It is a common practice for people to buy property abroad. The reason for doing so is usually to save money or increase your chances of getting a better return on investment (ROI).
In this section, we will discuss top essential elements of buying property abroad as an investment. There are several reasons why people choose to buy property abroad, but there are also several disadvantages that need to be considered.
Although our lives have been very different for many of us over the past couple of months, our dreams and plans remain. My dream is to own a home in another country of ours. This may be a beach apartment, city-center flat, or a house in the countryside. But what happens when you want to buy overseas property as an investment? Sure, the concept is still very much the same, but before making the jump, there are different things to consider. Somewhere that is perfect as a holiday home may not be the right investment opportunity.
This article looks at the essential elements to consider when buying property abroad as an investment opportunity.
It is essential to consider how the property’s location will work for you in the long term. Firstly, is there a rental market? It is worth looking at rental properties in the area to see the price, how long they have been advertised for, and whether short or long-term rentals.
If the tourism season doesn’t stretch for the majority of the year, it may be better to look at longer-term rentals. This won’t give you as much flexibility but will likely provide consistent income for a more significant amount of the year. The important thing is to do your research to understand the best way for your property to generate additional income.
Getting your foreign currency
Buying a property abroad will likely involve international transactions and purchasing foreign currency to pay for your new home. People who have not done this previously may instinctively go to their bank to do this. However, because the banks are considered trustworthy, they can overcharge for their services to those who don’t know what other solutions exist.
The banks charge 4% on international transactions such as house purchases or business transactions. This means that on a £100,000 transfer, the bank will charge you £4000. Specialist FX brokers however, might charge less than half of this for international transactions meaning that using us for the same marketing would save you £££ money that is better off in your pocket than the banks. CLICK HERE TO SONNECT with our Partner broker
Exchange rate fluctuations
The main thing to consider about exchange rates is that they are constantly moving, and while the majority of the time, these movements are tiny, a more significant spike or drop-off is never out of the question.
Currency rates can be influenced by various factors such as political news, economic data, and natural disasters, so while it is sometimes clear which way the momentum will move, the foreign exchange market can often be unpredictable.
When buying $600 to go on holiday, movements against you in the market are frustrating but won’t affect you massively. However, when you are buying €400,000 for a property, a sudden movement in the market not in your favor can be a disaster.
Using a market order, foreign exchange specialists such as Currency UK can lock in an exchange rate for you. As a result, even if the market moves against you, you can keep the rate you were quoted when you ordered your currency.
Securing your property
Whether you will choose to rent your new property out as a holiday home or a place to live, you will need someone to manage it. You may be in a fortunate position where you have family members or friends in the area to take on this responsibility for you. But for those who don’t, you will need to find an agency to manage the property for you and who can be there if things go wrong.
One thing to consider here is how you will pay this agency and how they will pay you the earnings from the rent. If, for example, you transfer pounds into their euro account and vice versa when they pay you, the bank will charge you for every transaction and give you a very uncompetitive exchange rate. Alternatively, you can use a foreign exchange specialist who acts as the middle-man and sends and receives the payments. As a result, you can eliminate the bank charges and get a much more competitive exchange rate.
Working with a foreign exchange specialist can help avoid currency uncertainty and lock in your profits early, leaving you confident in your finances when buying a property abroad. Learn more here