Tim Murphy has bought more than 100 houses in 18 countries, and regrets only one. The property adviser and author says he made his worst investment when he failed to take his own advice. 'It's not even as if I was young and stupid,' laments Murphy, who already had a substantial portfolio when he was 'sucked in by the location' of a property in Spain. It lost money, reminding him of his No 1 rule: invest if it makes sound financial sense, never out of emotion.
Hong Kong-based Murphy is founder of IP Global, and author of the overseas property investment guide, Turning Crisis Into Profit.
He advises investors looking at offshore markets to settle on a location first, before considering which agent or developer to buy from. 'Do thorough research on an area you like - and the best person to do that is you,' Murphy says. 'Agents are very specific in terms of the certain areas or developments they offer, and the advice they give may not be the best for you.'
Having identified a likely market - perhaps taking your cue from the property pages of respected newspapers - tap into the wealth of information available online. Many government websites and property portals show prices per district, per square foot, and transaction histories, giving investors accurate information. If buying off-plan, especially in Asia, do your due diligence on the developer as well, Murphy says. Do developers have sound financial fundamentals? Any bankruptcy history? Ask the agent to show you its last development, and check the quality.
Although you won't be living in it yourself - so it doesn't matter what colour the walls are painted - consider your tenant's or future buyer's perspective. Many will want schools nearby, and access to transport. Google Maps can reveal such information in seconds. Think practically, Murphy says. 'You wouldn't buy a four- or five-bedroom home in the city - families would look to the suburbs for that. A one- or two-bedroom apartment in the [central business district] may not have a car park, so it would need to be near public transport.' A further tip from Murphy is to beware sellers offering rental guarantees. 'The word guarantee immediately makes me nervous,' he says. 'Look at who's giving it - is it worth the paper it's printed on, or has it been built into the asking price? I would rather not have a guarantee, and pay 5 per cent less for the asset.'
Victoria Allan, another Hong Kong-based realtor, who also invests personally, says the strength of the city's property market makes it a good time to look at markets outside of Hong Kong, where values haven't recovered so well. Allan says that 'strong local advice' is essential for understanding any overseas market, and for this she engages a buyer's advocate. A buyer's advocate, available in most markets, works only for you - they do not represent any particular vendor or developer, explains Allan, managing director of Habitat Property. You pay them a retainer to begin with, and they hunt out properties for you.
Upon completion of a sale, a further fee - a small percentage of the purchase price - is paid.
Even though she's in the business herself, Allan always uses a buyer's advocate for her own offshore purchases.
For a start, it widens your choice. Buyer's advocates often have access to properties which, for whatever reason, may not be listed on the open market. They can also move in quickly on 'hot properties' that may go under contract before it's even posted on the internet, and they can bid for you at auction. 'Advocates also help with your due diligence, particularly in understanding the process of closing,' Allan says. 'For example, they can negotiate a contract pre-auction, so you might only need to put down 5 per cent deposit, instead of the usual 20 per cent.
'They can get you the best deal, usually saving their own fee through negotiated discounts.'
You can find a buyer's advocate by browsing - they often have their own website - or ask for recommendations from the local real estate body. Allan recommends seeking referrals from their previous clients. In her book, the biggest no-no is to buy an overseas property without having seen it first. If you don't have a buyer's agent - or even if you do - get a 'trusted person' to check it out for you. Ideally, this could be a friend or relative, if you're lucky enough to have one in the area.
'You need to know if it really is three blocks from the beach, or if a building being constructed next door is going to block your view,' Allan says. 'A trusted person can tell you: 'yes, I think this is good' - or no, 'you are insane'.' And if you don't have a trusted person nearby, invest in a plane fare yourself. She also advocates never attempting to deal with a landlord direct, as 'you will always get ripped off'.
'Most vendors, and even some agents, are only interested in making a sale, not repeat business,' Allan says. 'You only make a good investment by buying the right property in the first place ...'
Murphy's top tips for Hong Kong investors buying overseas are: don't let emotion influence your decision; look at the tax treatment in the country you've chosen - coming from Hong Kong's low tax base, the taxes in some countries can seem steep - and check the currency of the market you're buying in. If it's strong against the Hong Kong dollar, it may devalue later.