International investments of residential properties are undoubtedly becoming more popular. More often to collect extra rental income or capital appreciation rather than occupying the property, there is an increasing number of Singaporeans who seek to purchase overseas properties. If you are one of them, here are some key considerations to ponder:
Trusted Property Management Partners
An important yet constantly overlooked key consideration is the partnership with a property management company. It is essential to seek expert advice and assistance with regards to overseas properties. As such, there is a need to engage an established company to assist with issues such as leasing, facilities management as well as provide tax advice amongst others, in order to ensure minimal complications, maximise cost effectiveness as well as rake in a clean amount of net operating income.
The fluctuations of a specific foreign country’s currency value against the Singapore dollar is one that must always be considered. The real estate market or economic climates of a country, of course, are the other key factors that may affect the projected value of an overseas property investment. However, any appreciation or depreciation of the foreign currency will also affect the overall returns from the investment due to its fluctuations. Hence, it is important to always keep track of the movement of a country’s currency value.
Taxes and Fees
Various countries differ in their forms of taxes and fees, as well as the amount payable for each of them. Prior investigation of these factors is absolutely important before making a decision to purchase, as the differences may be huge. For instance, property stamp fees in Singapore may be capped at $500, however, stamping fees in Malaysia has no cap and merely based on contract value (just to give you an example, there is a common possibility of paying about S$20,000 for a million dollar property)! As such, it is highly recommended to do preliminary research on the possible costs incurred while determining the required returns from the property.
Another factor that should not be taken for granted is the mortgage. The process of financing an overseas investment may not be as easy as it seems. Singaporean investors are much less likely to obtain financing from the foreign country that they seek to invest in.
Henceforth, the purchase of an overseas property is usually financed by a local Singapore-based bank, or fully purchased by cash. Nevertheless, this may still prove to be a much viable option due to the fact that loans in Singapore typically charge lower interest rates as compared to loans from foreign banks.
Location is also important in obtaining an attractive loan package. Investments in properties within developed countries (such as London, Australia, etc.) have been proven to be easier in obtaining financing as compared to developing countries (such as Cambodia, Myanmar, Malaysia, etc.) due to the level of stability of the respective countries’ economies.
However, even within a country itself, banks will further scrutinise the specific location of the asset. For instance, residential properties within Zone 3 of London are less preferred by banks as compared to properties in Zones 1 and 2, that are regarded more of a ‘safe haven’ due to their close proximity to the city center and ever-present high demand.
A proper exit plan is very crucial in ensuring the success of an overseas property investment. Always have a specific target group of buyers within a specified period of time. One tip is to buy what the locals would, and can afford to buy – to ensure that the property can be disposed easily.
At the same time, beware of the presence of capital gain taxes – there is a possibility that the shorter the holding period, the higher the tax payable should you decide to sell it off.
Finally, when it comes to buying an investment property, what’s your strategy? How do you know if the asset you are going to put your money in is worth investing? What are your investment objectives?
It’s more than strolling into a hotel ballroom on a Sunday afternoon and making your purchase on a whim while enjoying the free refreshments provided. Many a time we let our “gut feeling” get the better of us, no thanks to the promises of emerging markets and fancy amenities.
Most investors fail to realise that what they really need is just good old fashion experience – with no hidden agenda nor conflict of interest. And that’s where Complete RPI comes in.
What can you actually afford? What is the net return after all costs allowing for void periods, service charges, disproportionately large agency fees and shifts in interest rates? Fear not, because we give our clients a realistic overview of the huge commitment they are about to take on, answering questions that actually matter.
We understand the desire to acquire a shiny new apartment, but at the end of the day, these investments do not come with guaranteed returns. Instead, we’ll propose to you a mix of investment opportunities for both capital growth as well as yield, to diversify your portfolio and spread your risks.
With access to the entire UK market, Complete RPI does not simply tell clients what they want to hear. Instead, we acquire properties with tenants in situ (i.e. the property is currently tenanted), guaranteeing rental income. Some of these properties have ongoing corporate rental agreements for 3, 5 or 10 years; on top of that, some of these properties may require refurbishment, where the value can be further enhanced.
If that does not convince you, then surely this will: exclusive access to your property portfolio via your personal property portal that we will asset manage. While current features include the ability to review financial performance, inspection reports, management statements, invoices and expenditure, we are constantly updating and improving the system to serve our clients better. Trust me, you’ve got to try it for yourself.
- Have you received totally impartial advice when it comes to UK Property Investment?
- Are you happy with your UK property agent?
- Has your UK investment property increased its rental income significantly over the past few years?
- Does your UK investment property have a 98% occupancy rate?
- Did you realise that you can release equity from your UK investment property?
If you answered NO to any of the above, please contact us – Complete RPI makes YES a common factor!
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This post was originally published on Redbrick Blog Section