Purchasing a holiday home is a luxury – and an opportunity to make money – that many people would relish, but it is not all about fun in the sun and relaxing by the pool.
Foreign property investment is a complex and potentially problematic process that requires thorough planning and consideration of various factors, from finance and taxes to maintenance and legal regulations.
A guarantee of regular holidays and relaxation could well be the ultimate goal of buying a holiday home, but one of the first things to be taken into account when initiating the process is finances.
There are various financial aspects of purchasing and owning a home abroad, such as setting yourself a clear and realistic budget.
According to Holiday Lettings, the key to budgeting for your investment is setting a maximum price limit and keeping to it. The holiday accommodation website points out that a number of significant expenses must be included in the overall purchase price, such as mortgage arrangement fees, legal costs, stamp duty and local taxes.
The financial obligations will not end once you have completed the purchase. You will have to keep up mortgage repayments and also pay for things such as maintenance, repairs and insurance.
With such a wide range of potential costs to consider, it can prove helpful and reassuring for holiday home buyers to use a specialist currency transfer service, which will allow you to make regular international payments, as and when you need.
Investing in a foreign property is a big commitment, so it is important to take plenty of time to think about where you want to buy and ensure that the location suits your needs.
Think about the aim of your investment – do you want a holiday home mainly for personal use, or are you looking for something with broad appeal that you can rent out for some extra income?
In a recently published guide to buying a holiday property, Ian Cowie, the Telegraph’s personal finance editor, pointed out that one of the most significant factors to consider is accessibility.
John Waldron of Connells estate agents said: “For a second home that is to be used for that quick weekend away, ease of access is an absolute must, because a four or five-hour journey at each end of the weekend can take the gloss off the holiday.”
You should also think about the safety of the area you are buying in, as the property could go unoccupied for fairly long stretches of time, and practical aspects such as proximity to amenities.
Estate agents and lawyers
According to the Association of International Property Professionals (AIPP), one of the crucial necessities of buying a property overseas is getting an independent lawyer to represent your interests.
Your lawyer should not be affiliated with any other person or organisation in the wider buying process and will charge a fee that should be included in your budget.
With regards to estate agents, the AIPP stresses that it is important to go with a firm that is 100 per cent professional.
Check the reliability of your agent by asking lots of questions about the company and doing some research on its track record. You should also seek out genuine client testimonials and ask for detailed, written clarification of the service the firm offers, which can be checked by lawyer.
There are many more things to be taken into account when buying a holiday home, such as the upkeep of your property while you are not using it.
A neat and tidy garden, if left untended, could quickly turn into a wild collection of weeds and long grass, while a swimming pool could end up unusable if you do not arrange for it to be maintained.
You might also want to have the inside of the home cleaned on a regular basis, another financial commitment that could require you to make international money transfers.
Before going ahead with the purchase, visit your location a few times to familiarise yourself with it. This will reduce the risk of any nasty surprises after you have invested.
Looking to the future, you might want to consider issues that could affect the resale value of your holiday home, such as trends in the local real estate market and any nearby infrastructure or property developments.