I thought I’d stick my two penny worth into trying to raise an objective general debate about investment criteria in buying properties abroad rather than indulging in a development promotion (although I could do that as well). I do have the “luxury” (I use the term advisably) of owning properties across the full spectrum from land (with a local partner), a development of 32 properties being built currently (again with a local partner), an offplan apartment for flipping and a holiday home that is generally let year round so I am seeing the property market from both sides

For what’s it worth my own investment criteria are;

1. If you’re not in way before the rest forget about short term speculation. The only way to make any money then is to become a developer yourself to move yourself up the property chain one stage (or even two stages by buying land) Don’t be one of the herd

2. Do not touch any of the big agencies. They are on percentages of 15 – 20% from the developers of the property values. YOU are paying for these ultimately (it may only become obvious when you try to resell) Their employees are generally almost totally on commission – they are not to be trusted

3. Be very cautious about investing anywhere at all without having been there at least several times. 90% of the people you meet will be wanting to relieve you of your money – don’t trust anybody without a real feel of the local market

4. I’d be very careful about BTL anywhere out of the UK unless you were part of a much bigger consortium. How do you handle a boiler breaking down in your Riga flat in the middle of winter? (How do you even know it has broken down?)

5. I wouldn’t touch anywhere where there is neither strong local resale/holiday nor European retirement markets. Unless there are either of these there is no underpinning of property values at all – in my mind this totally discounts countries like Bulgaria and Morocco

6. Don’t buy anywhere built on sand. Once the Americans have departed Iraq and the Iranians have effective control of Basra and the lower Tigris I’d feel pretty exposed if I had property in the Gulf States. They won’t be coming to rescue you – or your capital (by the way the developers and their money will be safely tucked up in New York or London)

7. I wouldn’t go anywhere where the sales/purchase costs exceed around 7/8%. In vulnerable property markets you are just minimising your upside potential. Likewise local taxes on profits if these are high

8. Only buy in areas where there is a good infrastructure (or at least one that is up and coming) Might be great in your development (at least to start with) but what happens when, for example, the mains water runs out in the summer, the electricity goes off, how far it is to the local doctors/hospital and what facilities do they have. There has to be really good maintenance contracts as well – unless properties are well ventilated you’ll arrive in the Spring to start your holiday with green mould all over the walls

9. Only buy in attractive areas with attractive landscapes/vegetation, villages/towns and “nice” locals. Look 20 miles around where you want to buy – are there good cheap restaurants, good cheap food, people with a “service” mentality (I’m not sure if this doesn’t discount somewhat the ex communist countries) interesting places to visit, nice views etc etc Lifestyle is critical

10. Do not buy anywhere where the summer season is six months or less. Turkey/the Canaries etc with an 8/12 month season are always going to win in the rental yield stakes (forget anywhere on the Black Sea coast)

11. Be careful about Muslim countries like Turkey and Morocco. They may seem OK at the moment but who knows

12. Don’t buy anywhere where the language is written in funny symbols (apart maybe from Greece) If you want to make some proper money you need to understand an area thoroughly and that means at least a basic understanding/conversational ability. If you can’t even understand the alphabet how do you start?

13. If you have the money and you are late in arriving in a location you happen to like think seriously about becoming a developer. However try to do it as a joint venture with a local (you will pay totally over the top on everything otherwise), make sure they match you pound for pound with the development costs, you have a proper detailed written agreement, there is a very large profit margin (at least 30% of the sales value) to make up for overspends, underbudgetting etc, make due allowance for the cultural differences and that you get on with them. Most important is obviously you trust them generally but still install your own check and balances

14. If you buy land try not to buy through agents (who will buy the land themselves before selling it on to you if you’re not careful at a massive uplift) Use someone locally – a notaire, solicitor, estate agent and pay them handsomely if they find something. Check out the PP etc etc carefully. You could earn handsome rewards for just doing nothing

15. If you are a serious medium term investor rather than a short term speculator or holiday home owner then you would be totally crazy not to seriously consider putting the property through your pension scheme and getting tax relief on it. Why pay 100% of the price rather than 60%?

In summary, there is only a finite amount of racing/investment money in the UK, Eire etc available for overseas property purchases. This is getting progressively spread over a wider and wider geographical area. When the tap starts to get switched off there’s going to be an awful lot of people (maybe me included) going to be hung out to dry. Take care

1) I agree, early is best, but not essential. A freind a couple of years ago bought 2 appartments on a nice golf development in Spain. He made 90000 euros in under 6 months just flipping the contract and hardly put anything in.
You say the only way to make money is to be the developer if you are not in very early.
Well, again another freind purchased a villa in Paphos Cyprus only 4 years ago for £250000. He has just resold for £750000, he isnt a dveloper.

4) Ongoing maintenance - yes a concern, but if you buy wisely it should be ok. As an example the Saidia development will have an onsight maintenance army, which owners pay for monthly. I always holiday in villas so Im well aware of mainteance issues but as long as you go about things in a methodical organised manner all will be ok.


5) Resale market for the Government Plan Azure resorts Morocco should outstrip the limited supply by a long way. To suggest otherwise indicates a lack of knowledge. Bulgaria - Im with you, I dismissed it 4 years ago.

13) I own land in Germany with planning permission for appartments and shops. I doubt I will 'be the developer'. Seems to me that this would excert a cost on my UK business (lost time etc). Also its easy to come unstuck trying to be a developer in a foreign land.

I know people who have developed property, they tell me they made big sums, yet when I consider the cost and time impact on thier 'day job' that profit vastly reduces.
Also if the market turns dvelopers are always the hardest hit.
NOT SAYING DONT DO IT, IN FACT I MAY DO SO, BUT ITS NOT QUITE AS CUT N DRIED AS 'DEVELOPERS MAKE MOST PROFIT'. A develpoer I knew in the Bahamas ended up leaving his UK job and giving 3 years to the project so really it wasnt that profitable when you think of the lost earnings.

15) I looked into SIPPS a while back and declined to proceed on the grounds the monthly fees were too high, I couldnt access the money before age 55. I May have to review this decision?


You say 'there is only finite money in the UK/Eire available for foriegn property'.
I would suggest this is a tad Anglo centric.

Anyone would think the world would stop without us. As an example many Belgians, Spanniards and French are buying in Morocco, indeed retiring there.
Also what about the fast growing Eastern block economies? These people are'nt savages, many are just like you and I and wont rest until they reach western living standards.

Also Scandinavians, Germans and Italians are big foreign investors, not to mention the Russians et al. I met Americans when investing in Germany and I read quite a few are investing in Morocco. Dubai money commited to Moroccan resorts is over £26bn from a standing start this year.

To illustrate potential, lets take 'one of those hyped - up, no hope eastern block nations' - SLOVENIA. Have you seen the price rises in the last 5 years around the key skiing resorts? How about Croatia. I nearly bought there years ago and since prices in many areas have quadrupeled and more. These arent flash in the pans - the UK doesnt have some sacred monopoly on HPI.

We must'nt assume everywhere is like Bulgaria. You forget places such as Slovenia were once part of Austria and Estonia is essentially a Scandinavian nation which will have Scandinaivan price in 10 years.
Likewise the Poles are building a profitable future with hard work and determination.

So before you write off vast sections of the planet, just remember that there were many who said Ireland would never struggle out of being the 'sick man of the EU' with high unemploymnent and low growth.
Korea was supposedly a a 'flash in the pan'. Malaysia, now the 16 th richest nation on Earth was a major recipient of aid until the 1960s, and then by the late 1970s was completely transforming.


Anyway, where do you thin is a good place to invest?

"You say 'there is only finite money in the UK/Eire available for foriegn property'.
I would suggest this is a tad Anglo centric."


No I actually said Britain, Ireland ETC - I know there's plenty of cash in Northern Europe countries going into property in particular but I take your points. Economies do grow and expand and in time they invest within their own countries and overseas. I'm not an economist but I guess if the world's economy doesn't grow at the same rate, in simplistic terms wealth is transferred from one nation to another. Maybe we should be second guessing where the Poles would like to buy holiday homes (lets hope it's not going to end up being Blackpool if you see what I mean)

Maybe I was a little dogmatic about becoming a developer but as I say further on, only think about this option seriously so long as you have the other pieces of the jigsaw together. It is a minefield otherwise. The other key criteria I left out is your own time of course. I do this full time - if you have any other sort of work forget it. The potential rewards are definitely there but yes -it's not for the faint hearted

Thoroughly enjoyed reading your views argybargy.

While I agree that the real money is made from the acquisition and development of the land, I still feel buying off plan has its merits. (I wouldn't have bought off plan if I thought otherwise.)

I feel off-plan makes a sound investment if the following criteria are met:
1) I feel the country or area has good potential for capital growth in the short to medium term.
2) No more than 40% is paid before completion.
3) Build period isn't short. (I want good appreciation before completion so have option of flipping and having a healthy return.)
4) Build is buy a reputable developer. (Admittedly Property Logic - LJDF products in Saidia - have no development experience in Morocco, but one or two directors have been successful property developing elsewhere.)
5) Property should have something to make it more desirable than others in the area. (Better for rentals and resale.)
6) Either have someone in the area I know and trust managing the property or property is in an area where there is no shortage of companies that could manage the property for me.
7) Risk versus reward assessment is favourable. I perform my own assessment of risk and reward following independent visits to the area.

I'm a fan of the Baltic States. Property prices have soared there and I think they will continue North for some time. As you mentioned, there are fewer reputable companies to look after your properties over there, but they can be found by doing proper research. (Those using the internet might not have the same joy as those that make a few phone calls and then visit the companies.) They tend to be companies that do something else as their main business function. For instance, some land banking companies offer rental and management of property as they know many of their land banking clients also have property there. They are hard to find though!

In the current global situation, after flippers have had 10-15 years of serious business, all your 15 points are actually one: there is no money to be made from property, unless one is satisfied with getting 2%-3% more that the inflation.

Catara

The worlds population is expanding. Land is not.

Land is a key commodity, especially useable land with ammenities.
When you repeatedly use the phrase 'the current global situation' I assume you are implying there is an inherent weakness which will cause some kind of economic collapse.
I assert the complete opposite is the case; Hitherto dormant economies have begun thier enexorable rise to indusrtialise, just as the UK did 200 years ago. Nothing is going to stop people wanting to achieve this. The byproduct of all this is increased demand on finite resources, OF WHICH USEABLE LAND AND PROPERTY IS MOST DEFINITELY ONE.

Take Morocco - I think its the next Malaysia. The gateway to Africa with free - trade agreements signed with the US and soon the EU. Did you know Africa has the Worlds fastest expanding mobile phone market?
Morocco is sucking in jobs from Belgium and France and now exporting high tech goods to us!

Anway I dont want to hijack this thread with Morocco


I sometimes think we get so wrapped - up in the here and now we forget the bigger picture.




I think being the developer is definitely a full time occupation as you say. Perhaps the likes of Soup Dragon and me will have a go at some point in the future. As new - build investors we might have a lot of knowledge to bring to the table (ie; a shoping list in tune with what many thinking investors seek in a newbuild offering).

Someone I know has bought land in Bulgaria and Thailand as a consortium. Only 2 of the members will actually be involved in the day to day development, the rest are passive investors. A good model hopefully?

It is good that you realize that you are hijacking any single thread by bringing the Morocco stuff. It is a first step.

About the land expanding, this is the usual story that desperate realtors use.

Anyway, the frenzy of real estate has lasted about the last 15 years, now it is time to get back to work and get some genuine developing ideas for economies.
The flipping of real estate was just an ilusion of wealth.