Posted by It’s that time of year again, when families are starting to jet off for their summer holidays, and often come back with sunkissed dreams of selling up and moving overseas, or buying somewhere to turn into an Airbnb rental.
I doubt there’s anyone out there who hasn’t dreamt of it at one time or another. I own and have owned in many places other than Ireland – UK, NYC, Spain, Dubai – and I’ve learned some important lessons over the years! So, if you’re thinking about buying a place in the sun, this week I’m sharing some tips you should consider before you start.
I’m also going to take a look at what you need to know before becoming an Airbnb host: be warned that it’s not always as simple as it might seem!
Rose-tinted sunglasses
Before you do anything at all, you need to sit down and take a good, hard look at your motivation for wanting to buy property overseas.
Have you just come back from a fantastic holiday and you’re slightly depressed at the idea of going back to your day-to-day life? Maybe someone you know has bought a foreign property and all you’ve heard them talk about for the past year is how great it is. Perhaps you’ve done some rough calculations in your head and you’ve worked out how much money you could make on the side by owning a villa on the beach and letting it out.
In short, are you making a lifestyle decision, or an investment decision? If at any point you’ve uttered the words ‘Wouldn’t it be nice to…’, then you’re making a lifestyle decision. If you’re being driven by cold, hard logic, then you’re making an investment decision.
Ask yourself (and be honest) – do you want a foreign property because you want to profit from it, or do you want it because you want it?
Location location location
Remember, just because you’ve enjoyed a holiday somewhere, it doesn’t necessarily mean it’s a good investment location! How well do you know the area that you’re looking at? Are you basing a decision to buy purely on the two weeks you spent there during the tourist season?
You have to do your own due diligence about where you’re looking to buy. If you’re getting good-sounding information from business magazines or papers, be wary of advertorials: they may look like objective pieces of writing, but remember that they’re written to push your buy buttons.
Welcomed with open arms?
By the same token, going somewhere on holiday is very different to actually living there. You have to understand the local sentiment towards tourism in general, and especially towards people buying from overseas.
In Spain, anti-tourism demonstrations are a regular occurrence at the moment. According to activist Pere Joan Femenia, “Mass tourism is making it difficult for local people who cannot afford to live on their own island [Mallorca] because tourist flats push up prices. Tourists fill up beaches and put a strain on public services in the summer. We want to cut mass tourism and to ban non-residents from buying houses which are just used for a few months a year or for speculation.”
Understanding the local market
The matter of property pricing leads me to my next point. 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? It might seem like a bargain, but is it actually overpriced for the area?
Living la vida local
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. After all, there’s only so much you can learn on Duolingo!
Without understanding the language properly, you’re automatically excluded from important conversations and that can be tough to experience, not to mention hugely laden with risks – 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 – I learned this in Spain and the process I thought would take 12 weeks actually took closer to a year!
What about Airbnb?
I think there are a lot of people out there that like the idea of buying a property on foreign soil that they can stay at whenever they fancy, but can rent out on Airbnb (or similar) the rest of the time. It’s an attractive prospect for sure, but as I mentioned before, it’s not always as straightforward as it might seem when your judgement is being clouded by pina coladas on your holiday terrace!
For starters, you need to understand the short-term rental laws in the area. In Greater London (granted, not the most sunkissed of locations), there’s a limit of 90 nights per calendar year on properties. In Amsterdam, you can only let out a property for 60 nights of the year. In most places, I believe you have to go and register your property as a short-term let at the local town hall before you can even think about marketing it (a challenge in itself and one for another blog!).
Once you’ve understood the legal requirements, you’ve then got to put systems in place for actually running the place, especially if you’re not going to be nearby. Finding cleaners and someone to handle emergencies or repairs, not to mention making sure they’re reliable, needs some careful consideration!
Are there any benefits to owning overseas?
I realise this might seem like I’m trying to put you off even considering the idea of owning property in another country – but there are some benefits!
Investing overseas can help diversify your investment portfolio, some overseas markets may offer better potential for property value growth than your home market, and owning a property abroad provides a ready-made holiday home for you and your family, as well as potentially serving as a future retirement location.
At the end of the day, investing in overseas property, whether it’s for leisure or for profit, can be rewarding, but you have to be aware of all the risks and challenges that are involved. Make sure you’re not getting swept up by how glamorous it can all seem, and certainly don’t commit to anything without doing double the due diligence!
If you have questions about buying in a foreign market, why not join one of my weekly live Q&A sessions on YouTube? It’s open to everyone, but priority is given to members of my free Elite Property community over on Skool, so if you’re not a member yet, sign up today!