If you’re a retiree or pensioner interested in buying property abroad and growing your nest egg, you might be seeking sound advice to make the best purchase.
While there is some risk coming from investing in property, as with all investments, you can minimise your risk while maximising profit. A smart property investment generates lucrative returns and can provide you with a reliable stream of income during your retirement. If you’re curious about buying an investment property abroad, here are the factors you should consider.
The Potential Risks of Buying Property Abroad
A critical caveat of entering the property market is that you’ll need a substantial amount of capital to enter it. When it comes to buying property abroad, there are no” ‘quick cash-out” options, and you must factor in the uncertainty surrounding buy-to-let opportunities in your decision-making process.
Why do you need to think about this? Unlike other assets such as cars, a property takes considerably longer to sell. Should you find yourself in a situation requiring quick access to your money to invest elsewhere or take care of unforeseen circumstances, you might run into some delays and difficulties.
Plus, most new investors forget to include the hidden costs into the initial purchase price. These associated costs, like plumbing repairs, compliance certificates, building and pest inspections, are just some of the things you should examine before settling on that exquisite home you want to buy.
If you’re thinking about buying property abroad for buy-to-let purposes, be aware that evicting unruly tenants is a lengthy process. If your home is empty for an extended period, you may not make the profit you hoped.
To sum up, the cons are:
- You need a lot of capital to enter the market
- There are some hidden costs beyond the initial purchase price
- It takes longer to sell, making it difficult to access your money to invest elsewhere
- The risks associated with buy-to-let and having the home empty for unexpectedly long periods
The Gratifying Rewards of Buying Property Abroad
Despite those caveats, you can overcome them with extensive knowledge of the investment market, the insight of the professionals you work with and strategic planning. Property is a substantial long-term investment, and you can mitigate potential risks by having other investment classes across your portfolio.
One of the numerous perks of buying an investment property at home or abroad is that there is less volatility than you see in other financial markets. In contrast to the stock market where buying and selling shares happens in a second, property investment has proved relatively stable.
Don’t forget that there’s always a demand for property. Housing shortages, global population growth and increased tourism in Europe are some of the causes contributing to this ever-growing need. Buying property abroad means you’re making an intelligent investment in something that will always be an asset.
Another big bonus is that you can claim inheritance tax when you bequeath your property to younger generators if you invest in property during your retirement. If you decide to pass your property onto anyone before your death, the law views it as a gift, and there won’t be any inheritance tax charged if you lived in the property for less than seven years before giving it to someone.
Most people see retirement as the time to enjoy the luxury of more free time and the freedom coming from your golden years, travelling or taking up a new hobby. If you’re buying property abroad to let, you’ll also yield the benefits of an additional monthly income that could give you even more financial freedom.
The benefits are:
- A relatively stable long-term investment
- There’s always a demand for property
- If you gift it to younger descendants in your will, you won’t have to pay an inheritance tax
- Letting an investment property can lead to more income to enjoy your retirement
How to buy a property abroad
Understanding the risks and rewards coming from buying an investment property abroad is just the start. The next step is to understand details about the market, tax implications and relevant property legislation, and we recommend you download our ebook, The Retirees’ Guide to Investing in Property for more details. Finally, if you’re serious about foreign real estate, then be sure to have a look at our property for sale on the Costa Blanca in southeastern Spain.