Most dreams about overseas property start with a holiday, and so too to most purchases! Few people buy an overseas property without first evaluating the area and seeing the property for themselves, usually because it’s an area they’d like to live in. Often, however, personal taste can get in the way of a good business decision. But, is it right to buy a property because you’d like to use it yourself and how much value should you attach to that?
Most commonly, it’s holiday resorts that attract owner-tenants. Often good deals are available based on limited letting basis and, if you will use the benefits, they can really make good sense. A useful exercise is to calculate how much you might spend on an ordinary holiday in a resort and weight that against the property decision. On their own, growth and income calculations might not make sense, but weigh them against the use you’d get from a property and they might.
The Ease of Management
You have two options when letting overseas property: you manage it, or you don’t. Management will probably cost you around 8% of your rental income, plus a slice that should go to your overseas property insurance and, for that reason, a lot of people choose a property they’d use because they can combine a holiday with a bit of property management. This can save money and time and be a solid business motive.
Make Sure the Demand Exists
However, always make sure that your favourite holiday spot will attract other tenants. A buy-to-let property fundamentally runs off good demand, and just because that lakeside goat farm in Algeria is your dream retirement home, it doesn’t mean that it’s anyone’s ideal holiday home. If you are buying somewhere you like, make sure it’s because you genuinely think others will like it too.
The best way to determine the worth of an overseas investment which you’ll be spending some time in yourself is to do two calculations. Do it as if it were a normal investment and then subtract the total from your break-even point. This is the ‘value’ that you’d place on your use of the property. Is it worth it now…?!