You may be considering buying property abroad. However, you must avoid these costly mistakes when doing so.
There are a number of reasons why you may be considering buying property abroad. Perhaps you are thinking about relocating? Maybe you are looking for a sound investment to add to your portfolio? No matter what applies, you need to approach the buying market with caution. Avoid the costly mistakes that a lot of people make by following the advice below.
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Leaving out the groundwork
Failing to do your homework is a big mistake, and one that can be extremely costly. There is no such thing as too much research when buying a property abroad. You need to take the time to understand the location, the market, the demand for properties, the local area, and all of the legalities that are involved. It is also a good idea to join blogs and forums where you will get information and opinions from those in the know.
Overlooking the importance of local help
While it can be tempting to stick with what you know, and handle everything from the country you currently live in, it is much better to seek advice from local estate agents. Local estate agents will know the area like the back of their hand, and so they will be able to provide you with valuable advice that you won’t get anywhere else. Nonetheless, when it comes to contracts and such like, make sure you get an English translation, and then enlist the assistance of an outside professional to make sure that both contracts match.
Assuming the property market is going to be similar to the one in your home country
This is one of the biggest mistakes that people make. Firstly, you need to recognize that the makeup of properties in the country can be very different. Take Singapore as a prime example. Most people live in BTO flats in Singapore, i.e. public housing. Therefore, if you are thinking about investing in Singapore, this is something you need to consider very carefully. The rental landscape is clearly different, and so pinpointing the best location and the right type of market is going to be essential.
Forgetting about your overseas tax liability
If you own a home overseas, you could be liable for income tax, capital gains tax, VAT, property tax, and even inheritance tax as a consequence. This is something you need to find out more about up front. Find out whether there are any tax agreements in place between your home country and the country you are interested in buying a property in. Moreover, find out if there are any ways to reduce your tax liability. Of course, you should only consider solutions that are above board!
Overlooking the impact of the exchange rate
Unfortunately, when you buy a property overseas, it is likely to be more expensive because you are going to have to account for the exchange rate too. If you do not do this, your budget will not be accurate, and this is where issues arise. It is a good idea to speak with a currency specialist to find out if there is anything you can do to offset any risk of negative fluctuations.
Not understanding about title deeds
This is something that varies from country to country. In some countries, the title deed system can be so outdated to the point where you have no chance of figuring out who has the right to sell your property or land. In other countries, there are ongoing disputes about title deeds, a prime example of this being Northern Cyprus. Not only this, but there are then some countries whereby a foreign buyer does not have the right to directly hold a property’s title and, therefore, you must buy it through a business instead.
Forgetting about your domestic tax liability
Not only do a lot of people forget about their overseas tax liability, but also they often forget about what their second property means for their tax requirements in their home country. In the UK, for example, you are going to need to pay capital gains and/or income tax if you profit from a property in another country. It is important to figure this all out beforehand so that you can include it in your profitability calculations.
Selecting the wrong property
Needless to say, this is one error that you will want to avoid! Don’t target the high-end in a low-value market. Avoid the commercial sector in a property market that has an oversupply of office property. And, of course, don’t buy flats in an area where there is no resale market for apartments. This may all sound like common sense on the surface. However, common sense can easily go out of the window when you stumble across a property you love. Make sure it makes sense in terms of the marketplace and what is in demand.
Choosing the wrong location
It is easy to get swayed when a location is being advertised as the next big thing, but it is important to remember that this is not always the case, and the area may not be as profitable as it seems. You need to look more closely at what is driving the growth, as this will help you to determine whether the market is sustainable. After all, there is no use in investing in a property in an area if the growth in demand is not going to last. A good example of this is the Black Sea coast in Bulgaria. It was being marketed as the next big thing back in 2005. However, the influx of properties had a negative impact on growth, and this is something that not everyone considered.
Hopefully, you now have a better understanding regarding some of the main mistakes that people make when they purchase a property overseas. From choosing the wrong location to forgetting about the impact of the exchange rate, if you can avoid the errors mentioned above, you will be well on your way to overseas property success.