Property has long been one of the most popular forms of investment. However, rather than keeping things close to home, more and more people are deciding to invest in property overseas. For some people, this is a great opportunity to make some extra profit while also enjoying a holiday home. For others, they are simply aiming to capitalise on the world’s most profitable locations in terms of the property market. No matter what applies to you, read on to discover some of the common overseas property investment mistakes that people make so that you can avoid them.
Failing to conduct sufficient market research – There is only one place to begin, and this is with a lack of research. You really need to do your homework and know your stuff if you are going to buy a property in any location. The Malaysia property market is going to be completely different from the property market in the UK. From the types of properties that sell to the taxes and legal issues, there are so many different matters that need to be considered and researched. You also need to look at historical patterns and forecasts for the future so that you can make sure your investment decisions are wise ones.
Being blind to taxes – Another mistake that a lot of people make when it comes to overseas property investment is being blind on the subject of taxes. Tax rules vary considerably from country to country. This is why it is a wise idea to get expert advice on the matter, rather than playing a guessing game. You will need to declare and pay tax on any rental income in most locations. This is especially the case if you have used a property letting company that is based in the country where the property in question is situated. You may also need to pay capital gains tax when you decide to sell the property in the future. Again, this all depends on where you are buying, and so proper research and expert assistance is a necessity.
Failing to get the contracts translated independently – When it comes to buying a property in another country, there is a very high chance that the contracts are going to be in a language you don’t understand. You may be provided with an English version, but do not just assume that this is identical to the original copy. It is a good idea to make the most of a professional translation service so that you can make sure they match up. The last thing you want to do is end up signing something and agreeing to a stipulation you never intended to. While most people would not do this intentionally to fool you, it can happen. Plus, innocent slip-ups can cause drama in terms of the legalities later down the line.
Not considering the future – The property market may be booming in a certain location now, but is it going to stay that way? When investing, you should not only think about the here and now, you need to look into the future as well. Of course, this doesn’t mean you’re expected to be Mystic Meg, but you do need to do some research. Don’t only look into property market forecasts, but find out whether there are any planned developments or changes in your area that will impact your investment.
Not factoring in the exchange rate – When it comes to the cost of buying a property in another country, you need to make sure you put together an effective budget. You need to make sure that all costs are included so that you do not underestimate the expense associated with this type of investment. One area whereby a lot of people make mistakes is with regards to the exchange rate. You need to factor this in when you buy a property. Try a lock in a favourable exchange rate in advance and you could save yourself thousands of pounds.
Failing to look into year-round rentals – In a lot of countries, demand will be high and rental yields will be impressive throughout the summer months, yet this does not continue during the winter. You may struggle to rent out your property through the colder months, and even if you do, you may need to slash the rental price in half. It is pivotal to take this into account and to view your financial forecast over the year so you can get a true reflection of the profit you can make.
As you can see, there are a number of common errors that people often make when it comes to overseas property investment. Nevertheless, if you can stay away from the blunders that have been mentioned above, you can give yourself a great chance of ensuring that everything goes smoothly and that you generate a good return on your investment. Good luck!
