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Best "first step" onto the international property ladder?

Discussion in 'Buying Overseas Property' started by pilliam, May 23, 2008.

  1. pilliam

    pilliam New Member

    Hi.

    I'm a final year university student with a nice lump sum (inheritance, unfortunately) to invest - around £30K - and feel that, in the current market climate / my personal situation, the foriegn market would be a better option than the UK.

    I am considering both short and long term investments, looking towards a nice regular rental return (around 5 - 7% would be optimum, more would be great), in a country with a standard of living similar to the UK (not the bit where you get abuse from our yoof, the bit with indoor toilets and building regulations).

    Although I am not completely deluded, I would ideally want a property with little or no mortgage eg a capital investment, to limit my personal liabilities (negative equity) and also for fear (as a student) of being unable to gain or, if successful, continue a mortgage.

    I would appreciate any suggestions or guidance you guys could offer - my primary interests are price (as above), potential equity - short or long term, and revenue (to act in place of interest from banking it all!). A country with a reputable (and preferably simple!) property market would be great - the pitch has to be completely 300% watertight to convince my mother, who is to most extents the judge and jury in this case, and as such I am more interested in pre-existing properties as opposed to offplan property (lots of scary stories on here). I realise that no property is 100% risk free, let alone 300%, but it would be nice.

    Countries which have taken my interest thus far are Sweden (the north particularly for it's low prices, potential nature tourist revenue and relatively high standard of life), Germany - Berlin in particular (prices, reliable income(?))- and good old France, mainly because it is very close and appears to have a highly devloped Anglo-Francais market. I imagine this will all read as fairly naive and optimistic, but...well...ummm....yeah, pretty much.

    Many thanks,

    Pilliam-au-board-de-la-mer:D
     
  2. Riccal

    Riccal New Member

    Hi

    I think your main issue here is that you are looking to achieve 1st world levels of familiarity and security with an emerging market budget.

    There are several emerging markets which you can participate in with 30k sterling and no leverage (mortgage) but no first world ones. The countries that you mentioned would allow you a large deposit with your money but still requiring leverage. However, you have got the areas right in terms of income which, in those countries whilst not high, should yield enough to give you a spread over bank savings.

    If you want to enter the market unleveraged you are gonna have to persuade your mother that a little risk is necessary or stick your cash into some sort of savings account/bond whatever in the UK.

    If you can take on a little risk then you definitely have options. At the moment Egypt is an ideal situation. Your 30k will buy you a 1 bed apartment on the Red Sea and, even conservatively, should match 7% pa yield - generally doing better. But of course it is an emerging market which is making great strides towards conformity with the ideas of first world investors, who always seem to want the same protections that are in place in their domestic market whilst only paying the prices in the local market. However, there is always an element of risk. Understand it and plan for it. Otherwise, settle for low yields from a bank account and no capital growth.

    Cheers

    Rick
     
  3. rossantony

    rossantony New Member

    i agree with rick...

    ditto rick.

    here on the red sea you would be able to buy outright freehold with 0% leverage.

    from an egyptian/uk developer

    because of your budget you are extremely limited, and because you are wanting to eliminate risk my suggestion is to go for a studio/1 bed from a reputable developer rather than looking for a 2 bed in a more emerging location.


    also your budget being so limited this 30k market is slipping away fast in this emerging market due to the increases in raw material costs, oil, steel etc...

    so the salesmans phrase of "now is the time to buy" actually does apply in your case!

    regards

    Ross
     
  4. pilliam

    pilliam New Member

    so hypothetically investing in egypt, what sort of pitfalls / benefits should i be aware of? I have been told holiday buy to lets can be nice and work well, but only if it runs smoothly (another quite obvious observation there, but still) - how have you guys found it to be as a country for proceedings, legal and fiscal processes etc?
     
  5. Riccal

    Riccal New Member

    Generally speaking not too bad. I am actually going there on Sunday to meet lawyers and developers.

    The country is looking to actively encourage FDI (Foreign Direct Investment) and is revamping its legislation in order to facilitate this. As such its all a bit new so care is required. I have managed to find a good lawyer and know of several more who are detailed and careful and that is really the key. The lawyer will ensure you are buying what you agreed to from who you agreed to buy it from at the price you agreed and that the person you are buying it from has the right to sell it to you and that no debts are outstanding with regards to the land/property which then transfer to you. He will then look after the legal aspects of registering the property and ensure that whatever taxes and fees that need to be paid are paid correctly.

    Then its just a question of whether the product will perform as well as you hope. I personally believe Egypt will appreciate very well, even if you discount predictions on yield and capital growth by 50% you are still talking about 10% per annum growth and 6-7% yield (though I believe the yield will be better than that).

    I would be cautious about buying something on the grounds that you can flip (sell it on) before completion so never have to come up with the balance of the purchase price as I think that the areas where your price range give you access to do not, as yet, have a ready resale market. But give it 5 years and you will have made a significant profit on your investment.

    If you have 30k sterling to hand you may well be able to do a deal with a developer to pay all up front and get a significant discount. Dont forget though, most investors in these marketplaces use leverage, in other words pay a deposit of between 30-50% and mortgage the rest so that any percentage increase in the price is leveraged. In other words, if you have bought an apartment for 60,000 sterling and deposited 30,000 sterling, the rental yield should pay your mortgage every month quite comfortably so that you need not put any additional money in. If you sell it in 3 years for a 60% increase in asking price that actually returns to you 120% of your initial money invested.

    In summary, emerging markets usually mean slightly more hiccups but most emerging market investors factor that into their plans.

    Also, dont forget, as many other posters on this forum will confirm, be clear at the outset what you are looking for in terms of - Yield versus Capital Growth (or both) and timescales for your investment.

    Cheers

    Rick
     
  6. David howe

    David howe New Member

    Keep your money until you have a job and are in a position to finance and buy something that is worth buying. In the interim invest your time in research of particular countries in relation to


    Potential.

    Likely returns.

    Fiscal liabilities.

    Additional costs associated with purchase.

    Be lazy and you will get burnt


    David Howe

    Investment Romania - Property Romania, Invest Romania, Investment Romania





     
  7. rossantony

    rossantony New Member

    good advice...

    although everyone is talking about finance..which you dont need to do as you can buy outright..

    i think what david is touching on is the fact there are other costs apart from purchase price..e.g lawyers, closing costs, bills, maintenance...

    essentially you need to be able to cover all costs working on a 0% yield, otherwise you are opening yourself up to risk...

    however i have sold studios here at 15k to people, however most of those people are buying more for personal use..

    best of luck whatever you decide to do...
     
  8. David howe

    David howe New Member

    On the contary, what I am saying is do not be a sheep and follow the rest of the sheep that have made mistakes.

    Advice given to me a long time ago is it is better to walk away from 10 great deals than get stung in one, especially when it is your first one and you are going all in.


    Invest in research then invest in money, everyone here cn sell you something, but how many can sell that for you at a later date????????????



    Pick 3 countries you are considering and Romania and I will do a compare and contrast for you and play devils advocate with your suggestions???????



     
  9. pilliam

    pilliam New Member

    thanks for your comments so far - i'm glad to hear some people both endorsing and rejecting different ideas as i think to this date I have been stuck for direction.

    to refine this slightly - I want a rentable property (so minimal or no refurb needed) with a reasonable yield that (as recommended above) could cover any necessary outgoings for the property (from taxes to leaks etc). long term equity is important to me, however after a certain point (say a rate comparable to an english bank account, so a few percent accumulation per year), I would be content just to utilise this first property as a rent-cash-cow and a learning curve.

    in terms of rental, a holiday rental location (as opposed to long term) would be more my thing as it makes the property available to me occasionally, however i appreciate that the intrinsic maintnance and management fees would be a lot higher (in a country where I was not a regular resident) - this is something I have taken into consideration, however I feel the yield in a "holiday" property could be higher on a week to week basis and thus justify it (consider a b&b for around £25 a night in Brighton, Newquay, Bournemouth, anywhere, as opposed to monthly rental rates in the same location of approx 12.50 a night bills included). Obviously the guaranteed (at least monthly) income from a tenant would be comforting, but to that extent i think you can no more guarantee short term residents as you can a long term ones (a good property badly marketed is the same as a bad one marketed well?). leading me to Mr. Howes point request;

    three countries I like (both socio-eonomically and regionally) are Sweden, Germany and France.

    Sweden - not to disagree with the posts above directly, but I have found several advertisements for low cost properties (from £12k - £100k, 3 bed - 6 bed plus annexe plus stables etc) in accesible regons with a huge potential market for skiing, hunting, skating, "exploring" and fishing, as well as a high standard of utilities and living in most areas (eg internet, electric, connected sewerage, high standard roads etcetcetc). Although this location wouldn't really appeal to the ibiza or costa del sol demographic, there is a constantly expanding market for more reclusive and self served holidays, and with Swedens amazing seasonal variation (average summer temp is about 3 degrees celsius up on UK, average winter temp is something like 12degrees celsius less than the UK). also, the environment and country make it appealing - bears and wolves and deer and northern lights and streams you can drink from - not necessarily guaranteed yield, but a pro for me at least. I am aware that the seasonal light variations could make it hard to rent in winter / mid summer (either 4 hours or 24 hours of light a day) but, again, there is a large market for tourism in almost everything, and i doubt this would be hugely relevant, if not quirky and appealing(?))

    Germany - If I were to go for Germany, I would want a medium yield long term rental property in proximity to a large, developing city (Berlin would be ideal i guess) but to that extent location would be more important (than choosing which largem secluded valley in Sweden to go for, for instance) and as such I would appreciate advice on espectable / beneficial locations and no go areas etc

    France - basically the UK, but cheaper, with pro landlord legislation (as far as I know -have found some conflicting information on the www so im a bit confused), better weather and the added benefit of not being the UK! due to its relatively close position to me, I would consider most aeas of france plausible, with the higher yield / equity areas being more interesting. also, this property could be versatile in the sense of being long term / short term, functional / holiday, personal or group use etc. so any ideas or locations welcomed!

    sorry to wax lyrical - I love an audience.

    Pill-i-am-a-la-montagne
     
  10. David howe

    David howe New Member

    Watch your fiscal liabilities in Germany. Ok if you are keeping over 10 years, but below can be as much as 42%.

    Additionally forget the holiday market. This was an illusion created by agents. Half the time you will be told it is not rented and it will be with the agent pocketing the money. Way to hard to moitor not to mention expense. We actually do short term rentals in Bucharest (For ourselves not clients) Believe me it is not without hassle.

    Take a 12 month rental somewhere and use the money to go holiday where you want without being tied to a specific property.

    David Howe

    Investment Romania - Property Romania, Invest Romania, Investment Romania











     
  11. The Soup Dragon

    The Soup Dragon Senior Member

    Welcome pilliam

    I’m not a big fan of Egypt, but with your budget it’s certainly a contender. I could be wrong, but I suspect capital appreciation won’t be great in Egypt. However, if you are looking upon a possible investment as a more exciting way of providing an income with possibility of capital appreciation then this could be a good choice for you. Egypt is reasonably accessible too, so this investment could provide you with a lifestyle option too.

    If you mention Egypt to your mother I’m sure she will mention terrorism and perhaps the problems that tourists have had when leaving tourist conurbations (armed escort etc.) Forewarned is forearmed. Bombings do take place from time to time in the tourist areas. Clearly that isn’t a good thing, but its amazing how robust tourism has been in light of this.

    One final note of caution with Egypt. There has been a lot of building going on in recent years and I suspect there is the danger of oversupply. If this proves to be the case then you may find your property depreciates considerably in value.

    Germany. You mentioned Berlin. While it can be done in Berlin, Dresden might be worth thinking about if you want a tourist rental that will rent well and allow you time there too. Most people think of Dresden as the place flattened in World War 2. So much has changed since then and much of the old Dresden has been built as it was before. (Just look at the tourist sites for it – you wouldn’t know it was flattened 60 years ago.) Dresden is very popular with both German and foreign tourists. It is also a two hour drive (foot down) from both Berlin and Prague.

    What David Howe said on short term rentals is certainly relevant. Finding a good team on the ground is key and there’s no guarantee you will succeed on that front even with due diligence. (David’s no mug and he’s been stung on this front.)

    I’ve placed my thoughts on where to place your money on the “EUR 60,000 to invest” thread.
     
  12. The Soup Dragon

    The Soup Dragon Senior Member

    Post above appeared twice, just deleting the 2nd one!
     
  13. rossantony

    rossantony New Member

    im no expert on.......

    sweden..although i have had great times there. the only issue i can raise here is that it was very expensive there, on holiday, and that was 20 years ago!

    france..it is a big favorite with the brits, the weather can be an issue..the majority on british holiday makers that are active in the rental market generally look for guaranteed sun. its mostly popular with the wine and dine set, who buy for personal use..also its eurozone, which is very expensive for a brit buyer right now..

    germany..i do have some tenanted units in berlin, which come with a guaranteed income, although i am not sure your budget will get you on board.

    regards

    rossantony
     
  14. rossantony

    rossantony New Member

    on thread..

    hi soupdragon...

    the last bomb in egypt was in sharm el sheik 3 years ago now, so not happening all the time! since then turkey (marmaris) london, spain, have all been hit...Egypt was hit because it is an ally of the west, and since the response by the egyptian government has been gladly received. I feel safer here than back home in wiltshire, we have an almost 0% crime rate out here, wheras back home hoodies control the streets ( daily mail quote )

    I live here, and do not need an armed escort to travel freely. They only issue armed escorts to tourist coaches travelling through the interior to Luxor and Aswan. These armed escorts are designed to be deterrent in their nature, and are a good thing. dont imagine a jeep full of rozzers armed to the teeth either, its usually a sleepy, smiley copper, with a sidearm.

    the presidents son, gamal mubarek is a vey enlightened individual, i wonder if you have watched the bbc's coverage of the world economic forum held last week in sharm? he had tony blair smiling from ear to ear..(sic)

    we have 7% growth per annum GDP, and falling unemployment, massive FDI, a a government commited to reform.

    there has been considerable growth but egypt can afford it, as it is mostly desert. here in hurghada, the cost of property is rising continually, helped by FDI from foreign buyers, but mainly due to wider economic issues, like the cost of oil, and other raw materials, is pushing up prices, so a lot of buyers are egyptians. We are very popular with Cairo middle class, as well as gulf arabs who come to Hurghada for their summer by the sea holidays. There is always the danger of over supply and there are some areas of egypt, and my region, hurghada, where one should not buy, but there are also these limited custom built resorts, which are proving so far to be an excellent purchase for investors

    Like Romania, Egypt is starting from the first rung of the ladder. Like David, I also have some very precise figures, I would be interested to see how egypt and romania compare!
     
    Last edited by a moderator: May 26, 2008
  15. The Soup Dragon

    The Soup Dragon Senior Member

    Rossantony: I don’t wish to dwell on the bombings as my point was that tourism wasn’t hit badly by it. I have however pasted two links beneath that provide information on bombings in recent times - Dahab in 2006 being the latest.

    Terrorism in Egypt - Wikipedia, the free encyclopedia
    History of terrorism against tourists in Egypt, 1992 to present. (Surprisingly doesn’t mention Dahab 2006.)

    Its certainly encouraging that the bombings are taking place less frequently.

    How have prices for existing property (not off-plan) faired in your part of Egypt over the last 2 or 3 years?

    I’m perhaps being pedantic, but when you say the crime rate is almost 0% I think you actually mean that there is very little recorded crime. I’m always sceptical with crime figures, no matter what area they are for. There are many crimes that the victims are too embarrassed or scared to report. Some authorities are more lax about recording crimes and what counts as crime varies from place to place.
     
  16. rossantony

    rossantony New Member

    in reply

    i always forget dahab as well..it was 2005 in sharm, dahab was hit as it is a popular spot for israeli tourists, especially the youth who have just come out of national service. but as we both seen, nothing since then, primarily down to the action of the government here, taking a long view on politics here in egypt noone forgets that president sadat was killed because he made peace with israel. my point is that egypt has suffered because it has taken the path of peace and reconcilliation, and that the majority of people here are pro western and it feels safe, on a day to day basis. i hope i am not wrong in this assumption.

    in the past 3 years, the price of finished property has risen dramatically. in my block of apartments, 2 bed apartments were sold for £40k, and are now fetching £150k (front line, private beach, huge pool, spa, central)

    i see your point on crime figures, i never thought of that. but honestly i have never seen or heard of any petty crime againts tourists since i have been here. of course we get crimes of passion, and the odd nutter losing it, but here street criminality is not accepted. i dont know what % of egyptian men are rozzers, or forces, or security guards but you get the feeling that every family has a couple of each!

    what egyptians suffer from is business corruption rather than street crime.
     
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