Looking to earn some income from another country while living in Hong Kong? Perhaps you want to set up a nest egg for the family for later in life? If you are interested in buying property overseas as an investment, we get you some expert advice.
Have you always dreamed of owning a holiday home that pays for itself (and that you and your family can escape to when things return to normal!)? Or perhaps you are the more practical sort and prefer an apartment in a popular student city (one that your own children could eventually use)? Buying your first home in Hong Kong, which is perhaps the one you live in with your family if you have already bought one, is considerably different from looking at property as an investment.
The minute you want to expand and invest in a property, your borders dissolve and you start scouting around for the best places in the world to own a home. When looking at the benefits of an investment property overseas, they can seem too good to be true. Property appreciation, tax benefits, using a bank’s money to buy it via a mortgage, having your tenants pay the mortgage and getting you a sizeable potential income, the benefits seem endless! But before you jump in with both feet here are the five things you need to look at before making the decision to become a landlord in another country.
Investing In Property Overseas: Location, Location, Location
It is not an exaggeration to say that the location of the property is one of the most important factors in property investment. As the prices continue to go up in the main cities of London, New York, Sydney, Melbourne, etc., investors are looking at property in other cities around the world for opportunities.
An appealing location is key to setting the amount of rent, the quality of the renter and the likelihood of the property being vacant at any point. Look at the safety of the neighbourhood, the job market, public amenities and transportation, medical centres, entertainment and good schools close by. These factors are crucial to consider when it comes to property investment. Follow the blogs and expert advice from UK Mortgages, One Global Property Services and Savills.
The main reason for investing is to get a return. You need to look at the investment potential of the property and how much is it really likely to go up. Some areas are more up-and-coming than others and improvements (anything from a lick of paint to a full renovation) can do wonders for the rental and appreciation.
If you are looking for appreciation, some property agents might suggest buying something “off-plan”. What this means is that you are locking in a price now for something that has not been completed and so there is a longer buying process (handy when wanting to stretch to a higher value property) and also there is the time for it to go up while they are building it. This brings me to the next point.
Agents To Help You Invest In Property Abroad
One Global, a property agent I recommend frequently to clients, suggests that it is vital to “do extensive research on the developer of the project you’re eyeing. Look out for their track record, partners in your region, years of experience, among other key factors. A developer who ticks all the boxes is likely to successfully launch the project without major issues, giving you peace of mind after you make your investment”. I trust the advice of this property agent and find that often, property investment is as much about finding the right agent as it is about finding the right property.
I work with another wonderful property agent in Hong Kong, Savills. Both these are reputable and they sell properties that when valued by the banks stack up. There have been problems in Hong Kong (and globally) of agents putting premiums on properties to cash in on large commissions. Make sure that you know how much the fees for the agent, solicitor and property managers are and that things are made clear at the start of your business dealings.
It is very easy to select an investment property based on where you would like to live. You are not going to be living here so the only thing that matters are the numbers. When looking at what you can comfortably afford, not only do you need to look at the deposit, but also the stamp duty, any taxes, operating costs and insurances that you will need as a landlord.
A great property agent will be able to help you with the numbers. A vital factor when buying a property in a different country will be applying for a mortgage. Going direct to the bank can mean a fairly faceless process where the individual nuances of the investor are not taken into account. UK Mortgages MD, Neil Jensen, the mortgage broker I’ve worked with for 15 years at my firm has said “A good mortgage broker offers genuine value for money, as a mortgage process contains many stages and the broker knows all of these and is there to guide you through it.”
Buying a property can be a fairly complicated process. It’s essential to have a broker and an agent who work together to make sure the numbers add up. Together, this team can keep the whole flow simple and efficient. This can save you a fortune in time and energy, and get you a great mortgage rate.
The “Pain Factor” Of International Property Maintenance
While thinking about maintenance, ask yourself these questions.
How much time do you have to spare to maintain the property?
How much time and maintenance is the property likely to require? For instance, if you are looking for a student or holiday rental where there are several people renting the same place over a year, this can mean extra costs for cleaning and repair.
Given how tedious property maintenance can be, most people hire a property manager. If you are planning the same, make sure that you know how much their services will cost and what is included. You don’t want to get a shock with a large bill for changing a light bulb.
In short; remember: this is your money and you have worked hard for it. Property can be a great way to invest but make sure you ask all of your questions. Don’t feel silly for asking what might be obvious to others. Property is a big investment, and each opportunity deserves careful consideration.