Holiday homes abroad, bought either for a second home or to let can be a great investment and add diversity to your portfolio. So let's look a little closer at the process involved…
Decide on your destination
First things first, are there any particular countries you like? What languages can you speak? Which countries are served by your local airport? re just some of the questions you should consider. Europe has some wonderful destinations, however be aware of certain countries such as Spain as prices are falling and a lot of developments are being left unfinished due to lack of demand. Portugal and Cyprus have some great properties and prices start from around £60,000! If you're looking further afield, Cape Verde in West Africa is in the process of being revamped, or if you are looking for somewhere that the Great British Pound goes a long way, there is of course the 'sunshine state' of Florida.
Where should I buy?
After selecting the country, you need to choose the development and developer, and this is where you need to do plenty of research to make no stones are left unturned. The internet will give you lots of information but also speak to family, friends, colleagues and other professionals as experiences good and bad will help with your research. Many of our clients have purchased overseas, so we are always happy to put you in touch with a developer that has proved to tick all the boxes!
Getting the money
Once you have decided on a property and you have had your offer accepted, you need to work out how you are going to finance it. Mortgages can be raised on overseas properties and usually require at least a 20% deposit. If you don't have access to this you may be able to release some equity from your UK home. The overseas mortgage can be arranged in many different currencies including Euro's, Dollars and Sterling. Most overseas mortgages are what is called "full status" so you will need to provide proof of income and usually 3 months bank statements along with identification. If you are buying off plan then it may well be possible to apply for a stage payment mortgage so the funds are released to the developer as and when they need it. Also in doing this, you only pay interest as and when the funds are released.
Next you will need a legal representative as it is vital that you seek independent legal advice at this stage to make sure the sale is legitimate and the developer or person selling the property does in fact own it! Yes you may think this is obvious, but you wouldn't believe some of the stories we hear! Another important point is never sign a document you do not understand and do not be afraid to ask for it to be translated in English.
You will also need to set up a bank account in that country to pay the utility bills and any local taxes, and consider how you are going to transfer money to this account. You may find the charges imposed by your bank are quite high, and it may well be worth looking at currency houses such as hifx or moneycorp, as they often have better rates for frequent users or for bulk transactions.
Collect the keys
Once you have taken possession of the property and if you are going to rent it out, you will need to confirm with your accountant exactly what your tax liability is on any rental profit. As a guide if you are UK domiciled you may be liable for income tax on any rental income, or/and Capital Gains Tax (CGT) on any gains on disposal of the property. The property will also fall into your estate for Inheritance Tax (IHT) purposes. Also be aware that although you are liable for some or all of the above UK taxes this does not preclude you from paying the local equivalent taxes in the country where the property is situated. A double tax treaty usually deals with the rules on which country the property will be taxed in, but always check with a tax specialist to make sure you are paying the correct taxes and amounts.
Your next step is to send us a postcard, enjoy!