Heard the one about the developer in Bulgaria that went bust when one partner shot his colleague? Or the company in Egypt that sold properties to British buyers and then sold them all over again to Egyptians? Then there's the couple in Spain who ended up living for three years in a garage after their house was demolished by the authorities. And the Brits marooned in a ghost town resort in Cyprus, forced to buy their own generator to provide electricity. Horror stories about people getting their fingers burnt buying overseas property are legion and put some people off before they've even begun. But don't be deterred: many mistakes are the result of naivety or failing to take the necessary precautions, and if you wise up you can soon learn how to turn buying a property into a positive experience
What's more, with the markets in turmoil, it's not such a bad time to be buying overseas — there are real bargains to be had and plenty of opportunities to negotiate. So, if you're willing to learn from those who've come a cropper in the past, that sundowner on your sea-view balcony is attainable after all. Whether it's for investment, retirement or simply a holiday home you're looking for, here are some of the worst pitfalls and how to avoid them.
1. Think twice before buying off plan
When you buy 'off plan' you're really buying a concept rather than a property. In effect, you're taking a giant leap of faith that everything on the website or the glossy brochure will be built on time and look exactly the same. A friend reserved a villa in a new 'luxury resort' in Cape Verde. When he went out to see the location he found a wasteland surrounded by shanty towns.
People like new homes for lots of reasons: new fixtures, fittings, and finishings; being able to choose your home from a plan, and having some input, such as deciding between a plunge pool or a Jacuzzi. But problems often involve developments that are sold before they're built. One scenario is where the developer goes bust and the work grinds to a halt. Or the development gets delayed or postponed or cancelled altogether. Or promised facilities such as spas, fashion outlets and chic restaurants, are quietly pruned back as the money runs out.
If you're going to buy off plan, ensure the developer has a long pedigree, and accept that changes to the specification or timetable are likely. Don't be seduced by marketing brochures or computer-generated images.
One strategy is to wait until at least part of the development has been built and populated so that you can see the quality for yourself. There are usually a few early buyers willing to put their property back on the market, so you may be able to snap up a resale. Or buy a slightly older property in the same vicinity through the resale market. It may not be quite as pristine, but you will know what you are getting.
2. Don't rely on rental
If you fancy a second home in the Med, but can't really afford it, you'll probably tell yourself it'll be a great investment: "We'll rent it out for the 50 weeks a year when we're not there, and make a packet!" The flaw is that it's fairly hard to make money from letting out your property. For a start, families with children tend to all want the same six weeks in summer during the school break — and you may want to use the property yourself at that time. The costs are easy to underestimate, what with electricity, water, garden maintenance and even the local equivalent of council tax. And then you have to hire a housekeeper to clean up between guests — if you're in a resort with a letting pool it's not uncommon to hand over 50 per cent of your rentals in management fees.
Don't be beguiled by 'rental guarantees' offered by developers — the likelihood is that the sum guaranteed has already been built into the purchase price. And if letting is an important consideration for you, check out how many properties are already available in the area and how busy they are. A survey by Savills and Holiday Rentals last year found owners of holiday properties get around 15 weeks rent a year &mdash far less than some developers promise - with 53 per cent earning £8,000 or less.
You might be better off buying an aparthotel or other property designed specifically to attract guests. But, unless you've set out to make a financial investment, treat any income you can get from letting your property as a bonus.
3. Keep your distance from the sea
You're more likely to run into planning problems if your property is too near the sea. Much fuss is made about 'front line' properties, but these are frequently subject to challenge. In 1988, the Spanish government passed a coastal law that prohibited building homes within 100m of the sea. It was promptly ignored by everyone, and thousands of properties appeared along the coastline. But, in 2007, the government chose to implement the law — which could mean mass demolitions. A few of these have happened so far, and many foreign owners now live in fear of losing their homes. Coastal development is in its infancy in Brazil, but many properties on the northeastern coast are facing question marks over legality because of laws about 'set back' from the sea. And it's likely that problems will emerge for oceanfront properties in other countries built during times when the property market was booming.
4. Check your planning permission
Planning permission should not always be taken at face value. In Andalucía, many buyers obtained planning permission from the local authority, only for the regional government to later invalidate it. Therefore, there is no substitute for examining the whole planning context as rigorously as you can. The Foreign & Commonwealth Office has this advice for buying in Spain: "You must ensure that when buying off-plan from a developer, the development has approval from both the local ayuntamiento (town hall) and the regional government. It is also worth going to the urbanismo (town planning) department of the local town hall to have a look at the Plan General de Ordenación Urbana (Urban Plan), which will state whether or not the plot you wish to buy has any building restrictions, is in a green zone or includes a public pathway or similar."
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