When buying a home overseas it can be quite easy to overlook one of the essential steps because you are dealing with an environment where things operate a little (or a lot) differently. Here we give a few pointers on the issues to think about, drawing on a lot of the issues that we are asked about by readers.
1. What is your budget?
How much you have to spend on a property will affect where and what you buy and it is essential you have an idea of your budget before you start property hunting.
Not only will you need to consider the sale price of a property, but the purchase cost, which might add up to 14 per cent of the price-tag in parts of Spain.
You may be spending savings or a lump sum of your pension on a property, but if you need to get a mortgage for part of the value, how easy will it be able to do this? Conti, the overseas mortgage specialist, suggest seeking advice on this when you know which country you are looking in, but before you start your detailed search. You can get a mortgage offer in principle to prevent delay when you do find a property you wish to make an offer on.
2. Where and what to buy?
Your budget will obviously have some bearing on this, and if you are purchasing a home in your favourite holiday resort, then you may think this is easy - or is it?
If you are buying a full-time home there, make sure you don't confuse an ideal holiday location with somewhere that suits relocation. If you intend spending time in a place out of season, visit it out of season before you buy. Try it at different times of year if you are able to. If you want to use it in the winter - or rent it out in the winter - does the climate allow this?
If you are "temp to perm" buyer with one eye on moving out to a country when you retire, will the property suit you in five or ten years?
If you want a hassle-free, hands-off investment consider a new-build property on a managed complex or resort. If you know you won't able to use a property for many weeks a year, consider forms of shared ownership or property fund that allow usage of a pool of different homes.
3. Location, location, location
No, not quite the same as the point above, this means that once you have chosen your area or town, or even development, you choose your property with care.
If you are retiring abroad, think about what amenities you might need on tap in a few years - healthcare in particular. If one of you is unable to drive for some reason, will you be stuck in the middle of the countryside, without public transport close by?
Remember that rental guests might not want to have to hire a care if you need to let it out at some point - and even with family guests, do you always want to be a taxi service? The airport transfer time also becomes key with rented properties.
In town or city properties think about noise, proximity to bars and restaurants, in beach resorts, closeness to the sea, and the advantage of buying in new developments is that you can choose the best plots, floors or position of properties - corners are often coveted.
4. Is the price right?
It is crucial that you know what you are prepared to pay for a property, and whether it is priced at a fair market value.
You will of course get a good idea from looking on property portals but bear in mind that advertised prices are not always the same as achieved prices, and the same goes for rental rates.
Also consider that "guaranteed rental income" may well be built into the sales price - again, along with doing due diligence on the "guarantee" part of that, ask yourself if you want this aspect frontloaded.
A good agent should help provide you with an informed picture of what a property is worth - and thus how much you might make an offer for - based on how long it has been on the market, the position of the seller (how quickly they wish to sell) and recent comparable sales.
Being able to close the deal speedily, or move in immediately, tends not to be the big deciding factor it can be on principal homes here in the UK. In some cultures an offer that is made too fast (yes that is Italy!), or too low, can work against you so this is where a good local agent can help with cultural differences as well as language barriers.
5. How much will it cost to run?
Before you commit to a purchase you need to have a good idea of ongoing costs, or you may find you can't afford to keep it - you wouldn't be the first.
Running two homes includes, for example, two lots of council tax, double the broadband fees, and an extra bill for house insurance that might be higher because it's not occupied for long periods. Many home-owners we speak to report that "breaking even" on running costs with the help of some rental income is the best they hope to achieve.
More and more owners, however wealthy they are, now rent out their holiday homes as a smart financial move, or even to partake in the sharing economy - and in some countries (like Austria) it's obligatory in tourist resorts.
So choosing somewhere that will appealing to renters could me a smart move - and this goes back to location above!
With a period property you need to be prepared for regular repairs and a slush fund for when something serious like the roof or the boiler goes suddenly. If it's a remote rural property, will you need to pay someone to keep an eye on it, tend to the garden or clean the pool? Beware that private pools can be expensive to run. In certain climates homes can need yearly maintenance due to heat, humidity and/or wind.
A general rule of thumb is there more extensive the grounds and facilities/amenities (golf courses and multiple pools can add hefty premiums), the higher these fees.
On top of upkeep issues there is home insurance - which may or may not be included in service charges, and local taxes or community charges relating to garbage disposal etc.
6. Take independent legal advice
Do not buy a property without using an independent lawyer, who is looking after your interests. It may not be a customary, or standard, part of the purchase process in certain countries to use your own lawyer, in addition to the local notary, but it is your right to do so.
Even if an agent bats away the notion that you need to use a lawyer, stand your ground. If they sell you a property on a development that proves to be financially unsound, they are only the middleman so cannot be held directly responsible.
So many of the things that have gone wrong with home purchases abroad could be avoided by taking this one step. You need to use someone who is not associated with the agent or developer, and who will perform all the due diligence on your behalf on the property you are hoping to buy.
This will include checking whether a property is owned by who is offering it for sale, whether it has any debts or liens attached to it, if it comes with all the relevant planning permissions and on whether it sits on that plot of land legally.
7. Currency matters
Just like seeking independent legal advice, as mentioned above, using a foreign currency exchange broker is a no-brainer when transferring sums of money overseas. But unlike the above there's no "if" about whether it will save you money (by preventing something going wrong), it 100 per cent will, and usually around 4 per cent when compared with bank rates.
There are so many currency (or FX) brokers around that rates are competitive and pretty similar, but finding one you feel comfortable with is key, just as with locating your estate agent and lawyer.
Put simply, there are various ways that your broker will advise you on when to transfer funds abroad to take advantage of currency swings - for both your property purchase, and also ongoing costs in the local currency such as mortgage payments, service charges or utility bills.
8. Tax and residency issues
Remember that investing in a property means not just buying four walls, but in fact adding to your assets and thus adding tax implications.
Savvy buyers seek tax-planning advice from the word go, considering how they will buy the property (spouse/children's name, or as a company?) along with whether it makes sense to leverage, as mentioned above. Your inheritance tax burden may well be affected by whose name is on the title deeds - and this is where specialist succession planning advice comes in.
In come countries you will need to complete a yearly tax return, whether you earn an income from the property or not, but it makes sense to make a separate will for your overseas property, wherever you buy.
Finally, if you intend to spend half of the year in your overseas home, decide in which country you will be considered tax-resident. Again, this has implications for how your income, including pension income, will be taxed (eg Portugal and Malta) and your finances will be a lot more complicated if you don't plum for one or the other.