How to avoid buy to let pitfalls abroad?

The economic events of the last year have given many investors the impetus to review their portfolios.  With interest rates at historic lows and stock markets in turmoil, investors have had to look for alternatives.

Around the world, falls in property markets have provided many investors with great opportunities to add profitable buy to let properties to their portfolios.  And it’s not too late to join them – provided you’re careful.

Steady & sustainable, not rapid get rich quick

The first thing to manage are your own expectations: economic conditions mean that we are unlikely to see a return to rapidly rising property markets, so it’s important to recognise that an investment in property won’t deliver quick and easy profits.  You need to commit your capital for the medium to long term, so it’s important not to make mistakes.  The flipping of off-plan property for quick profits has not realised its potential for many an investor in the current economic downturn.

Research different areas in detail to identify all the possibilities – Property Venture®’s articles,  newsletters and country guides (on left hand menu under each individual country) provide the ideal starting point – and be clear about your own objectives and risk profile right from the start.  As with any major transaction, you need to do your due diligence thoroughly and get professional advisers you trust.  On that basis, it’s still possible to create a rewarding overseas property business. 

Steps to go through

If this is your first step as a foreign property investor or as a landlord, or if you’re moving into a new area overseas, it’s vital that you get help from someone with the skills, experience and local knowledge to assist and advise you.  Before you snap up that bargain apartment or villa, talk to people with local knowledge, especially if you’re not familiar with the area and you’re aiming for long term capital growth.  Other property owners are an invaluable source of information and recommendations, while overseas property or rental agents, should be able to tell you about the strength of demand, the relative appeal of your target property vis-à-vis others on the local market, and what kind of rental rate you’ll be able to charge.

Analysis and numbers

Do your sums, allowing for maintenance and voids as well as the mortgage and bills. You’ll probably need to pay a local agent for day to day management and liaison with tenants and you may want to visit the property once or twice a year. Although if your rental agent keeps an eye on the property, this should work well and is usually acceptable for most insurance policies.

If you’re expecting to generate an income, make absolutely certain that the property will produce strong cashflow and yields in return for your investment, both financial and personal.

With all the facts at your fingertips, you’ll be well placed to judge the potential risks and likely rewards of the investment.  The right property in the right area is a very attractive investment option.  These days, it won’t make you rich quick, but if you’ve done your research thoroughly, it might just make you very rich a little more slowly.

Louise Reynolds
Property Venture^®

Property Venture^® is an independent, UK-based agent. We help time-strapped investors and holiday home purchasers, buy abroad by guiding through the buying process, so reducing the hassle. We visit the countries you buy in, so we can offer common-sense, grounded advice. Overseas members of NAEA. This means we have been subjected to the membership criteria and have signed up to follow the professional Code of Conduct established to help you, the potential buyer or investor, buy property with confidence.