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Proceed With Care For Maximum Returns

Aug 18, 2008
In the last few years there has been a massive increase in buying and letting property abroad, a trend driven by rising British property prices, the opening up of new destinations by budget airlines and cheaper air fares.

Letting abroad can work well and is a great way for landlords with properties in the UK to spread their risk. However, there are many things to be aware of.

Obviously, language, distance, local customs and restrictions can be a barrier, especially if you're doing any building work. In some areas properties must be renovated or built using local materials and techniques, thereby raising costs. With newer properties there may be unusual residents' regulations to comply with. Also, property taxes, legal fees, land registry and mortgage costs all tend to be higher outside the UK.

It is essential to employ good lawyers, architects, surveyors and builders, so spend some time checking their credentials. The Law Society has lists of British solicitors with offices outside the UK. Check references locally.

In many countries you'll have to also deal with a notary - the civil servant whose job it is to check the title deeds, draw up contracts and make a record of the sale. However, their job is not to advise you, so you'll probably still need a lawyer.

In most places you'll be committed to the purchase at an earlier stage than at home. Get your legal adviser to establish that you have a good legal title to the property and to check the person you are buying from really does own the land. If there are any complications with getting a good title or establishing rights of way over land, ask your lawyer to make this clear.

Your lawyer should also explain how local planning permission operates. If you bought for a sea view, he or she must check that the land in front of you can't be built on. Some councils have tight planning laws which will stop the area being swamped with hundreds of 'me too' developments while others have an anything goes approach.

For architects and surveyors, the Royal Institute of British Architects and the Royal Institute of Chartered Surveyors have small databases of practitioners abroad. Try to get a local practitioner so as not to offend the locals.

Be clear why you are buying. As well as letting, you may also be buying with an eye to one day living there or using the property yourself as an occasional holiday home. It's OK to have a mix of reasons, but you still need to be clear how much money you wish to spend, how much you think the property will get in rent and what the running costs will be.

If you are thinking of ultimately retiring there, consider how suitable the property will be when you're older. Also check with the Department for Work and Pensions and the Department of Health to see if you'll be able to access your British pension and whether you qualify for free health care in that country.

If you are buying purely as an investment then personal preferences won't count, so you can focus on things like demand, occupancy, advertising, agent fees and rent, unencumbered by any other personal objectives. You'll need to budget for marketing the property, maintaining and insuring it, agency and service charges, cleaning and dealing with any problems as they arise.

Check before you buy you need to know that you'll be allowed to let it out, so check the local letting laws, safety requirements and on how you'll have to account for your income locally.

Talk to people who have let property there before and find out what problems they had and how they overcame them. Your landlord association may be able to put you in touch with other local British landlords. Unless they come with unimpeachable recommendations, treat with due scepticism any advice from people who are trying to sell you something.

Look out for any local regeneration initiatives that may push up property prices and rents. If a big new airport or connecting road is being built, that's good news if you are in the holiday letting business, providing you aren't too close to the flight path or the motorway.

If you are going to let to holidaymakers, the property must look good on a website and be easily accessible. Outside the main tourist areas there may be a more authentic feel but if it's too far from the nearest airport and miles from the nearest shops, it won't let easily. Seaside areas are usually more expensive to buy into but should get higher rents. However, they may not let outside the summer season unless there is another attraction like good golfing. Properties in cities may be attractive for both year round holiday lettings, business lets and for the longer term tenant market. It all depends on local demand and supply, so check this carefully.

If your property is served by a single airline there is a risk they could stop flying there, so look for places that can be reached in a number of ways.

If you are using an agent, tell them you have a local friend who will keep an eye on the property. That should stop the agent pocketing money from holidaymakers who turn up at their office wanting to let your place for cash. Keep a payphone in the place and ring occasionally. If someone answers you'll know it has been let and can challenge the agent if the rent doesn't show up.

Variations on holiday home ownership include time shares where you buy with other owners and each have a share of the property. Clearly you need to be satisfied with the arrangements should one or more of the owners wish to pull out or sell his or her share. Another alternative is 'leaseback', and arrangement by which investors buy the property then lease it back to a developer or manager who guarantees a fixed income. Check the small print of these deals carefully.

In the longer let market you'll need to check out local tenancy laws and regulations as well as local rent levels. Tenants may have more protection than in the UK and it may be harder to evict. Also, rent controls may exist, putting a cap on what you can charge.
About the Author
Karl Hopkins works on many websites including http://www.fly-2let.co.uk a complete online resource for anybody wishing to buy homes overseas. Make sure to read our comprehensive buyers checklist before buying property abroad.
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