There are many things to take into account when buying investment property in the UK or Germany, but this PRIVATE acronym might help as a start point, particularly with so much change afoot on the European and UK property scene.
Purpose: Clarity of investment purpose
Are you buying an investment property as part of your retirement planning or to fund a certain lifestyle, or to help with University fees? If so, what does it need to cash flow to deliver on this objective? And do you need to invest directly in property or could you achieve the same result – or better – by investing indirectly over a fixed term? By this I mean getting the security of property but not actually owning the asset, like a debt or equity property product.
Reality: of timeframes
It pays to be realistic about how much time it will take to complete the investment purchase, particularly if you need to get a mortgage or are buying in a Continental European city which is not where you are located. The buying process is likely to take longer, especially if dealing with a local foreign bank for a mortgage. You really don’t want to be forking out for expenses upfront if you are not fully geared up to buy.
Intermediary: buy via an agent or directly from developer?
If you are buying off-plan or new build then it is possible to buy off a developer directly. But do consider they will offer only their product, so you have not much to compare it with, unless you are are undertaking a lot of your own research and check alternatives out.
If you are after a second–hand property or resale, which often offers really good value-for-money, then you might want access more of the market through an agent, new build and resale stock. Whilst you are at it, make sure the agent has a good reputation and is a member of the professional body, such as the Association of International Property Professionals (AIPP), which also provides access to The Property Ombudsman. This gives confidence, knowing there is some recourse if things go wrong.
Value: a property with innate value or just simply cheap?
Some homeowners think they have got a great deal if they have bought cheaply. But this isn’t always the case. For example if it does not have the correct build permits or licences, it is more than likely unsaleable or illegal. Or if the property is in a poor location with a scarcity of amenities, or transportation links, then it might not represent great value. You want it to have some ‘value’ when you come to sell, or exit.
Access: how good is the location?
Does your investment property have good connections to transport, whether tram, bus, train, road, or multiple? If you are aiming to attract a long term, Executive tenant, is it close to where they might work for convenience, or are you buying in a tourist spot which might lend itself more to serviced accommodation and be less suitable for a longer term tenancy?
Test: Sanity check your emotional ‘buy’ response with a cool head. Sleep on it
It can help if you don’t feel too rushed in making big financial decisions like buying a property in a different country. Don’t rely on emotion alone, check out the facts about the property and make sure it all stacks up. Can you afford it and not stretch your finances? Are you thinking sufficiently with an investment mindset, thinking about how attractive it is for your target tenants, rather than what you subjectively like?
Exit: do you have an end game plan?
It always helps to know what you might want to do in 5, or 20 years’ time. If you want to keep your options open and sell on to locals rather than just overseas buyers, then maybe consider a bigger town or city with a year round population who live and work there?
If you want a bit of capital appreciation, when you come to sell, then it might be worth buying something a bit more distinctive than a me-too box house, in an area where there is known buyer demand, or where there is a sense of ‘scarcity’, like a city centre or on an island?
Of course there are plenty of other things to consider too, like getting familiar with the whole buying process, budgeting for running costs, working with independent lawyers, and so forth, but by going PRIVATE you are already making a great start.
© Written by Louise Reynolds, Director of Property Venture® an award-winning, European investment property company that offers advice, sourcing, support and problem-solving services to time-strapped entrepreneurs, expats and executives to help them enrich their lives through property investment in Europe. The focus is mainly: UK and German investment property, buy-to-let and homes in Poland, Managed Leaseback in France, Spanish property.
On the Advisory Board and a Member of the Association of International Property Professionals (AIPP) the business has been vetted, approved and voluntarily commits to Industry Regulation and the Professional Code of Conduct.Tags: Buy to let, investment property, objectives, Strategy