First time buying...abroad! Sensible??

dannyboycey

Hi everyone, I was just looking for a bit of feedback and advice on an idea I have. Sorry if the post is a bit lengthy but I want to give a bit of background.

My partner and I have recently paid off all our debts and started building up some savings (after years of debt it feels great:D ). We are currently in rented accomodation and in a position where we are considering buying our first house. The house we currently rent (which is a small 2 bed terrace) costs us £600 a month. To 'buy' something similar where we live, we would be looking at approx £170,000+ To me, this seems pretty crazy, as although we are at present paying off someone elses mortgage, if we bought, we'd be paying a hell of a lot more per month, leaving us with little 'spare' cash at the end of the month- something I've seen happen with many of my friends in recent years (we are both 29 by the way)

We are currently toying with the idea that perhaps we could purchase somewhere abroad and rent it out for most of the year whilst still renting in the UK. We are prepared to downsize here, as 1 bedroom is plenty for us at the moment, thus we could reduce our rent to around £475-500pcm. I have seen some new-build, fully equiped apartments in Lisbon for under £90,000 (1 bed). What I was wondering was is it feasable that someone in our situation could purchase abroad and rent in the UK, and does it make financial sense? (or more sense than buying here at least). I'm not stuck on Lisbon, I would also condider the rest of Portugal and even France.

I don't even know if we would get a mortgage for a house abroad?? Our joint income is £50,000 per year and as I said, we don't have any credit cards or loans to pay off.

Is it just a crazy pipe dream or could we actually make it work!?? Any feedback would be greatly appreciated.

To summarise, my idea is:

Reduce rent to £475 by downsizing
Purchase property abroad
Pay a large percentage of foreign property mortgage by renting it out

Guy_Montag

Interesting idea, one I've considered - can't afford to buy here but could buy elsewhere.

My first thought is research. Think of it as investing £90k in a company, you should know everything about it.

So you should know location, do you speak the language? That would help a lot.

Do you know rental yields, is there a good market, is the rental market to locals or to tourists. Is there a good selling market for apartments, is it to locals or to "investors". What are the letting agents like?

Would you buy in £ or euros? How much would the £ have to fall to f'k you up? Can you hedge against that?

What are the local rules & regs? What are the legal requirements for buying, selling & renting? To take the worst case: could you end up in a Portuguese prison for manslaughter if your boiler develops a fault? How can you avoid that?

And so on ad infititum.

lynzpower

90k I estimate would cost you somewhere in the region of 450 pcm interest only. Im not an expert on mortgages though this is a fag packet calulation.

I expect youd have to pay buildings cover & life assurances on that.

Youd have to pay this if you dont have a tenant, plus all the usual costs of flying out there to sort stuff out, fixtures & fittings and finding someone to rent it off you, and keeping them.

dannyboycey

Guy_Montag wrote:

So you should know location, do you speak the language? That would help a lot.

Good point. I don't speak a word of Portuguese (but would obviously try to learn as much as poss) - though I would need to budget for the cost of a translator for legal stuff. On the other hand, I do speak pretty good French ('almost' fluent) - and whilst this is 2nd on my list of countries it may well be the more sensible option. Not just because of the language and laws, but also, as lynzpower says the costs of flying out to maintain the property also need considering - this would also make France more attractive for testing the water with this kind of venture?

Guy_Montag wrote:

Do you know rental yields, is there a good market, is the rental market to locals or to tourists. Is there a good selling market for apartments, is it to locals or to "investors". What are the letting agents like?

This is something I really need to sit down and think about. Tourists are obviosly quick turnover (1 or 2 weeks average stay), whereas locals would be a longer term thing (in theory). I'm swaying towards letting to tourists though. The main reason for this is that I can easily book a week / weekend slot here and there for my own leisure time. I was thinking of perhaps using a holiday let company who would take on the responsibility for maintaining the property and bookings. I know that this will really eat into my profits but it seems like a safe way to start out. Anyone else have any experience of this?

Guy_Montag wrote:

To take the worst case: could you end up in a Portuguese prison for manslaughter if your boiler develops a fault? How can you avoid that?

This is the kind of thing that scares the s!*t out of me! I know it's unlikely, but it does happen. Again, this is why I was thinking of letting an agency take care of things for me.


As for a budget, we could afford a max rent+mortgage expenditure of around £1200 (including insurance). This were to be if we didn't rent out the property at all - so that would be a bonus - i.e. the more tourists we can let to, the less we pay per month.

I'm not looking at an interest only mortgage at this stage as I'd need to be pretty much fully booked for most of the year to make a decent return. Instead, I'm loooking at it as an investment in the property itself. With the rental income going towards (or better still exceeding) the mortgage.