Writing down your core beliefs - your philosophy of property investment, if you want to be pretentious - makes you focus. I suggest you try it. It is an interesting exercise.
In my case, these principles have simmered nicely for over 30 years. Many of them were, for many years, deeply unpopular. Lots are now recognised and acknowledged as just plain common sense. This is something very rare in the property investment world!
1 You have to invest. No one else is going to look after you in your old age
This is now widely accepted. You cannot rely on your state or company pension, unless you want to live in poverty.
2 Your investments should be diversified
Stocks, bonds, cash, real estate, works of art, gold, diamonds etc. Only you - guided by your financial advisers - can decide which mix is right for you. It will change with your age, your financial position and your family situation. Your investment strategy therefore needs to be reviewed on a regular basis. Simple is usually good.
Many of our clients invest heavily in real estate. That is not surprising. They wouldn't come to us if they wanted to invest in gold! They don't trust the stock market. They don't trust the banks. They believe (in my view, rightly) that real estate has been a good, reliable, long term investment and that it has the great benefit of never going bust on you. Of course, in bad times, it will lose some of its value, but (if you have chosen well and taken legal advice when buying) it will not turn into a puff of smoke.
Of course, this does not mean that real estate should be your only investment. Many of our clients are, I believe, too exposed to this sector in general and, in particular, to higher risk locations.
3. Making an investment plan is, in the main, a science and not an art
Of course, there is skill involved in interpreting the information you receive but there are some basic principles behind property investment. See our presentation 'The Basic Principles of Property Investment'.
If you do your analysis properly and follow the rules your investments are far more likely to be successful.
4 A bargain is only a bargain if you can sell it at a profit!
A home in Ruritania for £5,000 sounds like a bargain. Often, it isn't. This may just be the local market price in a market where there is no indication that prices are likely to rise any time soon. More likely, it is MORE than the local market price. You have been identified as a gullible foreigner and are you paying a 'tourist tax'.
Even if £5,000 is the right price and you can see it rising by, say, 20%, will you still make money after taking into account (often high) transaction costs associated with the purchase and the sale?
5 Buy in haste, repent at leisure
Sellers and estate agents always want you to commit NOW. The price is gouing up. There is another buyer. The rules allowing foreigners to buy are going to change.
Take your time. Take advice. Take a reality check.
6 Choosing the best property usually benefits from professional advice
International property is not a simple investment investment. There are too many markets, too many types of property, too many legal and tax issues, too many 'opportunities' and - frankly - too many dodgy characters out there just waiting to separate you from your money.
Unless to have the time and inclination to do a huge amount of research and unless you are confident in your ability to identify the bargains from the avalanche of rubbish to which you will be subjected, you are probably well advised to take some INDEPENDENT advice about your property investment plans. It is not expensive and will, almost always , make or save you far more than its cost. See our Investment Advice page.
7 There is no point in making money and then giving it all to the taxman
When you invest in international property, you will become involved with the tax systems of (at least) two countries. The country where you live and the country where the property is located.
Both are likely to have rules and loopholes that will, quite legally, allow you to reduce or eliminate your tax bills. This can save you a huge amount of money.
Take advice from a specialist who knows the rules in all of the countries concerned.
This planning needs to be done before you agree to buy the property. Once you have done so, most of the best opportunities to save money will already have passed.
This advice might, in some cases, lead to your deciding to invest in another country altogether!
8 Property needs to be looked after
You will, almost always, need some form of property management. Working out what you will need and where you will get it from is a key part of your plan. Certain types of property management are simply not available in certain places, possibly suggesting thast you should look elsewhere.
9 Understand about Risk and Reward
Some property investments are much more dangerous than others. The country might be more dangerous. The legal system might not work well. The market - and, in particular, the resale market - may be in its infancy or very restricted. The house might not yet be built - exposing you to the risk of the developer going bust with, in many places, no system of protection or compensation in place.
Curiously, you do not always make more money by taking more risk. In fact, the reverse is often true.
Make sure you understand and are happy with the amount of risk you are taking.
10 ALWAYS take independent legal advice before you buy a property
See out page on Lawyers & Legal Advice.
