Key Post: Excellent article on investing in overseas property

Brendan Burgess

Brendan Burgess

Founder
Messages
52,144
The Sunday Business Post's property section has a great [broken link removed]by Diarmaid Condon on the practical, legal and tax implications of investing in overseas property.

It is by far the most comprehensive and practical piece I have read on the subject.

I hadn't heard of Diarmain Condon before. He is involved with a company called Independent Property Consultants which seems to sell Spanish property and they have a useful[broken link removed] .

By the way, I still think that investing in overseas property is not a good idea. But if you are going to do so, you should read this article.

Brendan
 
Re: Excellent article on investing in overseas property

Brendan,

I note your reservations on overseas property. Personally I think property investment in Ireland is leading to unrealistic expectations by investors as this market has already outperformed to date. Interested in your views or anyone elses for that matter.
 
Re: Excellent article on investing in overseas property

Brendan,
firstly I would like to thank you for the link to your excellent bulletin board, it is much appreciated.
To clarify one matter, I used to be an agent for IPC in Ireland up to last year but I have started out as an independent overseas property consultant since that time. The parting with IPC was entirely amicable, I just felt it was the correct time to leave, and I would have no hesitation recommending them to anyone wishing to purchase in Spain, you will however find that the Irish portion of the IPC site is slightly out of date, I used to update that section myself.
The reply to your posting is interesting in that a lot of people purchasing abroad, specifically Spain, did so with unrealistic expectations on the rental side, this was to some extent the fault of agents but often just down to over exhuberance on the part of purchasers. Much of the investment potential is in capital appreciation rather than rental and many overseas clients have done very well in this respect, CGT does however have a large part to play if you sell within 5 years.
For pure rental plays it is difficult to look outside of the Canaries or Caribbean, anywhere sub-tropical with a double taxation treaty. The lack of a treaty does serious disservice to areas such as Malta which realise decent lettings but lose most of it to being taxed in both countries. Climate is a necessity for holiday rentals and unfortunately most mainland Mediterranean countries are too seasonal for exceptional lettings. I would think that the most you can expect an overseas property to cover in terms of mortgage payment is 40% which is a lot lower than most clients estimates.

Keep up the good work with the page,

Diarmaid Condon, [email protected]
 
Re: Excellent article on investing in overseas property

Just a note on purchase in Ireland for investment.

I forgot to mention in the last posting that my personal opinion on investment in Irish property is that there is currently such a rush to purchase accommodation for letting purposes, I feel there is likely to be a glut around the beginning to middle of next year. This is nearly as unhelpful as the recent position of lack of accommodation as it will lead to a collapse in rental returns. The government seem to be dedicated to getting this one wrong on a permanent basis, it is feast or famine with no middle ground. A good rental market with affordable rents and decent returns is necessary for all involved but current policy will provide neither. Those currently investing could find rough waters ahead unless remedial action is taken fairly quickly by the incoming legislators.

Diarmaid Condon, mailto:[email protected]
 
bought one in Spain so if you need advice ...

Used IPC and found Diarmuid straight forward and easy to deal with.

It's worth noting the following:

The real prices are double what is advertised (went for IPC's brochure too). Big shock when you get there. They ain't cheap now.
Borrowing from a Spanish bank is collossally expensive ... however it does kinda prove you own the property you think you have bought. Can write it off against tax but no one pays tax anyway ... yet.
Every transaction is marked 20% lower than the real price on the contract. They are a bit like the way we used to be.
Getting the water and electricity and gas connected is very tricky ... get a property management company to do it.
Furniture is suprisingly expensive despite the cheap cost of living.
Theft is common. Bag snatching is rife. Watchout if you are old or a woman with young children. The brochures say the costa blanca is a crime free area . Not so.
The cops are less than honest and uninterested in your problems.

Good points. Capital appreciation rivals Dublin ie 30+ % per year (so far). 35 weeks plus rent if on a golf course - can vouch for that. Great weather and cheap living. Nice people. Good golf.
 
capital appreciation?

I suspect the so-called "capital appreciation" in Spanish holiday properties is illusory -esp. when figures like 30% p.a. are being bandied about.

I spent a fortnight last year on the Costa Brava and could'nt believe (1) the amount of new apartments being built, all over the place (2) the numbers of apts that were totally empty - this in mid-July - across from our hotel in a popular resort, one apartment out of about 20 was occupied for the week.

If I put houses on the market for €100,000 in 2001 and for €150,000 in 2002, this only represents 50% capital appreciation if (1) there is someone to buy at the higher price; and (2) there will be enough people in future wanting to buy at the higher price to sustain it.

As Spanish developers seem to be able to build where ever they like, it seems to me that Spain will have a chronic overcapacity in holiday apts very soon, if not already. What will happen prices then?
 
the last post

In my case the capital appreciation is real. My neighbour in Spain just sold one identical to mine by putting his own sign up in his window. It sold immediately with 100% appreciation over 3 years and he is still getting inquiries daily. Could be a fluke but its nice to know all the same. Mind you it takes 150% growth to make 100% on your money because of taxes & purchase of furniture.

Basically the same rules apply as here. If you buy quality you should be all right in the long term. Quality in Spain means location and finished environment. By the agents own admission (after you become pals with them) 90+% of the holiday stuff (on the Costa Blanca) is the ‘rubbish’. You can get your box in the sun and it may go up in value if the good stuff goes up. The building patterns are a bit like here where small builders build a collection of small estates with no parks and a cheaply finished off environment with no proper planning. Unlike here some builders there are so big they own thousands of acres and can afford to build a whole town. Imagine a single builder here building a town and making it idyllic. What they have built already becomes the reason why the next tranche will sell at a higher price. On the costa blanca the big builders generally build on golf courses. They are a bit dearer but probably not so much when you consider you are getting the environment as well. The golf course has to be a good one.

I did know someone, not on a golf course, who took a while to sell his house even though new ones around him were selling like mad. This is because agents get a massive 20% of the purchase price of a new home and nothing like that for a resale so they don’t push resales.

35+ weeks rents have been achievable at my location (to my surprise) but the net payments to owners are low with the letting company taking half the rent for their trouble. The large no of weeks is because the letting company are switching putting their clients in apts. built 12 years ago to the newer ones like mine because the décor in mine is modern – its mable & white everything versus the old brown tiles and doors. The letting company will not take on anybody not close to a golf course. Rents are not that high on the costa blanca.

The building boom cannot last forever but they said that about here didn’t they. As long as the builders keep rising prices the resale ones will rise one step behind them. They are not that cheap nowadays.
To ensure rents and future sale buy somewhere people stroll around for a pleasant walk.

Buy with terrace facing pool and front facing something that is not ugly + facing southwards. Its actually very hard to get all of those things in one apartment.
 
Investment in overseas properties

Interesting to read various articles about investing in overseas properties,mainly costas of mainland Spain & the Canaries.Its not for the uninformed and severe lessons are to be had.Rental returns quoted are much inflated and not all facts are disclosed by estate agents.People tend to find out the negatives after the event and your estate agent is gone on to the next purchaser.I personally purchased in the Canaries and did all the running and negotiations myself.I did not use inspection trips or any other incentives.I studied the market hard and walked the streets gathering information over a period of 2 years.One needs to be on their guard constantly against people with vested interests (not least so called professionals) whose letters could be taken off car registration plates.Really I think it all boils down to why you want to buy in a foreign country,capital appreciation?,rental returns?,permanent second home in the sun irrespective of financial considerations?.You need also to be able to deal with stresses and strains of hiccups in management of your apartment(theres management companies and theres management companies) Unless one is in for the long haul,realizing your investment in the short term is not on(professional fees,cgt etc).rentals a bit of a myth(enough to pay community fees,electricity,rates,water and portion of mortgage).Tourist Rental laws in Tenerife at present are very anti competitive and returns to investors have dropped sharply.

Caveat Emptor.
 
Rentals

Hi Anon,

1. Do you regret purchasing in the Canaries

2. What's the difference between 'Tourist' Rental Laws & 'Residential' Rental Laws?
 
Foreign Property

Hi,Onomatopoeia.Where did u get such a name?
No,I don't regret it.I will do well out of it as I timed the market well.I saw in '99 that prices began to move upward rapidly as I was aware of the low market prices in early '97.My focus was capital appreciation.However if you were to ask if its a good idea to enter the market now in the hope of reaping financial benefits in the short term I would say no as growth has slowed to a more sustainable pace and with the costs of reselling you would not really gain much ground.However if its just for a home in the sun,well fair enough but you still need to know the value of property in the area and the locations.Not much different criteria than buying at home.
As regards lettings.Some complexes are designated tourist and others residential.My experience is that tourist complexes tend to be of lesser quality construction with a lot of noise & loud yobs coming in all hours of the morning.Much higher rents are commanded but the investor don't get them.Also higher wear and tear on the apartment with resultant higher maintenance costs.Residential apartments can be let by owners on longer term contracts (minimum 3 months by law).Rents to tenants are much lower than that to tourists but to the owners the amount they get into their hand is not much different whichever road they go.Again you must go back to the reason why one buys in these places.If you intend retiring there say 6 mths of the year now or at a later stage then I would say residential complexes are a much better buy.Usually located in quieter areas but yet central to all amenities including beach.
Hope this is of some help to you.
 
Buying In Canaries

Hi Anon,

The name is from an album by Jonny 5 & Yak. You must have heard of them :lol

Are you saying that if you are not 'in' already then there is not much point in buying for investment purposes at the moment? Whether that is capital appreciation or rental? Is it just the Canaries or Mainland Spain as well?

What about moritoriums on new building work ? Would this not inspire you to buy or does moritorium not mean ,just that ,in the Canaries?

Thank you for your response already. You obviously have learnt alot from your travels and the use of a great deal of shoe/sandal leather. I'm sure that your wisdom would be of great benefit to alot of potential buyers in foreign parts. Now, if you could only bottle it and sell it!
 
Foreign property

Hi Again,Onom,
Like any investment decision I suppose ones looks to try and read the market to assess its level and I just think that above average gains might be hard to achieve if one entered the market in Spain & its Isles right now.One contributor mentioned that estate agents on new developments in mainland Spain can achieve commission as high as 20%.I would be worried about this aspect as in my view this is nothing short of an inflationery increase in price of property there.Turnaround time to make a few bob would be much longer than the canaries where to my knowledge such levels of commission are not to be had.Also when it comes to the Canaries I think infrastructure & facilities are far ahead that of east coast of Spain coupled with the fact that weather is almost guaranteed except for the odd quirk like flooding of Santa cruz in the North a few weeks ago which happens about every 70 years.
Moratorium on building brought in by the canarian government was one of the reasons in the past 18 months that canary property prices soared.Anyone who invested in the right locations on new developments in Tenerife in early 2000 have achieved growth of about 50% to 60% to date.Again I stress the right locations as is one of the main criteria in assessing any property purchase whatever part of the world you are in.
From your responses you appear to be someone who has done a bit of research yourself but are unsure whether you should invest or have already done so and is worried about your investment.If that is the case and you invested some time back in quality developments I would say don't worry.You have made money.If you are only thinking about it just be sure to buy in the right locations and be prepared to hold on to it for a couple of years.
 
Foreign Property

Thanks Anon for your insight. You have laid my demons to rest :lol
 
Excellent article on investing in overseas property

So what I am hearing is that if you invest in Cyprus/Spain, it should be by a golf course and nearby the sea and town. If so, the investment should be sound and appreciate nicely???
 
Investing in property in France

In the process of purchasing a property in Paris. It is part of an investment initiative that is in place on most European mainland countries. The scheme includes:

- 20% VAT back from the gov.
- 80% mortgage on VAT inclusive price
- therefore 100% mortgage (really about 97%)
- sign up with local hotel
- garaunteed rental return of 6.5% per year
- rental income indexed linked
- all management with local hotel
- need to sign letting agreement over 9 year period
- includes 1-2 weeks personal use a year

Has anybody any experience in this ? Capital appreciation is not very high in Paris. I view it as a hassle free pension scheme. Am I a fool ?
 
Re: Investing in property in France

Hi French Investor

<!--EZCODE QUOTE START--><blockquote>Quote:<hr> guaranteed rental return of 6.5% per year<hr></blockquote><!--EZCODE QUOTE END-->

I'd look very, very carefully at this bit of the deal. Who is providing this guarantee, and how are they doing it? In a worst-case scenario where the rental market flops in Paris, is there some massive pile of cash somewhere that is going to continue to pay out cash to you and all the other Irish investors? I know nothing about this particular scheme, but I can't see how any sensible business could provide this kind of guarantee. At a minimum, I'd suggest you get legal advice from an independent source on the strength/value of this guarantee.

Cheers - RainyDay
 
France or Cyprus

The index linked guaranteed 6.5% return on the french property plus 2 weeks personal usage looks a super deal.
How solid is the guarantee would be my concern.

Cyprus also looks a good prospect as they are joining the EU in 2004 and all the current restrictions will be going e.g. one property per person, foreigners can only let their property long term.Those from EU countries wishing to work in Cyprus will no longer be restricted and this influx will create a further property demand. Cyprus within the EU will be attractive for Middle East and Russian investors or holiday homes. The price of development land in Cyrus is now starting to escalate and this will start to come through in future development. Property is expected to rise by 40% just on the EU factor. Also VAT on property will be harmonised with the EU adding further to the price increase. With 300 days of sunshine, golf, beaches, nature trails, mountains and skying on Mount Olympus in winter it has a lot going for it along with a long rental season and good prospects of capital appreciation. There are all year round direct flights from Dublin from 2002. I am currently considering an option on a property and I would be grateful for any comments on the pro's and con's of this market.
 
Re: France or Cyprus

Forget the property Swingbridge - You should go for a job with the Cypriot Tourist Board :rollin
 
Buying in France

I'm looking for feedback on buying in France, particularly an insight into their leaseback system. I'm selling a property here in Ireland, as I feel prices and roi are levelling off and the supply/demand factor is becoming very neutral. On my last visit to France, I felt the value for money (sq.ft per euro) to be better and the rental levels to be attractive. Has anyone direct experience of dealing with French letting agencies ?
 
Foreign Investment

How did this transaction work, did you proceed, is it all that was promised. Regards
 
You must log in or register to reply here.
Back
Top