How many different ways can you invest in a property overseas? In the last month, I have met with 4 different companies all offering different routes to owning property overseas. Each has their own place and I thought that it may be useful to summarise the schemes in a blog post.
The first option was something new, that I had not seen before. Most lenders now require expats to put more than 20% of the property price down as a deposit on a purchase, when the purchase costs are added on top, many would be investors are unable to afford to buy UK property. This scheme helps investors access the UK property market in an innovative way.
The developer has a project in UK consisting of 1 & 2 bedroom apartments.This company seeks to provide investors with investment opportunities below the current UK Stamp Duty threshold, which is GBP125,000, although they do offer more expensive properties too.
To secure a property the investor must pay a reservation fee and 10% of the purchase price. At this point they have Title to the property. The property is anticipated to take about 24 months to build. During this time the investor needs to pay an additional 20% of the purchase price, which can be done on a monthly basis to a solicitor who releases stage payments to the developer. On completion, the developer has a number of lenders who are willing to provide finance of up to 70% of the value of the property. The developer has also engaged the services of a large letting company who guarantee the rental income which is calculated to be sufficient to cover the mortgage. The rental guarantee is reviewed every 5 years and the letting agent’s charge for managing the property are heavily discounted.
The second scheme was offered by an international property company who seeks out investment opportunities in America, Australia, Asia and Europe. They have a long list of properties which are on offer. In this instance the properties are also usually new builds or are being purchased off plan. The price of properties offered by this company where in excess of GBP250,000 and often much higher. Investment yields were lower but this is probably due to the fact that they were focusing on prime residential areas rather than higher yielding opportunities, as in option 1.
The third option was an independent property adviser. This service was far more bespoke and involved meeting with the prospective investor to determine what his or her requirements were. Would the property be solely for investment? Would the investor live in the property? Where would the property be? What budget would the investor have? Should it be a new build, off plan or an historic building? etc. This person is very experienced in the international property market and currently has access to 70 developments in London alone. He would arrange visits to the property for prospective purchasers if required and be able to discuss the merits of each development from an independent perspective. Properties typically start at GBP500,000 for this service.
The final option was a highly respected developer who was involved in the building of The Shard, Europe’s tallest building and London’s new iconic skyscraper. Following the completion of The Shard they are looking for professional investors to help them fund many of the new projects they are being offered. Investors would be coming in at the ‘pre-planning’ stage which means that there is significant risk associated with this investment option but also potential for professional investors to generate significant gains. This property investment is via a fund and could be accessed from GBP10,000.
On a recent trip back to the UK an article in one of the newspapers highlighted the problems of buying a property in a location you are not familiar with. They cited an advert that had been running in Asia for a studio apartment in London which was priced at over GBP500,000. The advert was highly inaccurate in its description of the amenities and the location of the property. However the advert received many responses from would be purchasers. On questioning local estate agents, the newspaper discovered that the property was probably only worth half the asking price. Research is key in property purchase and I would recommend visiting the property at different times of the day before parting with any money if you do not know the location.
I hope the above was useful, please let me know if you have any questions or comments.