Tips for overseas property investors
Before buying an overseas property, always check the conditions of sale carefully and do due diligence on the investment returns.
In our previous article, we shared suggestions on mitigating risks when investing in overseas properties. Here are a few more tips on how to be a wise investor.
Those looking to buy an overseas property must do their research before selecting a credible developer and estate agent, and find a trustworthy lawyer to protect their interests.
It is important to check the sales agreement carefully before signing. For instance, are you entering into an agreement with the developer directly? Developers usually maintain and enter into agreements with buyers through project companies. Buyers should therefore ensure the project company is a subsidiary of the developer before signing a contract.
Buyers should also be aware of any significant clauses in the agreement, such as whether the project has planning approval and a 'long-stop date'. This reflects whether the project has secured government approval for development. It offers buyers even more guarantees if a completion date is specified.
In addition to the residential market, investors have recently shown interest in overseas student accommodation given its attractive rate of return. Student accommodation is often marketed with a yield of up to 8 to 9 percent, making it a very appealing investment option.
However, buyers should research how the return is calculated before signing an agreement. Sometimes the rate of return is calculated based on the assumption of full occupancy. Since student accommodation is unlikely to attract renters during summer breaks, buyers must judge for themselves whether the actual yield can reach 8 or 9 percent.
One point worth mentioning is that student accommodation is typically run by operators, so investors should find out if the operator or landlord intends to provide the option to buy these properties. If such options are available, it offers more flexibility for investors.
As for residential properties, it is crucial to compare the rental returns with current market figures. Investors should consider the level of investment and the guarantee period when deciding whether or not a project is a worthwhile investment.
If you are willing to do due diligence and the necessary research to fully understand a property development’s background and sales terms, as well as hire a credible lawyer and estate agent to handle transactions, then investment risks can be minimized.