Where to buy a property in the foreign market

28 August, 2011 No Comments

Know the reasons why you want to buy and have a list of priorities… these are the most important factors to determine the best places to buy your property

It is not the same to buy a vacation home than to buy a home only for investment purposes …… Due to globalization it is less uncommon to buy a house in foreign territories, especially because purchase prices are usually more affordable than in Spain, or Europe in general. The good climate of Spain made it, for many years, one of the main countries in the Mediterranean chosen by French, English, German, Dutch and Belgians as a retirement destination and also as a place for their second home. Nowadays, due to a stronger €, the Spanish people are those who invest in emerging countries where house prices are still cheap in comparison to the prices that have been paying here in recent years.

1 – In the case of purchasing a vacation home the idea seems relatively simple; to find a sunny place where we can escape to relax. But we must go further and think realistically …. How many times a year and for how long am I going to go?…. Do I need to rent the house when I’m away to cover the maintenance costs? If so, how many months per year should I rent it to break even? It is therefore important to carefully study the climate of the area, with its seasonal cycles, rainfall, hurricanes, etc.
One should know what’s the available budget and the total cost that entails. For example the distance is more important than one might think, because in the long run travel costs add up (shoot numbers if you are thinking about a family…), and can end up being much more expensive. Suppose you choose to invest in Malaysia, where it is relatively cheap to buy a house by the beach. If the trip is expensive or airlines do not have direct flights, then you must make some flight connections, the trip is usually expensive and uncomfortable.

2 – In the case of purchasing a property as an investment purpose, or perhaps to enjoy from time to time, it is crucial to consider which areas are suitable for a capital disbursement and study how the resale market behaves. We must also take into account currency variations and the risk that it adds into the transaction.

If the purchase is solely for an investment purpose, then the distance between the place of residence and country of destination is irrelevant. What’s relevant is to evaluate whether they are regions with a high demand by both nationals and tourists. Finally, you should have the strategy to sell in order to be ready when the time to sell arrives: it is preferable to buy in an area where not only local buyers are active, but an area that has a strong local and international market, which would make a possible sale faster and easier. Such examples may be: Tenerife, Laco di Como (Italy), Orlando (Usa), and cities like Paris or Barcelona, as they are locations with a high demand for vacation rentals. Riskier investors could check out opportunities in countries farther east.

3 – If the purchase is intended to settle/ retire and live permanently in the new country, decisions are perhaps simpler, with valuations such as the climate, cost of living, taxes and quality of life (if so, you must also study the job market or how to meet the needs of a family). You have to see the difference between buying a vacation home or a first residence. Tourist areas have a high demand for a few months out of a year, but the remaining months are almost dead with fewer services that supply the area. You must also assess what kind of winters does the area have.

The Mediterranean coast of Europe, combines a good climate with great communications and accessibility. Traditionally, the most popular countries are Spain, Turkey and Cyprus.

Basic ideas to consider before making a purchase:

* If possible, execute your own market research “in situ”. Ask questions, see different options and look for multiple information sources.

* If rental is important, bear in mind that demand for rentals may differ throughout the year.

* Realize that mortgage conditions, if necessary for the purchase of this particular home, vary widely from country to country.

* Finally, as I previously mentioned, know exactly what’s the purpose of your purchase; this will facilitate what kind of country or property best suits you.