Four things to consider when investing abroad

Owning an overseas property is a dream for many people, but the safest way to ensure this is smooth sailing is to properly research various factors to do with housing in the country in which you’re looking to purchase.

Thorough knowledge of the location, taxes, laws and currency, and having the help of industry experts, is essential for success.

Here, we break down the four things that need to be considered before deciding which country and property to invest in abroad.

Rules surrounding taxes

Taxes vary from country to country therefore you must be knowledgeable about the different rules and regulations that are in place when it comes to taxes.

Doing research at an early stage can prevent any confusion or issues happening in the long term. It can also help to save money in the future, too. The general rule of thumb is that foreign tax authorities will charge tax on your letting profits. 

Any overseas property you own needs to be declared to HMRC, profits that are made must be calculated and expenses must be deducted as well. 

Capital allowances for investments against rental income can be claimed in some instances. Local taxes such as purchase taxes may also be required. There may also be a foreign tax on the letting income. This involves the overseas tax paid being deducted from the UK tax.

Tax can be a tricky subject, so it’s recommended that you seek advice from a local tax expert when buying abroad. The last thing you want is to be in hot water with the tax man so do not hesitate to contact a financial adviser or experienced firm to get all your ducks in a row.

Exchange rates and international currencies

For UK residents, rent payments from an overseas property investment are typically paid in sterling. However, those buying overseas must understand that changes in currencies, due to them fluctuating, could alter the amounts received.

By educating yourself about foreign currencies – in particular the Euro – as well as sterling, and staying up to date with any fluctuations in the exchange rate, you can avoid any nasty surprises.

The strength of the pound is constantly changing – and has been affected in recent years by factors such as Brexit, Covid and political instability. The strength of the pound and the euro affects the exchange rate, therefore signing up for notifications about these changes can help you better budget for your investment home.

International transfer fees can be avoided by having a bank account in the UK. In addition to this, there are a vast number of money transfer services available to help understand changing currencies. 

Get connected with experts

There are plenty of industry experts here to help make everyone’s international investment journey a success.

Investing in a home abroad can be more difficult compared to investing in a local area because often the investor does not spend as much time in that international destination.

Here’s where a local property management agent can come in. By spending enough time researching the chosen agent, you can prevent mishaps from emerging. 

Ensure that they are trustworthy and have a range of experience. By reading other people’s experiences working with the local management property agent, you can gain a firm understanding of their credentials.

Know the location and property

As mentioned earlier, with overseas properties it is unlikely you get to spend as much time getting to know the overseas destination and the property. 

However, virtual viewings are excellent for those looking to get an idea of the home they are looking to purchase. If the right amount of research has been done on the area, this can sometimes be enough to decide if you should invest – or at least go there to take a closer look.

Familiarity with the area is by far one of the most important aspects when investing in a home overseas. Knowledge of this will determine whether it is a popular spot with other holidaymakers and could also determine the type of tenants who will be attracted to the home.

When getting to know the location, you must ask yourself whether it has nearby transportation links, what the local amenities are, and what the crime rate is. These are only some of the many considerations you should factor in.

Lack of research in any of these areas could ruin the success of investing abroad. If you want to earn a good income from your overseas investment property, taking the above factors into consideration should help you on your way.

But don’t forget to lean on the experts as well before committing to any major investments.