Where To Invest In Property
While you can invest in property at home, you will quickly find that a steady source of bargains is no longer available in North West Europe and in the Northern US states. This is where the majority of investors live, and the easy local pickings have been taken already. There are pockets of investment opportunity which arise due to particular local circumstances, but for most of us, if we want a ready supply of investment properties where there will be reasonable opportunity for capital growth and good resale opportunities and secondary market, the best option is to buy outside North West Europe and the Northern US states.
Market changes
Perhaps it is because the UK is an island nation, or it is because personal property ownership has always been a strong motivating force, that the UK has been the epicentre of overseas property investment. This was fueled by the UK government 'right to buy' policy which enabled thousands of public sector rental tenants to buy their own houses. Even if the tenants couldn't afford the property themselves, the 'right to buy' became an 'opportunity to buy' for their sons and daughters. This created a large pool of second-home owners, and was a great boost to the property investment market.
The first major overseas property market, from the UK perspective, was in France and Spain (Phase 1). This was based on proximity and familiarity. People were familiar with these countries as holiday destinations, and when the option of buying abroad became available, these were the first big markets for overseas investment. These markets matured and the 'front line' moved beyond them to Florida, North Africa, Central Europe and the Middle East (Phase 2). In a steady search for the best investment opportunities, developments are now underway in which are not necessarily peak UK holiday destinations, but which make good investment sense in a global economy. These include Malaysia, Brazil, St Lucia, Canada and new Central European destinations (Phase 3)
The Local Economy
One of the important considerations in deciding where to buy an investment property is in the state of the economy in the country in which the property is located. An economy which shows stable progress and investment is vital. This could be an economy which is at the start of a modernisation phase in a developing country such as Morocco, or it could be a mature economy such as Florida. In either of these situations you will know that in spite of periodic fluctuations, the underlying economy is stable and the political background is stable. We would strongly advise against buying investment property in a country where property prices are low, but where the economy is seriously affected by threat of political upheaval, corruption in public administration or organised crime. If you buy investment property in any of these circumstances, you may be able to buy it cheaply, but you will have no guarantee of future resale value, title of ownership being processed correctly, or freedom from interference by criminal elements. You do not need to get involved in dodgy deals to make money, so choose your investment country sensibly and sleep well at night.
Added Attractions For Property Investors
The concept of 'location, location, location' is not restricted to where you buy your main home. If you buy a holiday or investment property you will want to benefit as much as possible form the location. Whether you intend to let the property or sell it on, proximity to local facilities will make the process of making money from it much easier. These facilities might include
- a sandy beach with public access
- a vibrant town centre with good shopping and dining areas
- sports facilities such as golf and water sports,
- good transport links
- beautiful countryside
- cultural and historical attractions
In the ideal world you want to buy your property when there are few facilities available, and sell it after they have all been developed. In practice this means buying early in a new development where possible.
Buy Property For Personal Interest
If your investment property portfolio stretches to several hundred properties, you will see them all as simple economic units without having any sentimental attachments at all. If you are buying one villa abroad as an investment property, you do need to buy a property which will sustain your interest, and will not become an emotional burden. There are times when, in buying a property, you need to put some effort into solving problems. If you have no emotional attachment to a property you may come to resent it, and regret having started the whole process. If purchase of the property gives you access to a golden beach, and is 'your place in the sun', you will be driven by the goal and the problems take on a lower perspective. Of course, if you own several hundred properties you pay someone else to sort the problems.
Services Available
A property does not exist in isolation, but is dependant on the availability of a variety of services if it is to be successfully marketed, maintained and managed. If you buy a property in a location where these services are unavailable, you may find the resale or letting process more difficult. The following services need to be considered when buying an investment property:
- Water, power supply, garbage collection and sewage disposal. It's easy to take these for granted, but you will come across situations where water is pumped from a well or sewage runs to a soakaway which needs to be pumped out periodically. Ask about costs for these services. Find out what the situation is with your prospective property so that you buy with your eyes open and knowing what the potential problems and costs will be.
- Property management is critical to the success of your property investment if you intend to let it out. A good property management team will be dilligent in ensuring your property is looked after properly, bills are paid on time, and they will be proactive in solving problems arising during letting. They will also hopefully find you tenants.
- Availability of reliable builders for maintenance and development will be important if you have bought an older property with a view to refurbishing or extending it. The management company will be able to suggest options.
- An increasing number of tenants ask for Internet Access to be available. This is an on-going cost which needs to be considered carefully. You won't have the option if the service is unavailable in your area, so check this out before purchase.
- Local transport is critical if tenants are to enjoy their holiday fully and return again or recommend your property to others. Even if you only intend to resell your investment property quickly, availability of local transport will be an important consideration. Where car rental is the normal method of getting around, ensure your property location is within the scope of rental companies.
- Laundry and cleaning. If you intend to let your property, an efficient laundry and cleaning service is important, especially if you expect a fast turnaround between tenants. Your management company will advise on this.
Flight and Transport Availability
An investment property with good connections to the outside world will be easier to let and to sell. The proximity of an airport with a cheap connection to your villa will have a positive effect on its value. The best option financially is to buy ahead of the introduction of flights and watch the value of property in the area increase as transport links improve. Be wary of low cost airline routes where the service is volatile. If your investment is dependant on one airline, it may be at risk.
Resale Value
The trend in resale value of property in your area will be an indicator
of investment potential. Look at other properties available and ask about
changes over recent years. This is no guarantee of future performance
but gives an idea of the relative health of the economy.