For us this is the single most important topic overseas property investment advice, how to minimise the risk of an overseas property investment, something that is so easy but that so many investors give far too little thought too -- although less so now after the global wake up call.
In the UK I have never seen, known or even heard of anyone buying a house without viewing it first. Yet during the boom countless numbers of people were buying not one, but often several properties in faraway lands without seeing them.
Now, in off plan purchases obviously you can't see the property, but the point is that people were saying yes, signing up and paying up over the phone on little more than the strength of a salespersons word and maybe a dash of anecdotal evidence. This was highly risky and many people paid a costly price.
Nowadays, people are much keener to minimise their risk when making overseas property investments, and here are some guidelines on doing just that.
1: Due Diligence
This is basically another word for research; it means covering all the bases, looking for all the things that could go wrong with an investment and making sure that all of them have the minimal chance of doing so. Now, obviously, because we are talking about buying overseas investment properties, the possibilities for what could go wrong across the entire sphere are beyond the scope of this article, but the following checks are universal in overseas property investment advice.
i: Check the Developer
Is the developer financially sound? Are they ethical? Do they have any successful developments under their belt or, more importantly any failed ones? Are they currently fighting any civil law suits? Are they relying on the money from off plan sales to fund any stage of the building work?
ii: Check the Development
a) Off Plan
Does the developer own full title to the land? Is planning permission in place for everything on the plans? If construction is underway, are they sticking to the plans? Will the building meet all local regulations? Are there any other plots surrounding it that could be built on to ruin any views?
Does the vendor own full title of the property/land or the leasehold? Is the title sound or is there any chance that ownership could be contested? This is particularly important in places like northern Cyprus. Is the property built legally? This is particularly important in places like Spain.
Is the property a fair price, or, if it is below market value, is it really less than its true value? Speak to other owners in the area, find out what it is like to own there, holiday there, and if you plan to rent out your property, what rental demand is like in the area.
iii: Check the Area
For much of the research above you will need to go to the location you plan to buy in, to check deeds at the local land registry etc. But this shouldn't be frowned upon, instead it should be capitalised on, because while you are there you can check out the area, stay in some of the competition, talk to the locals and other foreign owners. You should also talk to owners of the developers previous developments (if they have any, but for me this is a prerequisite).
2: Believe Nothing, Verify Everything
One of the main reasons why so many people lost so much on international investment property bought during the boom is because they listened to the glitzy agents and anecdotal evidence. Agents have a vested interest selling property, and that comes first. I am not saying all agents lie, just that bad agents will sometimes lie, and good ones sometimes get it wrong. The point is to check everything you are told to see if it checks out. If some things don't check out then you must decide if it was an intentional trick or a simple mistake before deciding whether or not to buy with that party.
If you do all these things when buying overseas investment property, then you can really minimise the risk of property investment overseas.
*This page is provided for information purposes only and should not be construed as offering advice. IPIN is not licensed to give financial advice and all information provided by IPIN regarding real estate should never be treated as specific advice or regulations. This is standard practice with property investment companies as the purchase of property as an investment is not regulated by the UK or other Financial Services Authorities.