Investment Property Abroad

Buying a property off-plan can be an extremely lucrative investment option. Over the years, developers and agents as well as buyers, have it has made a lot of money from it.
For the developer, it’s a way of reducing risk. It’s also a way of financing part of their project with someone else’s money.

Estate agents like to sell off-plan as they can earn very generous commissions from the developer. They’re generally easier to sell because or their reputation for providing high returns on investment. The estate agent can just take the commissions and run. They don’t have to worry about any hassles from the buyer later on down the line.

Buying off-plan does however, have a downside…

Delays
The most obvious disadvantage is that you have to wait for long, sometimes uncertain periods before you can either live in or rent out the property. For but-to-let investors, they cant’ obviously gain rental income until it’s fully finished and furnished.

This is however only a disadvantage in some cases, as for some buyers it may suit them and could therefore be seen as an advantage.

Second Rate Locations
A problem that has been getting worse every year in Spain is overbuilding. A lot of the sought after coastal locations in popular areas are taken up. All that’s left for new developments are second and third line locations often with motorway views.

This however, is only true of places like Marbella on the Costa Del Sol. In newer locations like Murcia, Cadiz, Almeria and Fuerteventura, there’s still plenty of space for front line development.

Uncertainties
The fact that the property hasn’t been built yet can cause all kinds of uncertainties – uncertainties that can turn into genuine problems…

Between the time you sign the contract and the delivery of the property. Developers can run into all sorts of problems; everything from bad weather and bad project management to problems with planning permission and even insolvency.

New developments rarely finish on time, regardless of what the sales organisations tell you. So, it’s very advisable to build this into the contract and whatever financial plans you might have.

Inconsistencies
One of the biggest risks for anyone buying off-plan is that they might end up with a property that doesn’t match the plans and specifications that they had initially signed for.
Apart from the fact that developers are notorious for promising one thing and delivering another, actually understanding what the plans and specifications mean in terms of finished product can be quite difficult for anyone outside of the construction industry.

This is apparently one of the biggest complaints off-plan buyers have. Known as “Under build”, it’s where you pay for more than you get.

Guidelines
In Spain, as a buyer you’re entitled to insist on adequate documentation regarding the build specifications from developers before you go ahead and purchase. The Spanish consumer protection laws gives you significant rights when it comes to off-plan purchases.
If you experience any problems with build quality or find that the developer has failed to meet the correct specifications, you are urged to file complaints against him.

So the most important thing to do is check that the developer’s plans and specifications are sufficiently detailed to minimise any such problems. Ideally, check the details with your lawyer. Find out how the developer plans to deal with any of these problems, should they arise.

According to a recent article by Mark Stucklin, from Spanish Property Insight “63% of British buyers end up using the lawyer recommended to them by their estate agent. Of these, 20% report being very dissatisfied with the legal service they receive.”

He goes on to point out that using a lawyer appointed by the estate agent is unwise in most cases and that ideally you should choose an independent Spanish lawyer – one with no connection or obligations to the agent.

Why you’ll need a lawyer
Buying a property in Spain is a relatively straightforward process, but like in the UK, it can be detailed and sometimes complicated, especially if you don’t have fluent Spanish. Unexpected costs and problem can arise. This is why you need a lawyer, preferably one who speaks English and is completely independent from the estate agent.

For a second-hand property, your lawyer needs to make sure that the seller actually owns the property – that it’s his name on the title deeds.

In Spain, debts belong to the property not the owner, so he’ll need to make sure all debts are paid, otherwise you could end up buying into all sorts of stress and hassle.
You and your lawyer should meticulously check the contract and make sure that the property fully corresponds to the details in the title deeds – ie, size, number of bedrooms etc. These are just two of the most fundamental checks the lawyer has to make. He’ll have to do many more.

For off plan purchases, the lawyer’s role will involve checking the contract and making sure that it gives exact details of the type of property he’s going to build, with all the specifications and that all the correct licences and guarantees are adhered to.

What’s written down in the contract is your only real security when dealing with new developments. If the contract is faulty or incorrect, you could find yourself in big trouble.

The contract should specify a date for completion. Although new developments are nearly always finished late, your lawyer can help make sure the time frame is both reasonable and realistic.

Independent Spanish Lawyers
In most cases, UK buyers will just use the lawyer that’s been appointed by the estate agent. Initially, it seems like the obvious choice.

For buyers who come over on inspection visits, time is so limited that they rarely have enough time to find their own lawyer. So they just make do with the agent’s lawyer.
One of the main reasons buyers end up unsatisfied with the legal service they receive comes down to the agent’s motives.

In Spain, estate agents are highly motivated by closing sales; closing as soon as possible. They can make very juicy commissions off them. They want to sell to you as quickly as possible and will recommend any lawyer who’ll facilitate this – their own in-house lawyer being a prime candidate.

You can never be too sure about the relationship between the agent and their appointed lawyer. They could have all sorts of deals going on – anything to secure a quick sale.

This is why, ideally, you should find your own Spanish lawyer; one that’s independent of the real estate agent or developer. You need someone that can give you impartial advice and who works solely for you and in your best interest.

Try and find a lawyer before you start the purchase process – before you even contact the agent, if you can. This way, you won’t be pressurised into using their lawyer.

Finding a Lawyer
The British Consulate can provide you with a list of English-speaking lawyers right throughout the Spain and the Canaries. Checkout the following link – (British consulates in Spain) (http://www.spanishpropertyinsight.com/british_consulates_in_spain.htm )

Buying a new home in Spain
Buying property in Spain is very straightforward, once you take a few precautions. Thousands of people happily and successfully set themselves up in Spain every year. Most of them never look back.

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At the moment, some of the most lucrative overseas investment property areas are Spain, Australia, Barbados, Brazil and Cyprus.

They represent significant off plan, residential and buy to let opportunities; off plan often providing the biggest return on investment (if properly researched).

Spain has always been looked upon as a safe and steady overseas investment area. Demand for properties here has been rising steadily since as far back as 1988. There are currently over 1.1 million holiday homes in Spain owned by foreigners – and half of these are from the UK.

Spain is no more than three hours away from any UK Airport and now low cost airlines are flying more frequently to more and more destinations in Spain and the Canary Islands.

Apart from the low mortgage rates Spain also has the climate; the beaches; the cuisine; the nightlife; the infrastructure; a vast and varied landscape; art, architecture; music; culture; and every type of outdoor sport activity imaginable. It’s no wonder Spain is looked upon as a sound overseas investment area.

Australia has solid economic climate, which helps boost the property market and create continual demand and investment opportunities.

Investors are looking for overseas investment property for sale within Australia’s major coastal cities and tourist hot spots. With its amazing climate and very high quality of life, property in Australia is now highly sought after. The fact that they speak English is a big attraction for UK investors, a lot of whom actually end up relocating here after a year or so.

Barbados has significant investment potential, both as an area to live and an area to invest in. As well as being spectacularly beautiful, it has a booming economy and excellent infrastructure, along with stunning beaches, a perfect climate and very friendly people.

Brazil is an emerging market with very good potential. The market is stable with high growth and excellent returns on investment. The cost of living here is amazingly low – just 20% of that in the United Kingdom and Europe.

Cyprus offers excellent value for money (North Cyprus in particular). You can buy property here for significantly less than you could in Portugal, Spain and France. The property industry in Cyprus is now very well established.

Investment options (off plan or buy to let)
If you really want to get the most out of your investment and don’t immediately need to live in the property, off plan property is the best way to go.

It’s quite simple. You buy property in a new development at a low price and by the time it’s finished it has gone up in value significantly.

Off plan properties are priced very attractively for a quick sale. Developer’s will try and sell units as quickly as possible, in order to reduce the required capital outlay and minimize their own risk.

Normally you’ll have to pay an initial deposit, followed by installments at fixed dates until the project is completed. The advantage of this is that you only need a small mortgage. You can eventually borrow more money as the payments fall due. In this way, you enjoy substantial savings on interest.

Another advantage of off plan investment is that you get to choose from the best selection of properties. If you get in at the beginning all the most attractive properties are still available – the penthouses, corner units or properties with larger gardens – which all usually sell first.

In buy to let situation, you buy a property and rent it out as soon as possible. Ideally the rent should cover the cost of your mortgage and if you’ve planned it well, you might even have some money left over.

In order for this to be successful, you need to get to know the local letting market. Targeting short-term visitors during peak seasons can bring in high rents over a short period (normally July and August). On the other hand if you have a year round tenant you’ll receive a (lower) fixed rental income all year round.

When buying to let, it’s important to purchase a property that will rent out well, not just one that you’d like to live in. Speak to your local agent for more information on renting in the area before you purchase.