Copyright (c) 2008 Phillip Booker
I was once interviewing a BBC Radio presenter in my previous journalistic capacity and he said something that has rang true with me ever since. He said, “Once you become a parent you become a political and economic expert within weeks.”
Behind that comment is a wealth of insight. Your future, your finances, your health and your careers are all brought into the forefront of your thoughts once your children are born. Our ‘provider’ instinct and mentality switches on and we suddenly see the injustices of the world. A couple of those aspects, your future and your finances we can explore a little within this article.
Although useful, a pension shouldn’t be the only source of income we rely upon when we retire. We should have invested any savings wisely so they grow and give us ample dividends ten or twenty years down the line.
As for your future… Well unless we are selfish we will want the best for our children. This may involve a move abroad, not necessarily for the benefits of that country, such as the weather, but to avoid the disadvantages of our own beloved country, such as growing culture of yobo-ism amongst others.
Soap box over… Allow me to present you with some top financial tips that should help in investing in your property buying abroad.
Investing to let – In principle it sounds like a good idea. The likelihood you’ll get regular lets will be determined by the market. If there is a housing slump; that means that there is too many houses and not enough buyers. As such a slump affects the letting market, too many houses to let. Although a astute person would be wise enough to see the local market and advertise specifically. When the housing market is in a boom, so is the letting market.
Investing in a Second Home – Consider getting a mortgage in the country you are buying the house, as occasionally they have the better interest rates. Plus it is wise to get a small mortgage as they themselves do a search on the property to make sure their money is invested wisely. It is like a double check on the authenticity of the deeds.
Legal Advice – Don’t skimp on legal advice, only because you never know what may happen. In Spain for example you can be buying the debts of the property. More importantly ‘permissions for building’ being the paramount reason for getting proper legal advice. Your financial investment in your property abroad must be done wisely.
Fees and Expenses – Whichever country you are buying in it is always wise to expect to pay up to 12% on legal fees and expenses. Sometimes it may be as low as 4%, but unless you done ample research beforehand 12% will leave you with some change.
Currency Exchange – This is where too many people make their mistakes. They automatically assume that their Bank will give them a good deal, especially when they claim 0% Commission. Whenever we are making a deal it is always the ‘bottom line’ that counts and not the frills. If you are not too financially minded always ask what your money will end up as in the eventual currency. Currency Brokers have taken over as the prime currency exchange providers. Currency Brokers work to under 1% margin on profits, when the banks work between 3% and 4%. On a £100,000 this means £3,000+ Although some quotes have been known to differ by £15,000. The savings you can make by buying your currency wisely will prevent the exchange of currency being the single most expensive transaction in the purchase of property abroad.
Case Study
In November 2007 Simon from Gloucestershire wanted to invest in a property in Miami, mainly because the dollar was weak against the pound. He had £175,000 to invest which was going to buy him a substantial property. He’d been given a quotation from his bank at US $1.80 / £1. A broker in comparison could achieve US $1.84 to the £1; plus of course these brokers don’t charge any incidental fees. Simon if he would have gone through his bank would have got $315,000; but because he chose a broker they were able to secure $322,000. This saved Simon $7,000 almost £3,400
Don’t run the risk of fluctuations! Currency Brokers, can, by fixing a rate for your currency requirements today for a purchase in the future (up to 6 months).
Currency Example… The Pound against the Euro… 16 months ago was ¬1.48/ £1.00; 6 months later it was ¬1.32/ £1.00. On a £100,000 transfer the difference in those 6 months is £12,000
Currency Example… Again the Pound against the Euro… in February 2008 the exchange rate was ¬1.32/ £1.00; in July 2008 it is ¬1.26/ £1.00. On a transfer of £200,000 the difference in those 6 months have been ¬8,000 (approx £6,000)
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Apr.29,2011
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