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If you are looking to finance your holidays or diversify your investment portfolio, buying property overseas can come with many challenges, but the rewards can also be high.
“Suppose you own an investment property several hundred kilometres from your home, and you need a plumber to replace taps in the bathroom?” says Peter Koulizos.
“If the property is managed by a competent property manager, it shouldn’t be a problem.
“They should organise quotes, arrange access to the property for the repairs to be done and pay the bill on your behalf.
“This is OK in Australia where we have strict rules and a code of ethics that most property professions should abide by, but that cannot be said of all places around the world.
Buying property overseas can be fraught with difficulties for many reasons.
■ Arranging finance – Australian banks are hesitant to lending money to borrowers who wish to buy property overseas.
■ Lax property laws – Australia’s property laws are very tight, with parties’ rights and obligations being made very clear. The same can’t be said for many countries around the world.
■ Tax issues – you may need to find an accountant overseas as you are earning income overseas, and you may need to pay tax in that country.
■ Different language and culture – the landlord/tenant relationship varies considerably around the world.
■ More susceptible to being ripped off as you are an absent landlord – the temptation is there as they know there is not much chance that you will fly over each time there is an issue.
■ Currency risk – “This last point is very important,” says Mr Koulizos. “Not only do you need to do your due diligence before you purchase the property and try and keep an eye on it from afar, but you are also susceptible to moves in the currency.
However, according to Mr Koulizos, there can also be some advantages.
“Some of my students bought property overseas straight after the GFC when property prices plummeted in some countries and have since seen marked capital growth as the overseas property market has picked up.
“The benefits of buying property overseas can include a relatively cheap entry price and high rental returns.
“If you are seriously considering buying overseas, you need a local lawyer who can also speak English, a bi-lingual property manager and possibly an accountant.
“Your due diligence should also include visiting the area and inspecting the properties you wish to buy.”
Overseas investing is fraught with danger if you don’ thave the right research and it also brings currency riskthat can sometimes erode part if not all of your gains. It is vital that you conduct your due diligence as different markets operate in different ways.
■ Peter Koulizos is a Master of Property instructor at the University of Adelaide and the chairman of the Property Investment Professionals of Australia.
Peter Koulizos, Western Advocate, Bathurst, Page 4, 3 June 2021