George79
Member
I would like people to share from their own experience or experience of someone they know personally. What are the biggest risks buying properties overseas?
Nicholas Wallwork
Editor-in-Chief
Staff member
Premium Member
The biggest risks are not doing your homework (or due diligence). If you get a good lawyer, check title (ownership),developer track record e.t.c. you are well on your way to avoiding some of the obvious pit falls.
Buying overseas is where most of the "horror stories" lie simply because people don't do enough checks and trust developers overseas far too easily. Get a good, reputable agent to assist you who knows the local market you're looking to invest in and this will help point you in the right direction.
use a lot of common sense and if your gut tells you something is not right do more research and find out why... don't take anything on face value and ensure you have proper representation!
Buying overseas is where most of the "horror stories" lie simply because people don't do enough checks and trust developers overseas far too easily. Get a good, reputable agent to assist you who knows the local market you're looking to invest in and this will help point you in the right direction.
use a lot of common sense and if your gut tells you something is not right do more research and find out why... don't take anything on face value and ensure you have proper representation!
KGeeson
Property Forum Staff
Forum Partner
I totally agree with the above. Solid Due Diligence is key (far more so than investing in your own country, because if the worst does happen, it's far harder for you to track down developers in another country, or face language barriers and understand foreign laws). I would personally not invest overseas if it wasn't through a UK agent. It definitely pays to have an experienced UK based team on your side should any problems crop up.
A
aurelie
New Member
Due Diligence is for companies.
As a private person, it can be something totally unexpected. Mine was a farmer besides my estate - and the huge fire he made. - Indeed, I almost lost my house.
Bulgars, theft, water, other natural catastrophes ..
I keep my rural property but I do regret sometimes having it.
Don't get fooled by real estate agents and beautiful pictures.
In reality, the gardener didn't do his work, the guy charged to take care of your pool forgot to do his work - and then you'll spend a week gardening and cleaning up the mess in your pool.
The reality is very different from the movies.
In theory, money should solve all these kind of problems - but that's just theory...
As a private person, it can be something totally unexpected. Mine was a farmer besides my estate - and the huge fire he made. - Indeed, I almost lost my house.
Bulgars, theft, water, other natural catastrophes ..
I keep my rural property but I do regret sometimes having it.
Don't get fooled by real estate agents and beautiful pictures.
In reality, the gardener didn't do his work, the guy charged to take care of your pool forgot to do his work - and then you'll spend a week gardening and cleaning up the mess in your pool.
The reality is very different from the movies.
In theory, money should solve all these kind of problems - but that's just theory...
N
nmb
Well-Known Member
While due diligence is seen as a more corporate term there is no doubt that private buyers also need to do their research. The main risk when looking to buy overseas property is that quite often you are not able to visit the area regularly and you may not be fully aware of how the market works. No two property markets are exactly the same which is something that you need to remember.
Veronica
Administrator
In my opinion buying abroad through UK based companies often leads to heartache.
Many many people bought here in Cyprus through UK based companies and ended up paying way over the odds for poorly built properties and in many cases properties that never got built. These companies only cared about their commission and didn't look into the developing companies. As agents here in Cyprus we know which companies build quality and give value for money. We also know which companies are deep into the banks and in danger of going under.
This is the sort of thing that UK based agents don't know and therefore often lead their clients into trouble.
Also we advised our clients against going for Swiss Franc mortgages at a time when everyone else was pushing them. There are a great many British investors who are now in huge financial trouble because of the Swiss mortgage scandal.
Many many people bought here in Cyprus through UK based companies and ended up paying way over the odds for poorly built properties and in many cases properties that never got built. These companies only cared about their commission and didn't look into the developing companies. As agents here in Cyprus we know which companies build quality and give value for money. We also know which companies are deep into the banks and in danger of going under.
This is the sort of thing that UK based agents don't know and therefore often lead their clients into trouble.
Also we advised our clients against going for Swiss Franc mortgages at a time when everyone else was pushing them. There are a great many British investors who are now in huge financial trouble because of the Swiss mortgage scandal.
N
nmb
Well-Known Member
Local knowledge of markets and conditions is something which many people fail to value. Why would you put your investments in the hands of somebody who may live hundreds or thousands of miles away from the property market you are looking at? Very often you will pay more to go through these international companies than you would to find a local company in the market you are looking at.
M
Milos
New Member
I agree with the above however, i wouldn't say having a UK agent is necessarily the best solution. Although having a good knowledge of the market, they cannot replace the "local" expertise. In my experience, the UK (or any other Western European agents) can be exposed and can fail to deliver. It also depends which market it is. Having said all this, a UK/local partnership companies, if structured correctly, can perform the best.
I think the time is crucial, these things should not be rushed, if the due diligence takes a year, it takes a year, nothing beats the security of the investment.
Milos
(moderated)
Last edited by a moderator:
R
realdeals
Active Member
Many people fail to consider currency risks - they can be huge, just look at sterling against the dollar over the last 12 months. At worst it was more than 20% down!
J
James Glassbrook
Member
Agreed - as agents we always advise borrowing where ones income arises.
C
Chris Garren
New Member
Risk #1: Foreign language and culture
• How do the locals, especially your neighbors, see owners from your country of origin?
• Do you speak and read the local language? Can you read the fine print in a contract?
If you have problems understanding the language or getting yourself understood, can you imagine communicating with the property agents, the management office and the lawyer? How about negotiating with local contractors to get renovation or repair work done?
Risk #2: Economic risks
1. Economic
• Does the country have a stable economy and a sound financial system?
• Do you foresee any big fluctuations in the foreign currency?
If the foreign currency keeps falling, or your home currency continues strengthening, it will gradually wipe out whatever income or profit you have generated from your overseas property.
Risk #3: Challenges in remote management
1. Long-distance
Imagine having to book a flight and accommodation, travel for hours and spend a few days there to attend to property-related matters — all these you could have settled with a call or a short drive if the property was in your own country!
Do you really like to go to the same country and stay in the same accommodation during every vacation? And with all the errands to run, you may not be able to really enjoy yourself there. What was meant to be a leisure home may become a burden to you.
2. Property management
You may ask a friend, relative or your child studying there to manage the property for you. But it is a favor, not an obligation. The person may also move somewhere else in the future.
Some overseas projects throw in a complete package including property management, with a fee deducted from the income of the property. By engaging a property manager or a property management company, you are relying on the goodwill of an individual or a company. After all, you can’t check the condition of your place or the maintenance of the project very often.
• How do the locals, especially your neighbors, see owners from your country of origin?
• Do you speak and read the local language? Can you read the fine print in a contract?
If you have problems understanding the language or getting yourself understood, can you imagine communicating with the property agents, the management office and the lawyer? How about negotiating with local contractors to get renovation or repair work done?
Risk #2: Economic risks
1. Economic
• Does the country have a stable economy and a sound financial system?
• Do you foresee any big fluctuations in the foreign currency?
If the foreign currency keeps falling, or your home currency continues strengthening, it will gradually wipe out whatever income or profit you have generated from your overseas property.
Risk #3: Challenges in remote management
1. Long-distance
Imagine having to book a flight and accommodation, travel for hours and spend a few days there to attend to property-related matters — all these you could have settled with a call or a short drive if the property was in your own country!
Do you really like to go to the same country and stay in the same accommodation during every vacation? And with all the errands to run, you may not be able to really enjoy yourself there. What was meant to be a leisure home may become a burden to you.
2. Property management
You may ask a friend, relative or your child studying there to manage the property for you. But it is a favor, not an obligation. The person may also move somewhere else in the future.
Some overseas projects throw in a complete package including property management, with a fee deducted from the income of the property. By engaging a property manager or a property management company, you are relying on the goodwill of an individual or a company. After all, you can’t check the condition of your place or the maintenance of the project very often.
L
Longterminvestor
Administrator
Great post Chris - people also assume, wrongly, that all markets are the same and operate in a similar manner.
Gareth Bain
Member
Forum Partner
There have been a lot of good points raised above and I agree with them. I have recently purchased a property in South Africa while living in London. I am originally from South Africa so I knew the area fairly well but these were the key learners that I picked up.
1. Make sure you research the area. Find out what other properties are selling for in the area. Find out what they are renting for as well so that you can determine the demand.
2. Make sure you find or work with a good agent. It is important that they know what you are looking for and what are your expectations.
3. Have regular communications and leave nothing to assumptions. The more dialogue you have the better. You start to build a relationship and you get to know each other which will help when it comes to the negotiations.
4. Factor in fluctuations in the exchange rate and the time it takes to move money. Give yourself a buffet and manage your cash flow carefully.
5. Find out about the legal rules and regulations. People can try and take advantage of you because you live abroad. Make sure you know your rights, the laws and what you can and can't do.
6. If you are doing a renovation, make sure that you work with good builders. Be prepared to pay more to get it done right first time rather than doing it on the cheap and having to redo it at a later stage.
Investing abroad can be stressful, but make sure that you have your finger on the pulse but don't micro manage. Provide your teams with guidance and remember to have fun.
1. Make sure you research the area. Find out what other properties are selling for in the area. Find out what they are renting for as well so that you can determine the demand.
2. Make sure you find or work with a good agent. It is important that they know what you are looking for and what are your expectations.
3. Have regular communications and leave nothing to assumptions. The more dialogue you have the better. You start to build a relationship and you get to know each other which will help when it comes to the negotiations.
4. Factor in fluctuations in the exchange rate and the time it takes to move money. Give yourself a buffet and manage your cash flow carefully.
5. Find out about the legal rules and regulations. People can try and take advantage of you because you live abroad. Make sure you know your rights, the laws and what you can and can't do.
6. If you are doing a renovation, make sure that you work with good builders. Be prepared to pay more to get it done right first time rather than doing it on the cheap and having to redo it at a later stage.
Investing abroad can be stressful, but make sure that you have your finger on the pulse but don't micro manage. Provide your teams with guidance and remember to have fun.
R
realdeals
Active Member
Do not take your eye off the ball AFTER you have bought a property!
