With the local property market in a slump and property investments in countries like the UK and Portugal booming, now is a fantastic time to diversify your portfolio and invest in property abroad. There are new developments are springing up all over the world, ripe for investing but choosing the right property can be the difference between disaster and financial success.
International property specialist and founder of Hurst & Wills, Lisa Bathurst, says working through a property specialist will save you money by providing independent, no-biased advice to help you avoid bad investments. “There are so many developers out there, it is important to know which developers are reputable and have done good work, and which developers – and developments – to avoid,” says Bathurst. “We have come across some investors who have been badly burnt attempting to buy foreign property without independent, professional help.”
“Over the years we’ve been in business we’ve met people who have bought land that years later has still not received planning permission. Another investor bought parking spaces at a UK airport that didn’t actually exist. We’ve also heard several stories of developers taking a 50% deposit and then going into liquidation,” says Bathurst.
“Another client invested in a hotel unit to qualify for a golden visa in Portugal. After paying the deposit, he visited the site a year later and found it in ruins. This investor eventually got most of his money back, but only after an expensive legal battle. The process also delayed his visa application by 18 months by which time property prices had rocketed,” she said. “In another case an overseas company with a clever marketing team sold land in Eastern Europe full of promise. Investors fought collectively for 10 years to get their money back.”
The trick is to know who to deal with and that takes knowledge and experience of the business, says Bathurst. “Investors must be aware that developers obviously only sell their own stock and that they could be under pressure to get rid of units,” says Bathurst. “Developers often build properties that are unpopular with tenants. We’ve seen many poorly designed developments that are challenging to rent out, making them bad investments.”
“Developers who have built in the wrong locations can mislead overseas buyers who don’t realise that one street to the next in certain neighbourhoods can make a big difference,” she says. “They could also be under pressure to sell the ‘hard-to-shift’ units in otherwise popular buildings. Buying the wrong apartment in a block can make it tough to rent out. If you are not satisfied with what you have bought, recourse can be tricky as international developers often don’t have a presence in South Africa. They usually just fly in to do roadshows, sell properties and then leave again,” she says.
“The advantage of using independent property specialists is that they have access to several developers across many markets. That means firms like Hurst & Wills can offer clients a variety of different investments to best suit their investment strategy,” says Bathurst. “We are aligned with the buyer, not the developer, so our clients get balanced advice. As investment property is our core business, we visit the projects our clients invest in several times a year and provide unbiased updates,” she says.
“We only work with reputable developers who have satisfied our own due diligence. So, we only work with developers who have been in business for many years, who have successfully completed many projects and whose developments achieve high occupancy rates,” she says.
“Independent specialists will also highlight the many other considerations an investor should be aware of before buying offshore. Issues such as cross-border tax planning, structuring and capital allowances all form part of the larger decision-making process,” she says.
“We do our own Return on Investment (ROI) calculations to ensure each investment we recommend stacks up. We have seen investors being lured in by developers offering guaranteed returns, but these are not always the best investment,” says Bathurst.
“As an independent firm, we are able to tailor a shortlist of investments to suit our client’s unique needs, in-line with their own wealth strategy and objectives,” she says. “Based in Cape Town, we focus on developments that suit South African investors. Our experience and expertise make the process of investing in overseas property less risky and when you have someone you can trust advising you throughout the process it’s a much more enjoyable experience,” she says.