Buying Property Abroad

Many people aspire to own property in a holiday destination, nice idea but consider carefully before getting involved. Often I am told that the overriding consideration has been that the purchase will be an investment, sometimes this motivation needs to be challenged. It’s more than just housing.

Firstly, consider how your ‘Investment’ portfolio is shaping up. By the time a property in the UK and another abroad are added together, chances are that most of your wealth will be invested in Bricks and Mortar – an adventurous investment portfolio would have closer to 15% in property even though there are some excellent property funds available. Diversification is a very important aspect of investment planning. This is because if property falls in price and you are over exposed – your portfolio takes a ‘hammering’ – you don’t want all your eggs in the same basket.

Also, property suffers from Illiquidity in certain circumstances – by this I mean that you cannot sell part of a property, say the bathroom, it has to be all or nothing. Then consider the costs associated with selling a property including selling agents and legal work. Finally you might be reluctant or unable to sell if property prices fall – then what do you do?

There is another issue I would bring your attention to – in many countries the rules regulating real estate ownership differ from UK significantly including the rules of succession. These rules may be at variance to your own wishes, indeed you might need to have more than a single Will in order to manage your estate.

Trusts, Inheritance Tax and Estate Planning are some of the ways I can help in my role as an Independent Financial Adviser.

Returning to investment – it’s a bit like owning a book or borrowing it from the library – if you want some exposure to the property market – you don’t need to buy a property, you can ‘dip your foot in the water’ or invest a significant amount with a portfolio of property funds that will provide a much more balanced range of underlying types of property plus a much easier route out. Plus the opportunity to use your ISA allowances for maximum tax efficiency.