Where to buy, home or abroad?

Most people who are considering investing in a second property for rental do so by looking at buying abroad, but there are many locations here at home which have a thriving holiday rental market.

The housing market in the UK provides opportunities for foreigners buying a house overseas. But investigate the property investment market at home also, you may find the process of buying at home less complicated, and you can reduce the property running costs if you are buying locally to your home.

Most people from overseas are attracted to London - a very cosmopolitan mix of people live here, but it is extremely expensive. Look at other areas, less expensive but still offering the overseas tourist a wealth of historical interest.

As you probably realise, the buying process in England and Wales involves a lot of trust. Offers are not legally binding until you exchange contracts - which can be as late as the day you move in!

Things are more straightforward in Scotland when an offer is legally binding. But then you need to be very sure that you want the house of course.

The principles of buying at home or abroad are broadly the same, so do your research carefully and methodically.

 What do you want it for?

The most important decision when investing in a second property is deciding exactly what you want the property to do for you:

• For short term capital gain
  If you want to get a one-off profit over a fixed period, consider an up-and-coming area. Properties in eastern European are usually cheaper, but rising fast. This can maximise your capital appreciation, but are higher risk investments.
• To provide a long term regular income
  Choose a popular tourist area, where the holiday season is longer. Climate is important to visitors for off season breaks, so a winter sun location can maximise weeks you can get a letting income. However, you may be able to rent your property for a long term off-season let, which can help with property security, but expect a lot less income.
• Mainly for your own use as a holiday home
  You may need to sacrifice the higher letting fees from the peak seasons if you intend to use it for your own long family breaks in the summer. This can substantially reduce the income you can realise from your investment.

 Beware of salesmen

Dedicated overseas property exhibitions or overseas trips or "inspection flights" to view properties can attract many potential buyers. But is important to remember what you originally had in mind. It is easy to be swayed by the hard sell of professional salesmen or estate agents. Care should be taken when buying "off-plan". Buying off-plan is the process of buying a property before it is built, direct from the property developers plans. You cannot see exactly what you are buying, it can be a many months before the property and adjacent development is completed. Beware of potential problems arising from local regulations which can mean the building can't be constructed according to the original specification or schedule.

 Hidden costs

Always allow at least 10% extra for the hidden expenses. Buying a property abroad (taxes, conveyancing, lawyers fees, agents fees, VAT, etc) is much costlier than in the UK. The total can very easily amount up to 10% to the cost of purchase price of the property. Check inheritance laws in the country where you are buying. You may well need to have a separate will made in that country, as well as your British will. In France for example your children automatically inherit your house; your estate does not pass to your spouse. Get good independent advice. Relying solely on the lawyer recommended by the property agent or developer can be risky.

 Up-and-coming areas

Buying in up-and-coming areas will increase your capital appreciation. The fashionable areas of Spain or France mean that property prices are already expensive and may not increase much further, or increase at a much slower pace than in the past. Buying in a less-fashionable area of Spain, France, or in the up-and-coming property markets of Bulgaria, Turkey and Croatia where prices are still low will increase the chance of a rapid price increase. It is important to note that the less-fashionable and up-and-coming areas still need to have all the virtues of the more established destinations. What you are really looking for is an undiscovered property hotspot. Often such places are neighbouring the more fashionable and expensive areas.

 Popular locations

Buy a property in a place that is popular with locals as well as tourists. You should always think of the exit route from your investment. The day will come when you want to sell your property and you will want to have the largest possible potential market. Ideally your investment property should be an attractive property for investors of different nationalities (not just British) as well as a possible home for locals. Adequate shops, restaurants, and facilities. Most people who want to use a property as a holiday home will want to be near shops, restaurants, and other facilities. This is particularly important if you want a rental income from your investment.

 Getting there

Is there an airport nearby? Is there adequate public transport? People who rent property will want somewhere that is easy to get to and will often gravitate to those places with a nearby airport served by low-cost airlines such as Easy Jet or Ryan Air. Consider the property off-season. The property and area might look lovely in summer when all the restaurants and bars are open. But what about in the off-season? Do all the facilities close? Does the area become a "ghost town"?

 Scenic spots

A good view is a major bonus from both the rental and the resale perspective. A sea view is top of most peoples list but rural or mountain views can be just as stunning. Nothing beats sitting on a balcony or roof terrace watching the setting sun. Beware though that views can change and your beautiful view could be replaced by a view of a new concrete apartment block. Check local planning regulations carefully!

 Language

Learn the language of the country you are buying in. You don't have to become fluent but you should learn as much as you can. Consider language trips abroad Above all, buy a property you like, in a place that you like. The chances are that if you love it and would enjoy staying there then others will too!