Investment Property Abroad

N1AK

I've been searching around for some reasonably in depth guidance on buying property abroad as an investment and have struggled to come across anything with nearly enough 'meat' to feel informed.

Are there any good resources on this topic that any of you are aware of or could recommend?

We're considering property because our own mortgage is nearly paid off. We've been building up savings and investments in a S&S ISA, Cash ISA and savings accounts but I'd like to diversify. Given that we won't be retiring for 30 years or more I want to spread our money to avoid being dependant on a single asset class or market. As Brits we're obviously heavily invested the British market and I thought foreign property might be a way to change that.

Are there other ways you would suggest diversifying instead? If property is a viable option is there any guidance you can give like, for example, whether holiday or domestic rental property makes more sense etc.

atush

Avoid overseas property for retirement provision. Huge costs, and returns low. I ought to know as I own 2 (FR and US). I bought for other reasons, not retirement provision.

The french one cost 5K initial, 20K to renovate. Woth a lot mroe now, but only because I have owned it 23 years.

Diversification could be commercial property in a SIPP, Global or other non UK funds. Reits or property funds.

What you haven't mentioned is pensions, and that is what you should be addressing rather than paying off mtgs early and holiday homes?

N1AK

atush wrote: »

Avoid overseas property for retirement provision. Huge costs, and returns low. I ought to know as I own 2 (FR and US). I bought for other reasons, not retirement provision.

The french one cost 5K initial, 20K to renovate. Woth a lot mroe now, but only because I have owned it 23 years.

Diversification could be commercial property in a SIPP, Global or other non UK funds. Reits or property funds.

What you haven't mentioned is pensions, and that is what you should be addressing rather than paying off mtgs early and holiday homes?

Sorry my first post may have been unclear. I'm not considering retirement provision, at least directly, I just wanted to highlight that I'm considering investments/finances over a 30+ year window because we won't be retiring until then.

My partner and I both pay into our work pension schemes. Our mortgage was a 10 year one and will be paid off by our mid-30s, though I am considering re-mortgaging if I can find a better place for the money it could free up.

N1AK

atush wrote: »

Avoid overseas property for retirement provision. Huge costs, and returns low. I ought to know as I own 2 (FR and US). I bought for other reasons, not retirement provision.

Thanks for sharing your personal experience. Do you think that is a general issue with property or something that it being 'foreign' adds to the subject?

bigadaj

There are many options to invest in through a pension.

With a pension you get tax relief and potentially employer contributions.

You've got shares isas so the process is no different in most pensions, you select the funds, asset classes and balance according to your risk profile.

There are funds, investment trusts and individual shares that you can hold which will give you exposure to property, both uk and elsewhere, and residential, commercial and similar, you can buy reits, or ther are funds that invest into infrastructure.

These would generally be of medium risk profile and volatility, between shares and bonds, but some people might consider them expensive currently as bond prices have risen because if low interest rates and bond or hilt yields. This is a very simplistic assessment, as certain property investments can be very high risk and it is an area which is rife with scams.

atush

N1AK wrote: »

Thanks for sharing your personal experience. Do you think that is a general issue with property or something that it being 'foreign' adds to the subject?

It is more the Foreign aspect, you aren't nearby, you aren't a voter, but are a taxpayer, currency risk, you have no option to run it yourself but would have to pay management.

After proper diversification into pensions, cash, S&S isas and other equity if I wanted to make money (rather than have holidays myself) I would look into a BTL in the UK.

marathonic

In my opinion, investment in foreign property should only be considered where you have an advantage over local investors. Local investors will have the local knowledge required to know whether something represents a good investment. Therefore, if a property has not been snapped up by a local investor, you have to ask yourself why. If it doesn't represent a good investment for them, do you, as a foreign investor, bring something to the table that's likely to enhance the property as an investment choice over the locals?

Take, for example, Irish property. An Irish person earning above €32,800 (£27,000) is going to have the following taxes to pay:

Income Tax: 41%
Universal Social Charge: 7%
PRSI: 4%
Total Tax: 52%

The best buy BTL mortgage rate available on the Irish market is 4.8%. The best buy residential mortgage rate is 3.85%.

As a Northern Ireland resident, I am looking into remortgaging my home to purchase an Irish investment property.

As a non-resident in Ireland, I would have no liability to Irish PRSI. Also, with less than €10,036 net Irish Rental income, I'd have no liability to USC.

My Irish tax liability would be 20% and I'd get a credit for any tax paid against my UK tax due. This is significant to me because my current earnings would put me in the higher rate tax band in Ireland but not in the UK.

These tax advantages over a local must be viewed with caution because tax rules can change, significantly.

After considering these advantages, you can then move onto the interest rates on borrowings - the primary expense in an investment property. Where a local would pay 3.85% at best (if they secure the borrowings against their own home), a UK resident could secure borrowings against their UK home at a rate as low as 1.99% (HSBC lifetime tracker).

Of course, the above information should only be taken as a starting point to some more serious research including, but not limited to, the best locations to buy.

N1AK

bigadaj wrote: »

There are many options to invest in through a pension.

Thanks for the response bigadaj. Both my partner and I both contribute to pensions and are doing so at the level required to maximise the employer contribution.

N1AK

atush wrote: »

It is more the Foreign aspect, you aren't nearby, you aren't a voter, but are a taxpayer, currency risk, you have no option to run it yourself but would have to pay management.

After proper diversification into pensions, cash, S&S isas and other equity if I wanted to make money (rather than have holidays myself) I would look into a BTL in the UK.

Thanks for expanding on your reasons the likely alternative to buying abroad would be a BTL in the UK. The attraction of a foreign property to me is somewhat the same as a couple of the risks you highlight. The distance and currency risks are both very real, however I am concerned that without adding distance and alternative currency to my portfolio it remains heavily dependant on the UK market and the pound.

N1AK

marathonic wrote: »

In my opinion, investment in foreign property should only be considered where you have an advantage over local investors.

Thanks, that's a good rational and you backed it up nicely with the thinking behind it.

Do you not also consider the diversification into another currency and market a benefit/risk?

marathonic wrote: »

As a Northern Ireland resident, I am looking into remortgaging my home to purchase an Irish investment property.

Are there any resources you are referring to for information on this? Or are you relying on your locality and knowledge of the market?

marathonic

N1AK wrote: »

Are there any resources you are referring to for information on this? Or are you relying on your locality and knowledge of the market?

Personally, I'm close to the border and have local knowledge of an area that offers reasonable returns - but not as good as those available in Dublin.

Therefore, I'm still in the early stages of investigating what to do - go for better yields in a market that I've no knowledge of or a lesser yield somewhere where I have local knowledge.

Some areas in Dublin appear to be offering rental values in excess of €1,000 per month on apartments costing somewhere in the region of €120,000.

A 10% yield is not to be sniffed at if you have a good grasp of the potential risks involved.