Take advice from the experts

Investing in overseas property is a dream for so many. And the key to making that dream a reality is to ensure that you are prepared for every eventuality along the road to success. So where better to start your research than by heading to the Invest in Property show, Earls Court, 13-15 April.

The show is widely recognised as the perfect platform for both experienced and novice investors to gather essential information on investing in property overseas.

Experts will be on hand at the show to advise both experienced and novice investors on everything from their first investment to the next addition to a successful portfolio. The show features financial and tax experts, current buying advice on emerging markets, off-plan purchasing opportunities, structural and interior advice, market information and predictions, tips for landlords and licensing, maximising buy to lets and let to buys, and hints for dealing with estates agents and solicitors, not to mention over 150 quality exhibitors.

Often novice investors jump at the chance to receive a discount on their first investment. However, the experts warn, discounts don’t mean bargains. Provided the local sales in the area are strong and there is rental demand, an investor should always consider paying list price.

The Invest in Property show shares some insider information for building a successful investment portfolio:

1. Research, research, research The most frequently offered advice is always the same. Do your research. Only when you know the state of the rentals market in your desired area can you make an informed choice. Additionally, ensure that you are looking for the right kind of property in the area. Talk to local lettings agents to find out which type of units rent easily: often, if the area is over developed, there can be an oversupply of one type of unit.This happens particularly with two bedroom apartments.

2. Lead with your head… not your heart Don’t let your emotions cloud your good business judgement. Henry Davis, from www.internationalproperty.ie advises: “If you are buying for investment purposes particularly, try not to become emotionally involved, remember this is a business transaction and unless you plan to stay and use your overseas property, choose an area with strong capital appreciation.” He adds: “Just because you wouldn't live there yourself doesn't mean it's not a good investment.”

3. Transaction costs reduce your returns Davis warns: “Remember that transaction costs reduce your overall yield. In Germany, for example, apart from transfer taxes (stamp duty) the buyer pays the estate agency fees, not the vendor. Transaction costs also increase in countries where the loan-to-value rates are low. The more cash you have to put into a deal the less the return on investment. Check all your transaction costs before buying; ask your solicitor for a full quote in writing (outlining all taxes and fees) before you commit.”

4. When is a discount not a discount? Discounts come easily on properties with a higher perceived value, overpriced properties and oversupplied destinations. It always pays to remember that list prices are developer-driven. It is very often wiser to buy in areas where there are good resale and rental markets rather than in an area where developers are offering discounts.

5. Appreciating short-term capital appreciation Capital appreciation prospects are limited if you purchase a two-bedroom apartment in an area oversupplied with two-bedroom apartments, whether they are completed or in the planning stage. In order to beat the market, try to establish which segment within a given market has the least supply and the greatest sales demand from both local and foreign buyers.

6. Have a haggle Haggling can have a surprising effect: you may well be shocked at how much discount you can get, particularly if you are a cash buyer. Says Davis: “Estate agents often over-estimate values and many test the market with unrealistically high prices. Some agents and developers have a built-in habit of implying there is more actual demand than there really is.” He advises: “The best negotiation strategy is to be able to highlight comparable properties selling in the area; basically if you can show that a similar property in the same area is selling for less, it's easier to justify the price you are offering.”

7. Beware of rental schemes If it sounds to good to be true, it may well be. Guaranteed rental schemes are sometimes used as a sales tool and can be offered in areas where there is an oversupply of rental properties. The developer may give you the value of the rental yield by way of a discount; this way you won't be taxed on the rental income. Some rental guarantees are legitimate and backed by established management companies or hotel chains. Always be cautious in this area and hand any documents over to your solicitor to check the terms and conditions.

8. Go local Always buy through a local agent. This way, any problems can be more easily resolved. Dealing with the developer directly in a foreign culture and language can often cause problems that you would not encounter by going through an agent.

9. Strategise One size never fits all when it comes to finding the right way to purchase investment property. Davis advises a strategy based on your long-term goals in line with your financial position. “If you are a first-time investor with limited resources be careful to choose a property with good rental income, otherwise you will end up sending large monthly top-ups to your mortgage provider.”

10. Resales Understanding the dynamics of the resale market is of key importance when investing. Try to think of both the foreign and local market when considering the location of your overseas property. It is vital that you consider your options to resell in the area. Think about where the most part of your buyers come from. If the most part are Italian and the Italian economy is hit by problems, then your ability to resell your investment may be seriously hindered.

The Invest in Property Show takes place at London’s Earls Court 2 from Friday, 13 to Sunday, 15 April. Opening times are 10.00am – 6.00pm (5.00pm Sunday). Entry to the Show is free. A full day pass to the seminars at the show costs £10 and a session pass costs £5. To pre-register for the show or for more information, log on to investinpropertyshow.com.