Buying a property abroad is a step that many people consider, particularly if they are nearing retirement and are looking to invest or would like to retire to sunnier climes. Here are some rules of thumb for anyone with disposable income who is considering taking a dip in the potentially deeper waters of the overseas property market.
Research the area and property
The Internet is a great tool for letting the potential buyer know what is available, but there are obvious advantages of actually viewing a property before committing to buy it. Another important thing to consider is that certain countries and areas have their own laws when it comes to owning a property. For example, in America, prospective buyers are only allowed to rent out properties within certain zones.
Instruct an independent lawyer
An independent lawyer or solicitor means that they represent the buyer and they have no interest in helping the agent sell their property. Impartial advice is important to ensure there is no conflict in interest, which can occur if the legal representation acts for both the seller and the buyer. Issues such as nearby upcoming developments or properties built illegally on land registered as agricultural - Spain is a good example of this - should be picked up by the lawyer early on.
Translate everything to English
Buying a property abroad can be a big financial commitment, so it is of utmost importance that the prospective buyer understands every document and contract before signing them. Most documents will be drawn up in the associated language, so they should first be translated into the buyers mother tongue before a document is signed.
Exchange rates can drastically affect the value of the property and should be considered not only when buying a property but also its potential when it goes on the market. Currency rates are constantly changing and the advice from a specialist can help to explain the way the market is expected to move and secure a good exchange rate.
Understand the tax implications
The tax systems abroad can be very different. They may also have an impact on the prospective buyers tax affairs back home. Tax rates differ between countries; the tax year is often different to that in the UK and the way that tax is calculated can be very different, as can any tax free allowances that the UK resident is used to.
Get paperwork sorted early
In order to purchase a property in certain countries, the prospective buyer of overseas property will need to register for certain documents. In Spain for example they will need a NIE number, in Italy and Portugal they will need a Code Fiscal and in Turkey they will need military clearance - which can take up to six months to be issued. They are not committing to buying a property by registering for these documents and getting them early can prevent any unnecessary hold ups down the line.
Factor in all buying costs
Often additional taxes and charges apply when buying a property abroad. Local property taxes, agent fees, title insurance, mortgage fees, notary and legal costs may have to be paid depending on the country where the property purchase is taking place.
Who should own the property?
This is probably the most important decision. Deciding on who should own the property has a major impact on taxes and inheritance and can save large amounts of money. There are many options ranging from an individual, a couple, partly or totally in the names of any children, company ownership or trusts for example.
Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks.