Many of us dream of owning a holiday home. This may be a beach apartment, city-centre flat or a house in the countryside. But what happens when you want to buy overseas property as an investment. Sure, the concept is still very much the same, but there are different things to consider before making the jump. Somewhere that is perfect as a holiday home, may not be the right investment opportunity.
It is important to consider how the location of the property will work for you in the long-term. Firstly, is there a rental market? It is worth looking at rental properties in the area to see the price, how long they have been advertised and whether they are short or long-term rentals.
If the tourism season doesn’t stretch for the majority of the year, it may be better to look at longer-term rentals. This won’t give you as much flexibility but is likely to provide consistent income for a greater amount of the year. The important thing is to do your research, so understand the best way for your property to generate additional income.
Getting your foreign currency
Buying a property abroad is likely to involve international transactions and buying foreign currency to pay for your new home. For people who have not done this previously, they may instinctively go to their bank to do this. However, because the banks are considered the trustworthy option they are able to overcharge for their services, to those who don’t know what other solutions exist.
On average the banks charge 4% on international transactions such as house purchases or business transactions. This means that on a £100,000 transfer the bank will charge you £4000. Currency UK, however, charges less than 1% for international transactions meaning that using us for the same transaction would save you £3000, money that is better off in your pocket than the banks.
Exchange rate fluctuations
The main thing to consider about exchange rates is that they are constantly moving and while the majority of the time these movements are very small, a larger spike or drop off is never out of the question.
Currency rates can be influenced by a variety of factors such as political news, economic data, and natural disasters, so while it is sometimes clear which way the rate will move, often the foreign exchange market can be unpredictable.
When buying $600 to go on holiday, movements against you in the market are frustrating but won’t affect you massively. However, when you are buying €400,000 for a property a sudden movement in the market not in your favour can be a disaster.
Foreign exchange specialists such as Currency UK can lock in an exchange rate for you, using a market order. As a result, even if the market moves against you, you can keep the rate you were quoted when you ordered your currency.
Securing your property
Whether you are going to choose to rent your new property out as a holiday home, or as a place to live you will need someone to manage it. You may be in a fortunate position where you have family members or friends in the area to take on this responsibility for you. But for those who don’t you will need to find an agency to manage the property for you and who can be there if things go wrong.
One thing to consider here is how you will pay this agency and how they will pay you the earnings from the rent. If for example, you transfer pounds into their euro account and vice versa when they pay you, the bank will charge you for every transaction and give you a very uncompetitive exchange rate. Alternatively, you can use a foreign exchange specialist who acts at the middle-man and sends and receives the payments. As a result, you can eliminate the bank charges and get a much more competitive exchange rate.
By working with a foreign exchange specialist such as Currency//UK you can avoid currency uncertainty and lock in your profits early, leaving you confident in your finances when buying a property abroad.
If you would like to find out more about how we can support your foreign exchange requirements call us today on +44 (0) 20 7738 0777 to speak to one of our FX specialists or click here to open a personal account with us.
Posted in Personal Resources on Feb 7 2020