Buying international property-what are your 10 Rules of Investment?

April 24, 2012

I recently attended an Investor show and heard Terry Smith, of Fundsmith, talk about the 10 Rules of investment . It got me thinking, the rules are really no different to buying international property and here’s how…

1. “If you don’t understand it, don’t do it” – is the same for international property as for other investments

International Property Tips, Bird of PreyMost people understand Bricks & Mortar, which is why many people are attracted to it as an investment category. However, buy to let property abroad or buying a holiday home in Spain, or a property in Turkey, is not the same as buying in the UK, so if you are not sure what’s involved in finding a property overseas, speak to a knowledgeable agent.

2. “Market timing” – is also important for overseas property investment

“There are two types of people, those who can’t do it & those who don’t know, they can’t do it”

Market timing is tricky to second call. Few call the property market peaks & troughs perfectly. It is far better to know local market pricing and know if you are buying at a decent price. If you buy at an inflated price, it can be tricky to make money if you sell in the short term. There is a saying that, you make your money when you buy, not when you sell.

3. “Minimise fees” – keep costs down when buying property abroad

Minimising fees paid out is wise in many situations. However, it should not be to the detriment of getting good advice from an agent (which often does not cost any more money than buying directly), or cutting corners by not getting independent legal advice or conducting a survey.

4. “Deal infrequently “

Frequency of buying & selling properties depends on the personal investment strategy adopted. Buying to add value & sell on is a valid strategy, although this might be less well suited to buying a property in Poland for example.

There was a period in time when lots of people bought off-plan property, with a view to “flipping” (selling on before the property was built) in a rising market, but came unstuck when property prices faltered. This is an example of not over-relying on fast turnover of property or overfrequent dealing.

5. “Don’t over-diversify “ – is good advice in buying overseas property too

Here the gist is that with lots of diversification, comes higher chances of holding a poor investment.

This can hold true in international property too. What’s more, if you are buying property in Poland, a holiday home in Spain, or property in Turkey property,  as well as other non- European property, you will have different; buying processes to deal with, sets of legislation and sets of contacts to manage the properties abroad, all potentially building in extra cost. So a degree of focus makes sense.

6. “Never invest to avoid tax” – when it comes to finding a property overseas this also rings true

The focus given to tax avoidance, may distort the mind as to what constitutes a good investment. You may end up buying a really good tax-efficient property, but it is not actually a great investment.

7. “Never invest in poor quality companies” – or for that matter buying overseas property which is poor quality

A poor quality asset can drain you of resources, not enhance them. The same for property, buy good value property, which may not always be the cheapest. Just because a house in Bulgaria is £25,000 doesn’t make it better value than an apartment in Krakow, Poland for £55,000. One might be highly rentable, the other not.

8. “Always invest in a Business that can be run by an idiot”

The idea here is that at some stage the business might end up being run by an “idiot”.  In property, you might run your property-related affairs or have a team in place, or delegate to someone else. Either way the easier the strategy and operations are to understand, the more successful it is likely to be.

9. “Don’t engage in the ‘greater fool’ theory”

Trying to outwit the market is a challenging one that not many people succeed at. If the returns are high, there is likely to be a high risk, or worse it might be too good to be true. If you go down this route, make sure you are comfortable with the level of risk involved and that you can afford to lose if it came to it. Investing in Russia for example is not for the faint-hearted, but a  country with better Corporate Governance in Europe, like Poland, or Spain, or Turkey might be less risky.

10. “If you don’t like what is happening, turn the computer screen off”

If you can’t stomach the risk or the investment ride, maybe you should not get into it in the first place, or just be prepared to take a step back to keep your sanity.

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Property Venture® is an award-winning, UK-based agency for overseas property who helps people buy investment property and holiday homes in Europe, more easily and safely than they can on their own, because we offer grounded common-sense advice.

The focus is mainly greater Europe: Poland property, UK investments, Spain property, Turkey property, Cyprus property

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