Things you need to know before investing in overseas property

For first timers, the property investment world – especially concerning foreign properties would seem tricky, overwhelming and daunting. Instead of plunging straight into the deep end of the international property abyss that will potentially leave you at a loss, here are some tips.

 

Know your purpose: The type of property you would like to invest in, whether town houses or apartments, is dependent on your targeted tenants (family or students), and many other factors that underlie your purpose for investments.

VENTURING into property investment armed with the right knowledge beforehand would certainly be essential, and when done properly, may prove rewarding. So, here are important tips you need to know before venturing into international property investing.

1 Know your purpose

The key to kick starting your international investment(s) is to pinpoint answers for your 5Ws and 1H:

  • Why do you want to invest?
  • Where do you intend to invest?
  • When do you intend to invest?
  • Who are your target tenants?
  • What do you intend to do: Purchase as owner or as pure investment?
  • How do you plan on financing your investment?

Strike out unnecessary clutter of thought and you will find yourself on a clear path to the ideal property investment.

2 Research, research, research

“Research is formalised curiosity. It is poking and prying with a purpose.” – Zora Neale Hurston.

The internet is a goldmine of resources, so make use of it. Attend local and international property seminars to help give you a good overview of the different property investing landscapes.

Pick up investment books that will provide you with useful strategies and insights into property investments.

Step up your research into the latest trends: Hotspots, new properties, areas that have potential for growth and many more. Research will grant you a tremendous head start, serving as a beacon of light to guide you through your decision making process.

3 Target and locate

“Even in a bad market, location, location, location is a way to still buy and sell property.” – Vanilla Ice.

Narrow down your target market for investment purposes: Would it be for students, working adults or families?

Individual target markets would usually have a trending location choice for accommodation.

The proximity and accessibility of the property to public transport and amenities, schools, work, etc., is always factored into their decision.

For example, families always consider locations that are close to schools and public amenities, whereas working adults would prefer accommodation near or within the CBDs (Central Business Districts) that provide easy access to work.

Top 10 things you need to know before investing in overseas property

4 Weigh out the pros and cons

Consider the upside and downside of each market. Monitor the movement of the different exchange rates, primarily of the emerging and developed markets. A stable currency is always good! Also, look into the trends of the individual market’s housing price indicators. The housing price indicator reflects whether the market is experiencing an uptrend, downtrend, or a plateau – giving you a good indication of which market to narrow in on.

5 Rental yield versus capital growth

Consider the rental yield of your property of interest. The rental yield for each country is variable – different locations and property types will generate different rental yields.

Typically, condominiums in the CBDs tend to generate higher yields as they appeal more to the young, urban working professionals who prefer to have ease of accessibility to work and within nearby amenities. Landed properties, on the other hand, will face higher capital appreciation but lower rental yield, as naturally, the property price is higher.

6 Demand versus supply

Investigate and monitor the vacancy rate versus the rental occupancy rate of each country closely. When sourcing for properties, always look for areas where there is high demand. The higher the occupancy rate, the higher the demand for rooms, leading to a higher rental yield – and possible capital appreciation.

In Australia, for example, due to the relatively slow and controlled property development rate and the high arrival of immigrants, the demand for residential accommodation is always high, leading to low vacancy rate.

7 Understand the different buying processes

When in Rome, do as the Romans do. Understand the different buying processes involved – from protocols, to rules and regulations in buying a property. Understanding the process from the beginning will allow for a smooth and quick transaction.

Top 10 things you need to know before investing in overseas property8 Law abiding investor

Different countries have imposed certain restrictions for foreign property investors. Do learn and familiarise yourself with the property laws of the country of interest to ease and simplify the decision-making process.

9 Financing eligibility and requirements

A good dose of scepticism and realism is ideal when considering the costs involved in your investment. Ensure you have sufficient capital, and are in fact eligible for financing when considering investing in your country of interest. Do note that the financing eligibility and requirements for foreigners to invest in properties will differ from country to country.

In Malaysia, for instance, the quantum loan offered by banks will depend on the age limit and the income level of the borrower. In Australia however, the quantum loan offered will solely depend on the income level of the borrower alone.

10 Keep your research close, but keep the property experts closer

Last, and most important of all, when it is time to get down to the real business, speak to the local property market experts. Just visiting Google and Yahoo will certainly not suffice. Only the local experts in the country of interest can provide you the inside scoop of the latest local trends, property news, capital appreciation and many more.

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