Five things to consider before buying a holiday home abroad

Choosing the destination and location is a crucial first step when buying a holiday home abroad. It’s important to think carefully about where you want to invest and your reasons for doing so. If your goal is to have a holiday home purely for personal enjoyment, without considering financial returns, then choose a location that you truly love. However, if you view this purchase as an investment opportunity, the destination and location will play a central role in your decision-making process.

In either scenario, consider your personal preferences such as climate, accessibility from your primary residence, available activities in the surrounding area, and proximity to essential services. Be sure to visit the region multiple times before committing to a purchase. Additionally, speaking with locals, expats, and current holiday homeowners can provide valuable insights and practical advice to guide your decision.

Laws and regulations concerning real estate purchases vary significantly from country to country, making it essential to understand the legal framework before committing to a project. Familiarize yourself with the country’s land laws, property taxes, restrictions on foreign ownership, inheritance taxes, and any regulations related to renting the property to third parties.

Certain countries have specific rules about the rights of foreign citizens to fully own real estate. For example, you may be limited to buying only one property in the country, or you might be permitted to own the structure but not the land it sits on.

Additionally, legal systems and the processes for registering deeds of ownership can differ widely. Conduct thorough research and perform title deed checks to ensure the legitimacy of the property. When in doubt, consider hiring a lawyer who specializes in overseas real estate to guide you through the legal complexities and safeguard your interests.

Never sign an agreement or a promise to sell without the assistance of a qualified lawyer and without verifying that the necessary authorizations and title deeds of the current owner are valid and up to date.

Establishing a clear and well-defined budget is essential before purchasing a holiday home abroad. Beyond the purchase price, consider all associated costs, including monthly mortgage payments, property taxes, lawyer fees, condominium fees (if applicable), management and maintenance expenses, utility bills (electricity, water, and gas), and home insurance. Don’t overlook travel expenses for visiting the property as well.

As a rule of thumb, the annual maintenance cost of a holiday home typically ranges between 5% and 7% of its value. While purchasing a second home can be a stable investment in real estate, which is often considered a safe asset, it's crucial to have a realistic understanding of the total costs involved in buying and maintaining a home abroad before making your decision.

If you do not plan to occupy your holiday home year-round, it’s wise to consider hiring a company to manage the property in your absence. An unused property can deteriorate over time, so it requires regular maintenance, just like a home that is occupied year-round. Tasks such as housekeeping, interior and exterior upkeep, as well as overseeing and repairing various installations, will still be necessary for your vacation home. While this aspect of ownership requires attention, it ultimately allows you to fully enjoy your property without added stress.

If you plan to rent out your property during your absence, hiring a local property management agency is highly recommended, if not essential. Managing rentals remotely can be challenging, and a trusted local agency can handle tenant interactions, maintenance, and property security. Make sure to understand the fees associated with these services and choose an agency with a solid reputation. Renting out your holiday home when you're not using it can help offset the fixed costs and may even generate additional income.

Buying a holiday home abroad can be a strong investment, but assessing the long-term financial outlook is crucial. If your objective is to generate profit from the property, research real estate trends in the area, market growth, and the destination’s tourist appeal.

Keep in mind that property values can fluctuate. If you plan to resell the property in the future, understanding the potential timeline for its appreciation is essential to achieving a good return on investment.

Purchasing a holiday home abroad is an exciting venture that demands careful planning and thorough research. By considering the five key factors discussed in this article, you will be better equipped to make an informed decision and succeed in your real estate acquisition. Don’t forget to seek advice from local real estate agents and financial specialists to guide you through the purchasing process and help you achieve the best possible outcome for your dream home.