibility to renters. Check out airlines like Easy Jet to get an idea of the various flight routes. Alternatively, visit Travel Supermarket to see what flights are available if you have a destination in mind. Of course, take note of whether you could end up in a stag slum like Prague, in which case, you better have a few Czech maids ready to service a potentially trashed up flat after every visit. Having an idea of the typical guest profile could help you prefer in advance.
3. Is the Country stable? Know the economic and political situation in a country. Are they a member of the EU? What is their currency? How does their legal system work? Do they have a high crime rate? These are all things that you should ask before getting anywhere close to withdrawing your life's savings for investment, so that your 3 acre piece of land will not get confiscated by the government.
Familiarize yourself with applicable taxes in your prospective country, and the rates before you buy. What is the rate of VAT in the country you are interested in? Will you have to pay VAT on top of the purchase price? What are the local property taxes?
Here is a list of countries with double tax treaty agreements with the UK. This is important especially when you sell your property, assuming you have achieved some capital growth, because you do not want to be taxed in both the UK and the country where you purchased your property.
Before you agree and get into any real estate venture, beware of the costs involved.
If you require a mortgage, make sure you know what the mortgage interest rates are in that country. Also be aware that these mortgage rates are unlikely to be fixed. Therefore, like in the UK, they can either go up or down, and in view of the current economic situation, you might want to think twice before investing money you don't have.
Also, if you buy a development, communal maintenance, fees may be payable. There may also be property management service charges. If you rent the property, a company to maintain the property including services such as laundry, security, advertising, and maids may deepen your pockets.
Summary: Research what purchasing properties outside of the UK entails. Find out whether an area is popular with tourists. Understand the additional financial implications of the UK's double tax treaty, including VAT. Get legal assistance to know and facilitate your transactions. All these little steps will help lessen future problems.
For additional information on investing in real estate, have a look on The Global Property Guide.