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10 Things to Consider When Investing in Overseas Property

10 Things to Consider When Investing in Overseas Property

While the global real estate market may have enjoyed months of uninterrupted growth, large-scale investors have recently begun to sell luxury properties amid fears that surging prices are creating a bubble. Although this may represent the higher end of the property market, it is a worrying development at a time when the global economy is finally beginning to emerge from the shadow of long-term decline.

This is just one aspect of the real estate market, however, which continues to evolve and create new challenges for investors and vendors alike. Just recently, British real estate firm Property Rescue collaborated with the national ombudsman to launch a new National Association of Property Buyers (NAPB), which will operate in the controversial “Quick House Sale” sector and provide self-regulation that protects both investors and home-owners alike.

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Luxury Real Estate

    The Key Considerations When Investing in Overseas Property

    Whether buying a home domestically or overseas, there are clearly a high volume of challenges that need to be overcome if you are to safeguard your investment. These issues are amplified when buying property abroad, especially if you are expanding your portfolio into new and relatively uncharted territories. With this in mind, consider the following factors before finalizing your international real estate investment.

    1. What is your reason for buying overseas property?

    This is arguably your single most important consideration when buying a property overseas, as it will have a direct influence on everything from your budget to the type of insurance that you invest in. If you are buying a property for the purpose of investment, for example, you will need to execute all financial decisions in line with your estimated return. If you are purchasing a home with a view for relocating, however, you will need to focus on standard considerations such as the surrounding area, local amenities, and school catchment regions.

    2. The need for finance and funding.

    With a clear understanding of your motivation, selecting viable properties to suit your needs is a relatively straightforward process. Securing finance is a far more challenging exercise, however, especially when you consider the fact that it will be subject to international laws and usually discussed in local currency terms. As a starting point, be sure to obtain an “Agreement in Principle” before confirming the purchase as this will safeguard you in the event that you are not extended a loan and enable you to reclaim your initial deposit.

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    3. Consider your tax liability as an investor.

    Everyone’s tax circumstances are different, and this is especially true in the diverse and changeable real estate market. Each nation will have its own unique body of tax laws and legislation, which may require you to repay costs such as stamp duty, title transfer tax or even inheritance tax at the point of purchase. Beyond this, some countries also require home-owners to pay land tax as a condition of their mortgage, and this is usually an annual cost that can eat into your capital. These potential costs must also be factored into your budget, as otherwise you may face significant legal penalties.

    4. Understand the value of local money and exchange rates.

    On a similar note, it is also worth understanding the value of local currency and any associated exchange rates. If you intend to bring money from your own country overseas at different junctures, you may also need to obtain a Certificate of Importation and open a local bank account. This makes it far easier to repay affiliated tax debts and legal fees on time, as you can quickly establish a series of standing orders to suit your requirements. If you are going to execute a smooth and trouble-free transaction, this should be considered a crucial part of your preparation.

    5. Obtain an independent valuation.

    If you were purchasing a home in the UK, you would not think twice about requesting a structural survey and an independent valuation. Many investors fail to do this when purchasing an international property, however, due to the cost and logistical challenges of organizing these tasks from a remote location. Obtaining an independent valuation and guaranteeing the integrity of the property is a fundamental part of any real estate transaction, however, and it is important to remember that any costs are a small price to pay to protect a larger investment.

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    6. Overcome the language barrier.

    Even if you do not intend to relocate permanently, you will still need to engage directly with international vendors and agents when purchasing property overseas. This may pose an issue with regard to any language barriers, which can easily create miscommunication and either delay completion of a deal or have a negative impact on cost. While you can overcome this by taking time to learn the relevant language, it is often far more tome-effective to employ the services of a legal professional with a knowledge of conveyancing.

    7. The need to confirm title and ownership.

    Given the remote nature of international real estate investment, it can be difficult to develop trust with vendors and agents. This means that you must be extremely cautious when discussing issues such as title and ownership, especially as any debt that exists on a property may be passed onto you once the transaction has been completed. If a developer has previously borrowed money to complete the work and not repaid this, for example, you may be liable for the repayment and any affiliated charges as the new owner.

    8. Research the location and local amenities.

    Even if you are comfortable with the financial and tax aspects of purchasing a property abroad, you must still conduct research into the location, its transport links, and local amenities. This is especially true if you intend to live there, although investors must also have knowledge of the region if they are to successfully let their property and generate a consistent return. When buying a holiday home for rental purposes, you must also be sure to research off-peak travel times as you may well experience a fall in demand and income during this period.

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    9. How will your safeguard your property when you are absent?

    If you are buying a holiday home or investing in real estate in order to make a profit, then there is no need to relocate permanently. This means that your property may well be empty for a significant portion of the calendar year, so you must be proactive and prepared to organize security year-round. One of the best ways to achieve this is to employ a local property management firm, who will make regular visits to check on the residence and organize any necessary cleaning or maintenance tasks. Although this will require additional investment, it can help to save you money and safeguard your assets.

    10. Do you have an exit strategy?

    Whether you intend to relocate internationally or develop a global real estate investment portfolio, it is important to remember that even the best laid plans occasionally go awry. You will therefore need a suitable contingency plan and exit strategy, as this will minimize any inconvenience caused and the potential for financial loss. For those hoping to relocate, it is therefore important to retain strong ties in your country of origin and ideally retain an existing property for a predetermined period of time. Investors will also need to keep a keen eye on the global real estate market and prevailing economic trends, as these factors may dictate the need to sell or change strategy.

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    Last Updated on August 20, 2019

    How to Set Financial Goals and Actually Meet Them

    How to Set Financial Goals and Actually Meet Them

    Finances can push anyone to the point of extreme anxiety and worry. Easier said than done, planning finances is not an egg meant for everyone’s basket. And that’s why most of us are often living pay check to pay check. But did anyone tell you that it is actually not a tough task to meet your financial goals?

    In this article, we will explore ways on how to set financial goals and then actually meet them with ease.

    5 Steps to Set Financial Goals

    Though setting financial goals might seem to be a daunting task but if one has the will and clarity of thought, it is rather easy. Try using these steps:

    1. Be Clear About the Objectives

    Any goal (let alone financial) without a clear objective is nothing more than a pipe dream. And this couldn’t be more true for financial matters.

    It is often said that savings is nothing but deferred consumption. Therefore if you are saving today, then you should be crystal clear about what it is for. It could be anything like kid’s education, retirement, marriage, that dream vacation, fancy car etc.

    Once the objective is clear, put a monetary value to that objective and the time frame. The important point at this step of goal setting is to list all the objectives, however small they may be, that you foresee in the future and put a value to it.

    2. Keep Them Realistic

    It’s good to be an optimistic person but being a pollyanna is not desirable. Similarly, while it might be a good thing to keep your financial goals a bit aggressive, going out of the line will definitely hurt your chances of achieving them.

    It’s important that you keep your goals realistic in nature for it will help you stay the course and keep you motivated throughout the journey.

    3. Account for Inflation

    Ronald Reagan once said – “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman”. And this quote sums up the best what inflation could do your financial goals.

    Therefore account for inflation whenever you are putting a monetary value to a financial objective that is far away in the future.

    For example, if one of your financial goal is your son’s college education, which is 15 years hence, then inflation would increase the monetary burden by more than 50% if inflation is mere 3%. So always account for inflation.

    4. Short Term vs Long Term

    Just like every calorie is not the same, the approach towards achieving every financial goal will not be the same. It is important to bifurcate goals in short term and long term.

    As a rule of thumb, any financial goal, which is due in next 3 years should be termed as short term goal. Any longer duration goals are to be classified as long term goals. This bifurcation of goals into short term vs long term will help in choosing the right investment instrument to achieve them.

    More on this later when we talk about how to achieve financial goals.

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    5. To Each to His Own

    The journey of setting financial goals is an individualistic affair i.e. your goals are your own goals and are determined by your want to achieve them. A lot of times we get on the bandwagon of goal setting only to realize later on that it was not meant for us.

    It is important that your goals are actually your goals and not inspired by someone else. Take a hard look at this step at all the goals you’ve set for after this step, you will be on the way to achieve them.

    By now, you would be ready with your financial goals, now it’s time to go all out and achieve them.

    11 Ways to Achieve Your Financial Goals

    Whenever we talk about chasing any financial goal, it is usually a 2 step process –

    • Ensuring healthy savings
    • Making smart investments

    You will need to save enough; and invest those savings wisely so that they grow over a period of time to help you achieve goals. So let’s get down to ensuring healthy savings.

    Ensuring Healthy Savings

    Self realization is the best form of realisation and unless you decide what your current financial position is, you aren’t heading anywhere.

    This is the focal point from where you start your journey of achieving financial goals.

    1. Track Expenses

    The first and the foremost thing to be done is to track your monthly expenses. Use any of the expense tracking mobile apps to record your expenses. Once you start doing it diligently, you would be surprised to see how small expenses add up to a sizeable amount.

    Also categorize those expenses into different bucket so that you know which bucket is eating the most of your pay check. This record keeping will pave the way for cutting down on un-wanted expenses and pump up your savings rate.

    2. Pay Yourself First

    Generally, savings come after all the expenses have been taken care of. This is a classical mistake which almost everyone of us do. We pay ourselves last!

    Ideally, this should be planned upside down. We should be paying ourselves first and then to the world i.e. we should be taking out the planned saving amount first and then manage all the expenses from the rest.

    The best way to actually implement is to put the savings on automatic mode i.e. money flowing automatically into different financial instruments (for example – mutual funds, retirement corpus etc) every month.

    Taking the automatic route will make us lose control of our money and hence will compel us to manage in what’s left with us thereby increasing the savings rate.

    3. Make a Plan and Vow to Stick with It

    Budgeting is the best to get around the uncertainty that financial plans always pose. Decide in advance how spending has to be made.

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    Nowadays, several money management apps and wallets can help you do this automatically. It’s easy and who knows, you may just end up doing what people fail to do.

    At first, you may not be able to stick to your plans completely but don’t let that become a reason why you stop budgeting entirely.

    Make use of technology solutions you like. Explore options and alternatives that let you make use of the available wallet options and choose the one that suits you the most. In time, you will get accustomed to making use of these solutions.

    You will find that they make it simpler for you to follow your plan, which would have been difficult otherwise.

    4. Rise Again Even If You Fall

    Let’s be realistic. It’s not like the world will come to an end if you made one mistake. This isn’t called leniency but discipline.

    If you fail to meet your budget for a month, don’t give up the entire effort just like that. Instead, start again.

    Remember that flexible plans are the most realistic plans. So go forward and try to follow your financial goals as planned but if for some reason, the plan gets out of hand for you, do not give up on it just yet. This has a lot to do with your psychology rather than any material commitment.

    All you have to do is to stay on the road and vow to stay on it, no matter how much you fall down.

    5. Make Savings a Habit and Not a Goal

    In the book Nudge, authors Richard Thaler and Cass Sunstein advocate that in order to achieve any goal, it should be broken down into habits since habits are more intuitive for people to adapt to.

    Make Savings a habit rather than a goal. While it might seem to be counter intuitive to many but there are some deft ways of doing it. For example:

    Always eat out (if at all) during weekdays rather than weekends. Usually weekends are expensive. Make it a habit and you would in turn be saving a great deal.

    If you are travelling buff, try to travel during off season. Your outlay will be much less.

    If you go out for shopping, always look out for coupons and see where can you get the best deal.

    So the key point is to imbibe the action that results in savings rather than on the savings itself, which is the outcome. Focusing on the outcome will bring out the feeling of sacrifice which will be harder to sustain over a period of time.

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    6. Talk About It

    Sticking to the saving schedule (to achieve financial goals) is not an easy journey. There will be many distractions from those who are not aligned with your mission. And it would be rather easy to lose the grip over your discipline.

    Therefore in order to stay the course, it is advisable that you keep yourself surrounded with people who are also on the same bandwagon. Daily discussions with them will keep you motivated to move forward.

    7. Maintain a Journal

    For some people, writing helps a great deal in making sure that they achieve what they plan.

    So if you are one of them, maintain a proper journal, where you write down your goals and also jot down the extent to which you managed to meet them. This will help you in reviewing how far you have come and which goals you have met.

    Use this journal to write down all essential points such as your short term, mid term and long term goals, your current sources of income, your regular expenses which you are aware of and any committed expenses which are of recurring nature.

    When you have a written commitment on paper, you are going to feel more energised to follow the plan and stick to it. Moreover, it is going to be a lot more easier for you to follow you and track your progress.

    At this point, you should be ready with your financial goals and would be doing brilliantly with savings; now it’s time to talk about the big daddy – Investments.

    Making Smart Investments

    Savings by themselves don’t take anyone too far. However savings when invested wisely can do wonders and we are at that stage where we will talk about making smart investments.

    8. Consult a Financial Advisor

    Investments doesn’t come naturally to most of us therefore rather than dabbling with it ourselves, it is wise to consult a financial advisor.

    Talk to him/her about your financial goals and savings and then seek advice for the best investment instruments to achieve your goals.

    9. Choose Your Investment Instrument Wisely

    Though your financial advisor will suggest the best investment instruments, it doesn’t hurt to know a bit about them.

    Just like “no one is born a criminal”, no investment instrument is bad or good. It is the application of that instrument that makes all the difference.

    Do you remember we talked about bifurcating financial goals in short term and long term?

    It is here where that classification will help.

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    So as a general rule, for all your short term financial goals, choose an investment instrument that has debt nature for example fixed deposits, debt mutual funds etc. The reason for going for debt instruments is that chances of capital loss is less as compared to equity instruments.

    10. Compounding Is the Eighth Wonder

    Einstein once remarked about compounding,

    Compound Interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t… Pays it.

    So make friends with this wonder kid. And sooner you become friends with it, quicker you will reach closer to your financial goals.

    Start investing early so that time is on your side to help you bear the fruits of compounding.

    11. Measure, Measure, Measure

    All of us do good when it comes to earning more per month but fail miserably when it comes to measuring the investments; taking stock of how our investments are doing.

    If there is one single step where everything (so far) can go wrong, it is at this step – Measuring the Progress.

    If we don’t measure the progress timely, then we would be shooting in the dark. We wouldn’t know if our saving rate is appropriate or not; whether financial advisor is doing a decent job; whether we are moving closer to our target or not.

    Do measure everything. If you can’t measure it all yourself, ask your financial advisor to do it for you. But do it!

    The Bottom Line

    This completes the list of tips for you to set financial goals and actually achieve them with not so great difficulty.

    As you can see, all it requires is discipline. But guess that’s the most difficult part!

    More About Personal Finance Management

    Featured photo credit: rawpixel via unsplash.com

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