What to consider when buying overseas or abroad

The internet has made it easier to buy property abroad, with buyers able to research online to find not only property but local lawyers to help with the transfer and information on regulations.

Some points to consider are:

- Do intend to live in the property?  If so, what are the requirements for foreign residency?  Will you have to seek permission as a foreign resident buying a house abroad?  Will you be regarded as a local resident for tax purposes and what will that do to your tax status in your home country?

- If you intend to visit occasionally while principally living in your home country you again have to consider tax consequences of renting out your property.  Will you incur a tax bill and in what jurisdiction?  You might be taxed at home and abroad.  In some places, you need to prove how long you have been abroad and they examine your passport to ensure their tax authority is not being cheated.

- Rental income sounds good but how will it be affected by currency translation?  There is likely to be more maintenance required if you rent out so how will the property be managed while you are out of the country?  Is it possible to talk to anyone for a recommendation of a local agent to maintain the place and provide the key and a contact point for people using the property?

- Do you see the property as an investment?  Are you looking at buying into a “hot spot” and selling the place for a capital gain a couple of years out?  Consider how you will monitor the local real estate market and beware of currency movements working against you.  Spain was a popular destination for many British retirees but the property market there collapsed in 2008.  Prices in luxury Australian suburbs and coastal towns started sliding with the financial crisis as the owners sold homes and holiday places as their wealth fell and margin calls were made.  These have, of course, provided opportunities for buyers.

- What are the local taxes and fees in the jurisdiction?  A good lawyer (independent of the developer/real estate agent) and property manager are vital here.  The lawyer will know what you are liable for and the property manager will provide you with the appropriate records and perhaps advice if the property is purely an investment and you need to know when to sell.

- How will you finance your investment?  Borrowing for a foreign investment will be complicated so sort out your finance first.  And, as with borrowing to buy property at home, remember to factor in the fees and government charges on the transfer of property ownership.

- If dealing with a developer, consider getting some independent advice, such as a report on the structure, even for a renovated or new building.  And talk to a local real estate about the development.  It might be marketed to foreign buyers because locals know something bad about the area or the homes are overpriced.  It might not be the sort of property that local people or tourists want to rent and the development might create oversupply in the area.  Watch out for promises of services such as transport and shops that do not yet exist.

www.shelteroffshore.com
www.aipp.org.uk
www.buyassociation.co.uk