I doubt there’s anyone out there who hasn’t dreamt at one time or another of owning a foreign property.
I own and have owned in many places other than Ireland – UK, NYC, Spain, Dubai and I’ve explored my options in numerous other countries as well. If it’s something you’re thinking about, here are some tips you should consider before you start.
What’s your motivation?
The first thing you have to do is ask yourself what’s influencing your decision? Are you making an investment decision, or a lifestyle decision?
People are driven by their emotions: you may have just returned from a lovely holiday somewhere but that doesn’t mean it’s a good investment location!
If it’s not cold, hard logic driving your decision, it’s about lifestyle. You might like the idea of having somewhere in the sun where you can just rock up on a whim, where you barely even need a suitcase as you can keep things there. Perhaps you think you’ll put it on Airbnb (and lock your belongings away) to make some additional profit, but that’s still closer to a lifestyle decision than an investment one.
Do you want something because you want it, or because you can profit from it?
Is your decision being motivated by envy? Perhaps you know someone who has a lovely property in the area and you want what they have, or (worse) you feel like you need to keep up with their lifestyle.
I can’t say this enough: make sure that your emotions are investment driven. Be calculating. Your friend won’t tell you any of the downsides of owning overseas, only the good bits (perhaps as confirmation bias or as a way to save face if they’re slightly regretting their purchase).
Remember that perception and reality are very different! Are you looking at the reality or the beautifully-filtered Instagram version?
How well do you know the area that you’re looking at? Are you basing a decision to buy there purely on the 2 weeks you spent there during the tourist season?
If that’s not the case, what are your basing your decision to buy there on? Perhaps you’re getting good information from business magazines or papers, but to that end be wary of advertorials: they may look like objective pieces of writing, but remember that they’re written to push your buy buttons.
Understand the market
Are you looking to buy overseas because you feel like you’ve been priced out of your home market? Perhaps you’ve seen what you can buy for the equivalent money at home and you’re being tempted by the chance to buy something bigger. To be brutally honest, that’s not a good enough reason to start looking abroad at a market you know nothing about.
You might have your sights set on a property that looks relatively ‘cheap’ to you, but how does it compare with the local market? Is that bargain actually overpriced for the area?
If you’re at the stage where you’re talking to local agents, this is where you should be especially careful. Ask yourself, what’s in it for them? Do they have your best interests at heart?
Make sure anyone trying to influence you is objective.
If local agents in Spain are working on high commission, they’ll tell you anything you want to hear in order to complete a sale. They might put you up in a hotel, show you all the good bits and tell you about some fantastic opportunities you’d be crazy to miss.
If they’ve got a percentage of the sale at stake, you have to take anything they give you with a pinch of salt.
Facing the unknown and understanding the system
There are lots of unknowns you’re going to come up against when you’re buying in an international market, and often the first stumbling block is communication. Do you speak the language? If not, you’ll struggle.
You’re automatically excluded from important conversations and that can be tough to experience – do you fully understand what’s going on and what’s being said to you?
Do you understand the legal system in that country? Don’t assume that solicitors, taxes or legal documents will be the same as they are in your home market.
How do mortgages work? Are there any hidden fees that you haven’t accounted for? How long does the process take? The first time I bought in Spain, it all took far longer than I was used to and I nearly lost my deposit because I’d underestimated the time scales involved.
Here in Ireland, I might reasonably expect to put a property on the market and have the deal done with a set time frame, maybe 12 weeks. In Spain, it took more than a year to sell one of my apartments. I thought it would be a similar process to what I was used to – don’t make the same mistake.
So how can you learn about all of this? In my case, I studied the market. I lived in Spain and did my own investigations. I thought I was a bit of an expert… but I wasn’t!
Don’t get overconfident and really think about what could happen if you end up (for example) in a legal dispute? You definitely won’t be an expert in a foreign system, and ignorance is definitely not bliss!
The best way to invest
The best way is to invest through a partnership with a reliable market player who knows their local market inside and out. Someone with a good reputation, and resources to put skin in the game with you. If you’re investing in a foreign asset and the partner isn’t putting any money into the deal, that should be a red flag. Are your interests aligned?
Utilise their networks and existing relationships to mitigate any issues. Make sure there’s no pressure on you to act or make decisions quickly. Make sure you have good chemistry and always sense check what they tell you – don’t just believe everything they say! A good partner is worth their weight in gold, but a bad partner can lose you all your capital.
Investing in foreign property can be very rewarding, but you have to make sure you’re doing it for the right reasons and understand all the risks involved. Don’t get swept up in the perceived glamour: getting a deal wrong in a strange market is far worse than getting it wrong in your home market.
If you’re interested in this topic I took a deeper dive into it in Episode 115 of the podcast, and if it’s raised any questions why not join me on my weekly real estate livestream – every Wednesday at 1pm (Ireland/UK) use the link below: