Property Investment Timescales
The investment property market is not a steady buying process you join at any time. The market, property availability, finance availability, locations, exchange rates and tastes all change over time, so the timing of your property purchase can make or loose you money. There are a number of factors which change over time, and if you are to gain maximum benefit from your property investment, you need to consider them carefully.
Currency Exchange Rates
When buying a property abroad, you will either pay for it with cash, or with a deposit and mortgage. Whichever method is chosen, you will have to transfer a large sum of money to a foreign country. One of the most significant factors in determining how much you spend on an investment property is the currency exchange rate prevalent at the time you move your currency. If you are planning an investment in the future, you can afford to wait and transfer your money when the exchange rate is favourable. If you need to transfer money in a shorter timescale, you can still work on getting better exchange rates. One method is to use a company specialising in currency transfer, such as Moneycorp, rather than a bank. You will get optimum exchange rates, and services are available such as automated transfer triggered by reaching a particular exchange rate.
When selling your investment property you can use the process in reverse, by not 'repatriating' your profit until your home currency is at its weakest.
Completion or Closing Time
Some property purchases can take a long time to complete, and others happen quickly. Use this to your advantage where possible. You may find that if you buy at the start of a development project, there is a time lag until the building work catches up with the bookings. What happens is that you freeze the property price when you book it and may not have to provide money for completion until some months or even years later. The resale value of your property is meanwhile increasing. This situation often arises when people buy 'off plan' before any building has started. There is always a risk that the development will not go ahead, but you can judge the developers record for project completion from past experience. Where you are buying late in the development cycle, completion or closing times will be much shorter.
Flipping
Flipping occurs where an investor buys an investment property without the intention of living in or managing it for a period of time. The property will be bought and sold on quickly when profits peak. If you buy a property at the start of a development project for instance, you may be able to hold it 'on paper', and sell it before it has been built. If the price has risen meanwhile, you make a profit between your buying and selling prices, but have not had to finance the completion.
Phase Of Development
Property markets vary over time for a number of reasons. Some of them are sound financial reasons, but others are to do with politics or current trends and popularity. What does happen is that markets go through a similar pattern of phases.
Phase 1 - the town or region has just been 'discovered', new property is being built, there is a buzz and excitement about the market. Property prices are relatively low, and those in the know are buying here as it is the new flavour of the month. The property writers review and discuss the new discovery.
Phase 2 - the development area matures and sales of properties slow down. Prices are at their peak in the last phases of the development.
Phase 3 - a resale market develops as investors cash in their investment on an on-going basis. Prices rise in line with national rates, but not as fast as during development.
The particular phase you buy and sell in will have a significant influence on your profit margins.
Taxation Taper Relief
When you sell a property you will have to pay tax, possibly at home and abroad, on the profit from the sale. Usually the tax authorities in your home country will only require you to pay tax not collected abroad. Most countries also have a scheme of 'taper relief' whereby the longer you own a property the less tax you pay. The rate of tax reduces each year until a minum is reached. If you do not want to make a fast profit by flipping the property, you can benefit by holding on to it for a number of years to increase tax discount through taper relief.
Re-using Your Investment
If you buy and sell an investment property, you will hopefully make a profit. Rather than putting that profit into your piggy bank, you can do the same process again using the profit to extend your deposit. This process of selling and re-investing the profit is one way of making your money work for you. The more times you repeat the process, the more times you make a profit.