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articles > The Perils of Investing Overseas
Article > Beware the Perils of Investing Overseas


Article kindly supplied by

Brian Croucher



What the glossy sales brochure doesn’t tell you and what the developer hopes you won’t find out… A true account of the perils and pitfalls that one of our readers encountered when buying investment properties overseas and how you can avoid falling into the same traps…

You name it and it’s probably happened to me in the past 6 years. I’ve been there, seen it and got several blood-stained T-shirts in the process. At times it’s been a nightmare. And I’m sure I’m not the only investor who’s lost a lot of money and sleep over the past few years.

With the UK property market still being strangled by the banks and with the uncertainty at home after the Government’s proposed spending cuts, many investors are looking overseas for higher returns. With it comes higher risk. Get it right and you can set yourself up for life by investing overseas. Get it wrong and you could lose everything. Spain, Florida, Portugal, Cyprus, Bulgaria, Rumania, Cape Verde and now even places like Brazil have all been tipped as THE next property hotspot and THE place to invest. So just how do you penetrate through the lure of glossy brochures to find your ideal investment property in the perfect overseas location?

Here are my top 10 tips for investing overseas, based on my own true-life experiences.

1) Never trust anything the developer or their agent tells you is true

Usually fatal, this is the most common mistake. It’s easily done because, like me, you usually receive the information in good faith from someone you know, such as your financial adviser. The trouble is that they are often relying on information from the developer which can be totally misleading. For example, “prices are expected to increase by at least 20% per annum for the next 5 years”. That’s nothing more than pure speculation. Never, never rely on such information. I always carry out my own due diligence and I strongly recommend you do the same. Be prepared to walk away from the deal if you’re not entirely happy with what you find.

2) Check out the fundamentals first

Wow, this covers a multitude of sins, but here are some of the main points to check… Does your property have clean title? If it’s new-build, does planning permission actually exist for your property? Is there any likelihood that the land could be snatched back, as happened in the region around Valencia in Spain just a few years ago. What is the track record of the developer? Get a list of other properties and/or leisure complexes built by the same developer within the last 5 years. Check these out thoroughly and, as always, be prepared to walk away from the deal if this information is not forthcoming. In which phase of the development is your property being built? What impact will further building work have on your ability to rent your property out? If the communal facilities are not being built until the final phase, what impact will that have in the meantime? It’s surprising how many developers never actually get round to building the communal facilities, so don’t rely on them for renting your property out. Ideally, they should be included in the early phases of the development. You need to be able to rent your property out from the day you buy it, not from when all the building work in the final phases of the development has been completed. Check that your guests will have the right to use the swimming pool if one is being built. I incorrectly assumed this was the case when I bought a property in Los Alcazares, only to find that guests staying in my property did not have any right to use the “communal” pool. This has made my property a lot harder to rent out than other identical properties on the same development. Fly before you buy. If you physically can’t do so, then insist on speaking to someone who’s actually been there themselves. What’s the location really like? Is it noisy? How close is it to the nearest beach? What are the neighbours like? Is it in a residential area or in a leisure complex? How easy is parking? How far is it from the nearest international airport? What are the local facilities like? I wish I had done this 5 years ago when I bought a property in Murcia, Spain via Inside Track. I relied (to my cost) on the information contained in Inside Track’s glossy brochure. The “resort” turned out to be a residential complex 30 minutes from the nearest beach with no communal facilities at all and occupied mainly by migrant workers from South America. Not exactly the ideal location for renting out to UK holidaymakers! If only I had jumped on an Easyjet flight and taken the time to visit the site, I would have realised that what I was buying was far removed from Inside Track’s “artist’s impression”. Many thanks, Inside Track.

3) Have at least 2 exit strategies for each investment property

Another absolute essential, especially if you are buying off-plan. What do I mean by this? Let me give you a few example exit strategies :

a) ASSIGN the contract to another buyer prior to completion. This is a short-term exit strategy and can work well if you are buying off-plan with over 3 years to completion and if your purchase price is at a significant discount to open market value. You need to be sure that you are buying at a true discount to open market value and that the contract clearly states that it is fully assignable.

b) RENT the property out following completion. Follow the tips in the rest of this article to establish whether this is a viable option.

c) SELL the property immediately after completion. Is there sufficient profit in the deal to allow you to do this? Make sure you include all the buying and selling costs. How will you sell your property? Is there a market for it? Who will want to buy it and why? What is your property’s unique selling point? Who will sell it for you? What are their fees?

You must have at least two such strategies for each property you buy, so that if plan A goes wrong for whatever reason, then you have plan B to fall back on. And preferably plan C as well! Look at how options a), b) and c) depend on you buying a property that will cashflow on completion and which you are buying at well under true open market value. I emphasize the word “true” here. Watch out for unscrupulous developers marking up their list price by 50,000 Euros and then offering a “special discount” of 50,000 Euros. This happens all the time, unfortunately. Your own due diligence is paramount to establish what similar properties are actually selling for now. That’s what you should rely on, not what the developer tells you. Being able to assign the contract to another buyer is essential in any off-plan investment. Let’s say that the property is due for completion in 3 years time. Look what’s happened over the last 3 years. You really MUST have this get-out clause in any off-plan investment in case of unforeseen circumstances. If the seller won’t agree to this clause in the contract, then walk away.

4) Know what the total purchase price is, including all the associated completion costs.

A headline price is one thing, but it won’t be the total price you pay. Make sure you know what else to budget for, such as :

  • Optional extras, such as external lights, patio paving and landscaping.
  • Stamp duty (or local equivalent). This can be as much as 15% added to the purchase price. You will need to find this money yourself, as any mortgage will be based on just the headline price. Mortgage valuation fee, mortgage arrangement fee, mortgage broker’s fee
  • Legal fees including your solicitor’s costs, notary fees and all legal searches
  • Your flights and accommodation costs if you need to attend the local notary in person to complete the purchase. Usually your solicitor can sign the paperwork for you as Power of Attorney, but check first
  • The cost of getting your property ready for renting out

5) Don’t assume that your property will be in a fit state to rent out

Oh dear. So you assumed your property would be ready to rent out the day after you bought it. Let’s use one of my purchases in Spain as an example. When the developer “completed” the property, it was nowhere near ready for rental. Firstly, the property was filthy. Dust everywhere. It needed a thorough professional clean. Next, I had to pay for the water and electricity to be connected. Then I had to buy the kitchen white goods (cooker, fridge, freezer, washing machine, microwave etc). Next there was air-conditioning to install, which wasn’t cheap. The trunking had been installed as part of the construction, but I still had to arrange to have the air-con units installed and connected. After that there were all the fixtures and fittings, including blinds and carpets. On top of that, I had to buy a full furniture pack (both interior and exterior), including sun-loungers, barbeque and right down to kitchen knives and forks. The final touch was to install satellite TV and to connect up to local wi-fi. Remember that if it’s a competitive rental area, air-con and satellite TV are essential for letting out to Brits in particular. That was the inside sorted out. I then had the front and back gardens to landscape. Oh yes, and because I was buying in Spain, I found that all the local tradesmen only spoke Spanish. I didn’t. Fortunately in this instance the developer was still around for several months afterwards and attended to my snagging jobs, such as settlement cracks and doors that don’t close properly. You may not be so lucky.


6) Create a detailed 5 year business plan

Treat each property as a stand-alone business and produce a 5 year (minimum) detailed business plan. I didn’t when I started buying overseas, but I most certainly do now and I have produced a business plan template, which you are most welcome to have (I can email it to you). The three most important questions to address are:

a) do I have the funds to exchange contracts and complete the purchase, and
b) am I certain it will cash-flow, and
c) how quickly can I get my deposit money back?

Your business plan needs to have 2 main elements to it, namely a) pre-completion and b) post-completion.

a) Your pre-completion plan must list all the up-front costs of buying your property and getting it ready to rent out. You must identify how all these costs will be financed. Does the property you’re buying qualify for inclusion in a SIPP? If you’re not looking to stay in the property yourself, this can be a great way to put your under-performing pension funds to better use. This is how I’m funding my most recent overseas investments. Check this out with your Financial Adviser.

b) Your post-completion plan must include a cash-flow forecast and identify how your property will be managed on a day-by-day basis.

• How will your property be marketed and will you do this?
• Who will check guests in and out?
• Who will wash the bed linen and the towels (if they’ve not been nicked) in between guests?
• Who will guests call at 2am in the morning if they’ve locked themselves out? – yes this really has happened to me!
• Who do guests call if the air-con stops working?
• Who will clean the leaves out of your swimming pool and check the pH levels?

7) Understand your cash flow

This is an integral part of your business plan, but it’s so important that I’ve included it as a separate item. You absolutely must get this right. Remember the golden rule : CASHFLOW IS KING. Here are some of the basics to include in your cashflow forecast.

a) Is your mortgage interest-only or repayment? If you have done your sums based on an interest-only mortgage, check how long the interest-only period lasts for before reverting to repayment. Can you still afford the repayments at the end of the interest-only period?

b) Consider seasonality. Completing on your purchase after the high-season in September is a completely different ball-game to completing in May, as up to 80% of your total income can come from the peak summer weeks.

c) What are your fixed costs?

• Ground rent
• Monthly service charge
• Use of communal facilities charge
• Water
• Local council tax
• Sky TV / TV licence
• Buildings insurance
• Letting agent’s fixed costs (key-holding etc)
• Budget on replacing your furniture every 5 years

d) What are your variable costs?

• Letting agent commission
• Guest check-in and check-out
• Electric and/or gas (you can expect your air-con to be left on 24 hours a day!)
• Laundry costs (nb : any towels provided will be stolen regularly)
• Budget for routine maintenance costs (eg clearing out the gutters)

8) Assemble your Power Team

Once you’ve got the keys, you’re on your own. The vast majority of developers and their agents won’t want to know. So who are you going to call ? Ghostbusters?? You’ll need :

a) Local Solicitor
b) Mortgage broker
c) Developer (for any snagging issues) and their local agent(s).
d) Accountant (you may need to submit an annual tax return in the country where you purchased)
e) Local Lettings Agent. This person is absolutely crucial for the success of your business, so choose wisely and ask them for references. They will be handling your money, so make sure you can trust them. Use their local tradesmen contacts. Will they market your property for you? If so, how many weeks do they expect to be able to rent your property out for? Should you go for weekly lettings or for longer term lets (eg 6 months)?
f) Local estate agent (if you intend to resell your property)

9) Produce a Contingency Plan

One thing you can be sure of is that if you’re investing off-plan then things will definitely NOT go according to plan. So think of worst-case scenarios and have a plan for each one, no matter how painful that may be. For example,

• What is the likelihood of the developer going bust and what would you do if they did? Would you lose your deposit? Where is your deposit held?
• What if you can’t get a mortgage at completion?
• What are your exit strategies (listed in point 3) and when would you invoke each one? For example, if you can’t make an annual net profit from lettings income, then sell up.
• What if the completion date over-runs? (NB: I am investing in the Turks & Caicos Islands and my properties are 3 years late!) Do you have any recourse for such eventualities in the purchase contract? If so, when can you invoke them. Watch out for the developer to invoke any force majeure clauses in their contract if they do over-run.
• Who is offering to provide the guaranteed income (if any)? BEWARE if it’s being offered by anyone other than the developer. There’s a high risk that you’ll never see any of it. This has happened to me 3 times (anyone remember Aramis Investments)? Aramis Investments offered me a 2 year guaranteed income through a separate company called Rental Espagna. When I visited their offices, guess what, their staff had long since fled. Guaranteed rental incomes are only as good as the company behind them. BEWARE.

How will exchange rate fluctuations affect me (either positively or negatively)?

10) Remember that you’re NOT inv
esting in the UK

Sounds obvious, but don’t under-estimate this one. There’s a language barrier, currency fluctuations, National Insurance (IVA) number, local taxes, local bank account, local solicitor, having to attend the notary in person, having to submit an annual tax return.

This is one lesson I learned the hard way. When I bought in Portugal I received a lot of correspondence in Portugese. Same thing happened in Spain. Not unreasonable, but I had wrongly assumed that everything would be in English. Not so. You may need to complete an annual tax return in each country where you own a property and pay the appropriate “real estate tax”. I have to do 4 tax returns every year. UK, Spain, Portugal and USA. I have an accountant in each country who does it for me. You’ll need to check this out yourself, but be aware and ask the question before you buy.


There we are. That’s a whistle-stop tour of just some of the pitfalls I encountered when buying my overseas properties. I’m sure the list is not exhaustive and many other overseas investors will have their own stories to tell. It wasn’t all doom and gloom and I’ve had a lot of fun as well. I hope it hasn’t put you off completely, because investing overseas can be extremely profitable if you know what to look out for. I just wish I knew then what I know now. Hindsight is a wonderful thing.



Brian with Martin Roberts (presenter of TV's Homes under the hammer)

For further information please contact Brian Croucher (office email) (personal email)
Tel 01380 831313 (office)
Mobile 07813 922035





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