Buying a successful fly to let property

With more and more Britons looking to buy a property overseas as an investment, flying to let has reached mainstream appeal. Not content with only using a second property as a holiday home twice a year, property buyers are looking to see returns on their investments both through capital gain and rental yield. But with new markets opening up every week, how can you ensure that you are buying a successful fly to let property? In the first of the second series of Overseas Property Podcasts, Nubricks.com asks two industry experts, Matt Havercroft, editor of A Place in the Sun magazine and Peter Conradi, author of the Fly to Let Guide and editor of the Sunday Times property section for their advice.

The fly to let phenomena was born from the concept of buying property to let in the UK. Many people found that additional income could be generated by owning and renting out second properties in the UK however as house prices have risen, buyers keen to tap into this market have been forced to look elsewhere – more often than not, overseas. This combined with the rapid increase in the number of routes covered by budget airlines made buying and renting out a second property outside the UK feasible.

One of the most important factors to consider before purchasing your property is who your target rental market will be. Are you looking to let your property out short term to holiday makers or to the business, expatriate or local population long term? You must consider if you want to use the property yourself at any time during the year or are you happy to have it simply as an investment. As Matt Havercroft says, “It’s also essential to have a marketing budget and plan in place and to factor these into your initial budget.”

Purchasing a property in a location served by a budget airline is a sensible choice, as Matt comments, “I think budget routes are clearly an important consideration when buying to let abroad, especially if the target market is a British holidaymaker” however there have been instances where routes have been cancelled by a budget airline so it is important to have a back up such as ferry, rail or road access.

If you are looking for rental income then be realistic about the yield you can expect; be cautious and research thoroughly the rental market in your chosen location. Often people think that the rental income will cover the cost of the mortgage but this is unrealistic in most cases. As Peter Conradi says, “It does all come down to research and understanding exactly what your potential renters will want and having realistic expectations about the kind of returns that you can make.”

Given that most letting agent’s management commissions range from 15-25% of your rental income to take care of your property abroad, in addition to this sizeable proportion of your property income, it is also essential to calculate in hidden costs such as local taxes, maintenance fees and community charges. As Peter comments, “Holiday lets also have their own extras charges such as having someone to meet and greet the tenant, do the laundry and cleaning etc” so this all needs to be factored into the return you expect. Think about how best to furnish your property, weighing up the wear and tear implications of long term verses short term lets in advance can be offset against future profitability.

If you are looking to rent your property out to holiday makers then don’t just consider the short haul market. Long haul destinations such as Thailand are attractive as they offer a long rental season with year round good climates, cheap property prices and increasingly affordable flights. “Many of these places have very healthy rental markets and so could be worth comparing with short haul destinations if you are just focussed on the pure rental return” comments Peter. Other places to consider are Egypt and Morocco or even ski resorts which can offer golf or outdoor activities in summer.

If you are buying a property as a long term investment then consider the future of flying to let. There has been increased discussion on the impact of frequent flying on the environment and the introduction of green air taxes however how much this will affect Britons holidaying overseas is yet to be seen. It can be fair to say that European countries such as France, Italy and Spain which can easily be accessed from Britain by rail or ferry will remain attractive.

So before you take the plunge and purchase a fly to let property overseas carefully consider your requirements and understand the local market. Buying property to let overseas can be successful but as Matt says, “planning and research is key”. For more top tips from Matt Havercroft and Peter Conradi download their podcast at nubricks.com/archives/272/fly-to-let-guide-overseas-property-podcast/ or visit nubricks.com for more information.