Buying property is currently being hailed as the new dot.com as it is becoming increasingly possible for every day people to have their very own international property portfolio without being born a millionaire. Expressions such as buy to let and jet to let are being coined from this new phenomena which is giving hope to those disillusioned, twenty somethings priced out of their home market.
Other property magnates include those taking advantage of their winnings from property booms in their home country, particularly the British and Irish.
In the UK, during the past five years, pushed by the many television programmes serving us hot new investment destinations direct to our sofas, buying property abroad has become a national obsession. With the internet as the starting point for research, would-be investors are flocking to the emerging markets hungry for killer returns.
Paul Owen, chief executive of the Association of International Property Professionals, highlights eastern Europe, but be careful to buy in the right places. “City lets in Eastern Europe aimed at the local rental market look attractive and returns look sustainable. Prague and Warsaw are both interesting,” he said. Prices in Prague rose about 15% last year; rental yields average about 5% and mortgage rates start at just over 3%.
Anybody with a bit of foresight will have invested in Latvia a couple of years ago as property prices have been rising by between 15% and 20% a year. The fact that you can borrow up to 90% of the value of a property also makes it favourable for investors reluctant to risk huge amounts of cash.
Investors interested in holding on to their property rather than selling on for a quick profit may consider renting it out. Choosing a property for buy to let purposes in a country which is at least a plane flight away requires a lot of thought and planning. The following points should be considered:
- You must work out your budget - your upper price limit. This will be determined by the amount of cash you have available to use as a deposit and the size of mortgage you can borrow. Take into account the cost of furnishings etc.
- When investing in a property to let, do not let your heart rule your head. This will not be your home so consider the tastes and needs of your potential rental market.
- Look for property that is in strong rental demand in a certain area.
- You need something which will be easy to rent, have minimal maintenance costs and will ultimately produce a long term in value.
- Give yourself time to do your homework and find out who your rental market are.
- Get advice from local specialist letting agents. They know exactly what types of property are in demand in their area, and the potential rental returns.
- Find out what the legal requirements and regulations are, with regards to rentals, in that particular country.
This list is merely a starting point. Buying to let in a foreign country should not be entered into lightly as you will be not be living around the corner from your investment. If you are really serious and perhaps dependant on making a regular income from your property you need to be certain that you are buying in an area where you will be almost guaranteed tenants. Steer clear of investor ‘zones’ where the market will soon be saturated with landlords competing for tenants.
Written by
Susan Pedalino