You’ve bought your first home and now you want to explore buying one outside of Singapore.
Australia seems like a good destination with their fine beaches, unhurried lifestyle and proximity to Singapore.
But is it a good place to park your money?
Here are some tips to look out for if you’re looking to invest overseas.
- Buying an investment property
- Costs of property investments
- Overseas investments
Buying an investment property
Where you buy and what you buy affects how much you ultimately get when you sell. Here are some things to look out for when trying to identify a good property.
Consider buying a property in an area you’re familiar with. If possible, walk around the neighbourhood at least two to three times at different times of the day and over a weekday and weekend.
The character, foot traffic and appeal of a neighbourhood can be seen in a different light at different times of the day and year.
Areas where high growth is expected will help you garner a greater return in future
The higher the rental yield, the better it is for you as an investor because it will take less years for you to recoup your initial investment.
Low vacancy rates
A high vacancy rate could indicate that a neighbourhood has less appeal compared to others. You can look up statistics online or walk around the neighbourhood in the night. As a general guide, a feel for the vacancy in the area can be determined by seeing how many houses have their lights on. Do this a few times.
Find out about proposed changes in the neighbourhood that may affect property values. Are there going to be schools, shopping malls, offices being built in future? If there are factories in the pipeline, you would want to reconsider your purchase option unless you want to rent the dwelling to people working in the industrial areas.
Look for properties that have attractive features that appeal to many people such as a many bathrooms, proximity to amenities like shopping malls, convenience stores etc.
A house will be easier to rent out if there is a wide range of people that find it a suitable place to live in. Consider the needs of students, office workers, retirees, singles, couples and families.
Maintenance costs can add up over time if the house is in a run-down condition. Make sure you find out how old the house is and if there has been any repairs done in the recent past. If repairs or an overhaul was recently done, the chances of one being required when you buy over the property is reduced.
Condominium units and apartments can be easier to maintain and rent out than landed properties, although there may be a common area maintenance fee to be paid.
Buying an overseas property requires the expertise of multiple groups of people from developers, lawyer, bankers and property management personnel. When such people advise you of a certain course of action, always take it with a pinch of salt. Do your own research and seek a second opinion.
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Prices are usually lower than a comparable Singapore property.
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Costs of property investments
Costs when buying
Some of the costs involved during the buying process including stamp duties, conveyancing fees, legal costs, search fees, valuation and building reports.
Management of a property can be done either by yourself or you can outsource it to a managing agent. The managing agent will be the one to help look for a tenant, ensure repairs are done when required, tend to the tenant’s needs and ensuring the property complies with local regulations.
You can save the money by managing a property yourself, but you may need to spend a lot of time doing so.
While you don’t need to pay for home contents insurance, you will need to organise building insurance which cover you for building replacement if, say, the house burns down. If you buy a unit, building insurance will be paid from your strata levies.
Repair and maintenance
The costs of repair and maintenance needs to be included in the calculations when purchasing a property. Common areas of repair and maintenance include wall repainting, air-conditioner maintenance and hot water systems repairs etc.
Some investors purchase a house that require extensive repair at a cheap price before refurbishing it. If you intend to pursue this strategy, ensure that you have accounted for all the necessary repair and maintenance costs required to bring the property up to a livable standard.
Selling a property
Similar to the property purchase stage, there will be costs such as legal fees, advertising costs, agency fees and capital gains upon selling a property.
Overseas property investments
Overseas investment in properties is more risky than investing in your home country.
Local knowledge is required and it may be difficult to maintain a property if you cannot inspect it as regularly as the investment property down from your present house.
There have been many complaints to the government and watchdogs on promoters offering cheap houses with rental guarantees in neighbouring countries. If you’re keen to invest in an overseas property, always do your due diligence and seek multiple opinions.
Here are some things to consider if you’re thinking about investing in property overseas:
- Distance – it’ll be more difficult to manage property managers and tenants when you’re thousands of miles from them. Always go with nationally or internationally renowned property managers or service providers.
- Hidden costs – Always factor in the costs of doing business in the country. There can be many tax, legal and business approvals that must be obtained in the course of maintaining a property.
- Exchange rate – Changes in the exchange rate could affect the amount of income you receive.
Besides looking after the practical aspects of a property investment, do consider how Feng Shui affects an investment, especially when selling to people who hold deeply to this school of thought.