Buying investment and rental property overseas

Buying investment property abroad

Buying abroad can of course be fraught with possible danger. Obviously you are faced with the difficulty of research and making checks.
However, the main factor to bear in mind is that other countries have totally different property law from the UK.

Eastern Europe

Many emerging Eastern European countries have very crude and barely formed property law, mainly because up until the early 90s most property there was owned by the state.
If buying in these countries, it is safest to purchase within an established major development, because the developers will have (or certainly should have) thoroughly researched the deal to ensure that they have full and unencumbered title to the land and all permissions have been obtained. This avoids the awful problem of distant relatives of the vendor turning up on your doorstep claiming they own part of the villa you are currently restoring!

Off to Sunny Spain?

Even parts of Europe with a better established property law can present problems.
In Spain for example there can sometimes be the problem of ‘over supply’. Any over-development after you have purchased can rapidly reduce the value of your property. In fact there are certainly very good bargains to be had now as the Spanish property market is in a very poor state. I would certainly NOT buy new unless you are getting a very big discount. It’s important to check that you are not purchasing in an area where there is likely to be major development in the future. There have been many well documented cases of local authorities in Spain seizing back parts of land for ‘urbanization’ projects that overseas investors have purchased years earlier in good faith.

If you do want to buy abroad, always ensure you use your own, preferably local, solicitor and definitely not one offered to you by the vendor or estate agent, and always make sure they also speak good English.

Germany

Germany is an interesting example of where landlord and tenant law isn’t as landlord-friendly as in the UK. The attitude to property ownership in Germany is entirely different to that in the UK. Whereas in the UK it is the norm for people to want to own their own house and flats, in Germany it is the norm to rent. For many years landlords have been corporate entitities like insurance companies and banks. Consequently the law has been framed to give tenants a lot more security of tenure than in the UK.
Also rents are relatively low, particularly in Berlin, as indeed are capital values in that city, beautiful and exciting though it is.
I personally think that if you are considering buying property to let abroad then it is best to stick to holiday and other short term lets. You do not want to be stuck with a problem tenant hundreds of miles away in other country, who refuses to leave your property and stops paying the rent.