Whether you’re looking for a holiday home, somewhere to live full-time or a pure investment, choosing a suitable overseas property requires the right strategy. Here we run through the things you need to be thinking about and essential questions homebuyers need answering.
Lettable holiday home
Many people who buy a second home for their enjoyment will also let it out to holidaymakers. While they might not intend to at the start, many change their mind after a year or two of seeing their place empty for much of the year!
Of course, generating rental income makes financial sense, especially if you have mortgage payments to cover in addition to the usual running costs. In addition to that, having guests occupying your property and an agent checking it regularly brings security benefits. On a broader level, healthy occupancy of holiday accommodation is good for the local area. A steady flow of holidaymakers keeps communities busy and makes them fun places to be, brings in income for businesses and helps to maintain a resort’s popularity.
So what are the main considerations when hunting for a lettable holiday home? Accessibility is key – you and your future guests need to be able to get there easily. This means being close to at least one airport (with ideally a backup option) with a good choice of flights from the UK and wider Europe. The transfer should have good transport options and not be too long (ideally no more than an hour).
It’s beautiful, but is it right for you?
When picking the property, location is equally important, remembering that we all relax more when we don’t need to use a car. This makes properties within walking distance of a resort’s social hubs and leisure attractions, such as the beach, strip, promenade or old town, top of the pile. At the very least have some basic amenities, such as a supermarket, bars/ restaurants, a short stroll away.
If you’re looking at properties on a resort or complex, pay close attention to the communal areas and amenities. Check they are all well maintained, that the pool(s) is clean and large enough for the number of residents, that there are enough sun loungers and seating areas and that noise levels are okay. Even speak to the odd occupant and get their honest feedback about the place.
Seasonality shouldn’t be ignored, neither should winter flight schedules. Many resorts across the Mediterranean shut up shop over the winter months and only really start coming to life from Eastertime onwards. If you want year-round excitement and somewhere with high occupancy levels, look at multi-season destinations – typically where the sun shines all of the year.
Pay attention to local rental regulations. These days many countries require properties offered as tourist accommodation to be licensed and registered with the local authorities. In some areas or resorts, it might even be forbidden, while complexes can even have their own rules.
Full-time home
There’s more to consider when choosing a place to live and start a new life. You might be moving to an area popular with tourists enjoying themselves, but you need to switch out of holiday mode to view the property.
Wherever you search, be sure to check how a place changes in and out of season. You’re going to be there for some if not all of the winter months, so find out how cold and how quiet it gets. Apply this thinking to the properties you view – are they geared up for colder weather or just summer rentals? Think about the lifestyle you want to enjoy when you move and apply this to the properties you view.
Don’t let cheaper prices blur your judgment. Don’t be tempted by somewhere bigger than you need just because you can afford it abroad, instead opt for something manageable and practical for your requirements.
Be clear about the type of community you want to be a part of. If you’re not a speaker of the local lingo and enjoy the company of all types of people, then diving into a very local area with predominantly native speakers won’t work. Being in an area with lots of fellow Brits and/or other international expats might seem like the easy route but it could well be the best option in terms of practicalities and on a social level. Often a balance is the perfect solution.
At the same time, be wary of being on a complex or in an area where most properties are holiday homes. In high season it’ll be busy and noisy with holidaymakers enjoying themselves, then dead quiet out of season when properties are left empty. Ideally, you want neighbours who also live there full-time. Heading a few minutes inland from the lively strip or away from the bright lights of the town centre usually takes you to quieter residential areas.
Proximity to everyday amenities, including things that you’d expect not to need as a holiday homeowner, such as a doctor’s surgery, hospital, dentist, banks, markets, shops for clothes and household items, and schools if you have a young family, should also be considered. Decent year-round public transport helps a lot too.
Off-plan homes are hugely popular with investors
Pure investment
This option is all about the numbers, you just happen to be investing somewhere foreign. Unless you are familiar with your chosen market, be guided by agents or consultants who have specialist knowledge in investment products. Local rental rules and how you will be taxed are often different to back home, so speak to a tax consultant and lawyer early in the process. Similarly, liaise with an overseas mortgage broker if you’ll be investing in finance.
To be put in touch with a trusted mortgage advisor, click here.
Before looking at a property, have realistic expectations about returns. Decide if you are investing primarily for regular income or mid to long-term capital gains – usually, it’s a bit of both. Get to grips with typical yields for the area(s) and types of property you are considering. Fully managed investments that often come with guaranteed rent for a set period typically won’t offer the highest yields achievable in the market. But they are passive and require no effort from you. If you have the time and resources to manage things yourself and build your own team of service providers, expect higher returns. For privately managed rentals, a good managing agent will be even more critical than back home.
Overseas investments are diverse, with different products suited to different requirements. As well as the well-worn buy-to-let model, options include apart-hotel resorts managed by tourism operators, golf developments, off-plan and build-to-rent schemes with attractive payment terms, investing in districts in cities undergoing regeneration, not forgetting short-term furnished lets with high annual occupancy in urban areas as well as resorts.
Some of the best capital returns come from purchasing early in off-plan projects in areas that are up-and-coming.
Don’t overlook your exposure to currency. As an investor, chances are you’ll be repatriating funds as well as making the initial investment. Speak to payment specialist Smart Currency Exchange to ensure you aren’t losing money unnecessarily at any time.