The worldwide recession has affected almost all aspects of our life, not the least the property market.
In some countries and regions, property prices increased astronomically in the past - a couple of years ago reports of 10 to 30 percent increases annually were normal. In many cases these increases bore no relation to the value of the property. However, despite the fact that the economy remains uncertain, it seems that demand for overseas property is still there. What has changed is that it’s now a buyer's market. Snapping up a bargain from an investor who is cutting their losses is something to be considered as property prices continue to decline across the globe.
Have you seen that TV advert where a chappie (with, I think, a Greek accent?) remonstrates with office workers because they simply can’t negotiate on prices? There is some truth in this: the Brits are renowned for their inherent politeness and inability to haggle. In today’s property market this could mean missing out on some really quite dramatic price reductions!
Both private sellers and developers alike are discounting properties while adding incentives to secure sales. Around the Mediterranean many developers are slashing prices AND sometimes throwing in white goods like air conditioners or the entire property completely furnished at no extra cost! These are the kind of deals you need to be looking for.
Many private sellers are experiencing financial difficulties having purchased off-plan property several years ago with the intention of selling for a profit on completion. There is now a surplus of new homes for sale and a lack of demand - many sellers would be more than happy to sell at a break-even price. Imagine getting a property for the price someone paid for it three years ago - it's more than possible.
Provided the owner or developer purchased the property before the ridiculous price hikes, it wouldn't be difficult for them to drastically reduce their sales price to get a quick sale – and in some cases still make a profit. Plus of course when they bring the money back to the UK they may be getting a better exchange rate on their funds, depending on what currency they are selling in and how it has fared against sterling. Effectively this means that they may sell for less than they paid and yet still get their money back - or even make a profit!
And this brings me to a very important aspect of netting yourself a bargain: the transfer of currency abroad. Many people, and at one time I numbered myself among them, are unaware that exchange rates differ dramatically between banks and really good currency companies such as Smart Currency.
Also, if you are making an offer in euros and then calculating what that will cost you in sterling on the day of your offer, you need to lock the currency in at that rate. That way you will know exactly what the property is costing you; you would be horrified to know how much some people’s cost has risen by when they have omitted this vital step. You don’t even need to have the full payment available when you do this: a currency company will reserve your exchange rate for up to a year for just a small deposit – what price peace of mind?
So - how can you get the best deal? The quick answer is to make discounted offers on a number of properties - sooner or later someone will agree to negotiate. How much should you discount on the asking price? That all depends on how eager you are to get a good deal and where you are buying.
If you're interested in investing it's absolutely paramount that you do your homework and create a strategy. If you're going to buy to sell on you need to determine the real market value - what people are prepared to pay for the property today. You also need to determine who's going to buy the property (target market) and if there is enough demand. Provided that you think you can sell the property at market value, you have to make offers way below that price point. Do your research, determine the costs associated with buying and then factor in your profit - people make a living from buying at below-market value and it can be very lucrative.
It can also be extremely expensive if done incorrectly. If you need any assistance with this please phone the OGC Resource Centre. They have all been involved in property investment and purchase for years and would be happy to share their expertise and their recommendations with you.
Bye for now and go get ’em!
Kim Brown
http://www.overseasguidescompany.com
Showing posts with label moving abroad. Show all posts
Showing posts with label moving abroad. Show all posts
Tuesday, 19 October 2010
Thursday, 26 August 2010
Renting out your property in the UK when you move abroad
Given that prices on house sales have dropped considerably in the UK, you may be wondering if your best bet may be to hang on to your property after moving abroad and then sell it later. It also means that if your move does not go according to plan you have at least not burnt your boats completely.
If you decide to keep your property and rent it out, then two more decisions are paramount:
Firstly, furnished or unfurnished?
If you are like me, then you want to take all your precious things with you. If you are like most other people, you will be delighted to leave them behind and completely refurnish abroad. First prize would of course be that you leave all your furniture in your home. You rent it out furnished and then, with the proceeds from the rental, you have enough to rent and buy new furniture abroad, and save yourself a bundle in shipping costs…but it doesn’t quite work like that.
Furnished properties need to be furnished to a very high standard, and all soft furnishings need to be certified as fire resistant. On top of that you may not get much extra rent on a fully furnished property. I know when I rented here in London the rent was the same furnished or unfurnished, so you may decide it’s not worth leaving all your treasures behind.
You do need by law to leave a few things behind for your tenants however; things like a stove, fridge, washing machine and garden tools/lawn mower if they will be looking after a garden..
Letting Agents
A letting agent will find tenants for you, arrange necessary maintenance, repairs and inspections, and generally look after your property. You’ll pay for the privilege of course – 10-15% plus VAT of the rent your tenant pay will go straight to the letting agent.
You do need to keep on top of things with your letting agent, for a number of reasons.
- Letting agents, like real estate agents, are optimists – do your own research on what properties like yours are renting for
- You need to make sure inspections are carried out, such as the annual gas safety inspection and regular (6-monthly) visits to your property by the letting agent
- You need to read the check-in and check-out reports and compare them – your letting agent will probably rely on you to highlight problems
- It can seriously affect your ability to pay your mortgage if your tenants are not making rent payments on time, or if your property is vacant for a while. Keep a contingency fund in the UK of around 3 months rent to cover such eventualities if possible. Keep in touch with your mortgage company if you do start having difficulty making payments
- A letting agent may not pursue unpaid rents with as much vigour as you would like them to – you may need to step in and sort this out. I would insist on a monthly debit order: if your potential tenants balk at this – I would look for other tenants!
- You will need to keep re-decorating your property to maintain a high standard of tenants – and remember that some tenants can do considerable damage in a short space of time
- If you do think your house may be due for some redecorating, try to arrange for a friend or family member to look over the property with the letting agent – they may give you a clearer idea of what needs to be done
- It is much better to keep a good tenant on a lower rent than it is to keep raising the rent – check-in and check-out inspections are costly, and you may have vacant periods between tenants. You’re also liable for council rates and utilities when the property is vacant. My parents lived in a rented home for years and never had the rent increased. They however carried out all maintenance and repairs and left the house in a far better state than when they had first occupied it!
- Read and understand the tenancy agreement you sign with the tenant – keep an eye especially on minimum notice periods. You can also specify a break clause, where you can ask to get the property back if you need it.
Despite the costs and hassle, most emigrants choose to use a letting agent rather than relying on relatives or friends to look after their property. There is quite a lot of paperwork involved, both for tax and ongoing things such as check-in/check-out inspections, and even to change utilities over between tenants – this could prove a nuisance for friends. There are also health and safety regulations for things such as fire alarms, extractor fans, boiler inspections, electrical inspections of appliances, and even requirements for fire escapes in some properties, all of which needs to be documented and kept up to date. There is also a lot of responsibility involved in choosing tenants and collecting rents. You don’t want to feel obliged to fly back to the UK when anything goes wrong.
You will need to let your house and contents insurer know when you are letting out your house, and may need to arrange special landlord’s insurance. The premiums may be a bit more than you are paying now, but you may be able to reduce your contents cover if you are letting your property unfurnished.
Make sure you understand the conditions of your insurance, especially if your property is going to be empty for a couple of weeks – you may need to get your letting agent to visit the property at set intervals and document their visit.
You also need to let your mortgage provider know if you are letting out your home. They may ask for a one-off extra payment or impose other conditions as they see fit.
Remember too that before you leave the UK, you’ll need to contact the HMRC to register as a non-resident landlord.
And finally, you need to make very sure that you can cover your costs with the rent you receive. The rental income needs to cover your costs such as mortgage (if applicable), insurance, maintenance, rental agency fees, change-over costs, provision for vacant periods, tax and so forth.
If you decide to keep your property and rent it out, then two more decisions are paramount:
Firstly, furnished or unfurnished?
If you are like me, then you want to take all your precious things with you. If you are like most other people, you will be delighted to leave them behind and completely refurnish abroad. First prize would of course be that you leave all your furniture in your home. You rent it out furnished and then, with the proceeds from the rental, you have enough to rent and buy new furniture abroad, and save yourself a bundle in shipping costs…but it doesn’t quite work like that.
Furnished properties need to be furnished to a very high standard, and all soft furnishings need to be certified as fire resistant. On top of that you may not get much extra rent on a fully furnished property. I know when I rented here in London the rent was the same furnished or unfurnished, so you may decide it’s not worth leaving all your treasures behind.
You do need by law to leave a few things behind for your tenants however; things like a stove, fridge, washing machine and garden tools/lawn mower if they will be looking after a garden..
Letting Agents
A letting agent will find tenants for you, arrange necessary maintenance, repairs and inspections, and generally look after your property. You’ll pay for the privilege of course – 10-15% plus VAT of the rent your tenant pay will go straight to the letting agent.
You do need to keep on top of things with your letting agent, for a number of reasons.
- Letting agents, like real estate agents, are optimists – do your own research on what properties like yours are renting for
- You need to make sure inspections are carried out, such as the annual gas safety inspection and regular (6-monthly) visits to your property by the letting agent
- You need to read the check-in and check-out reports and compare them – your letting agent will probably rely on you to highlight problems
- It can seriously affect your ability to pay your mortgage if your tenants are not making rent payments on time, or if your property is vacant for a while. Keep a contingency fund in the UK of around 3 months rent to cover such eventualities if possible. Keep in touch with your mortgage company if you do start having difficulty making payments
- A letting agent may not pursue unpaid rents with as much vigour as you would like them to – you may need to step in and sort this out. I would insist on a monthly debit order: if your potential tenants balk at this – I would look for other tenants!
- You will need to keep re-decorating your property to maintain a high standard of tenants – and remember that some tenants can do considerable damage in a short space of time
- If you do think your house may be due for some redecorating, try to arrange for a friend or family member to look over the property with the letting agent – they may give you a clearer idea of what needs to be done
- It is much better to keep a good tenant on a lower rent than it is to keep raising the rent – check-in and check-out inspections are costly, and you may have vacant periods between tenants. You’re also liable for council rates and utilities when the property is vacant. My parents lived in a rented home for years and never had the rent increased. They however carried out all maintenance and repairs and left the house in a far better state than when they had first occupied it!
- Read and understand the tenancy agreement you sign with the tenant – keep an eye especially on minimum notice periods. You can also specify a break clause, where you can ask to get the property back if you need it.
Despite the costs and hassle, most emigrants choose to use a letting agent rather than relying on relatives or friends to look after their property. There is quite a lot of paperwork involved, both for tax and ongoing things such as check-in/check-out inspections, and even to change utilities over between tenants – this could prove a nuisance for friends. There are also health and safety regulations for things such as fire alarms, extractor fans, boiler inspections, electrical inspections of appliances, and even requirements for fire escapes in some properties, all of which needs to be documented and kept up to date. There is also a lot of responsibility involved in choosing tenants and collecting rents. You don’t want to feel obliged to fly back to the UK when anything goes wrong.
You will need to let your house and contents insurer know when you are letting out your house, and may need to arrange special landlord’s insurance. The premiums may be a bit more than you are paying now, but you may be able to reduce your contents cover if you are letting your property unfurnished.
Make sure you understand the conditions of your insurance, especially if your property is going to be empty for a couple of weeks – you may need to get your letting agent to visit the property at set intervals and document their visit.
You also need to let your mortgage provider know if you are letting out your home. They may ask for a one-off extra payment or impose other conditions as they see fit.
Remember too that before you leave the UK, you’ll need to contact the HMRC to register as a non-resident landlord.
And finally, you need to make very sure that you can cover your costs with the rent you receive. The rental income needs to cover your costs such as mortgage (if applicable), insurance, maintenance, rental agency fees, change-over costs, provision for vacant periods, tax and so forth.
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