Have you ever wanted to own a retirement home overseas? I bet you do, even if you may not have seriously thought about it.
But there is one thing for sure, as a Singaporean, you love properties. After a few years of quietness, the Singapore property market seems to be reviving again, with increasing home sales transactions in the last few months of 2017.
An influx of collective sales also gets the locals excited. I simply cannot run away from the topic of whether-I-should-buy-a-property-now when having a conversation with my friends or clients.
But seriously, it just makes little sense to me to exchange a few million dollars (likely half of your life savings) for a concrete house here where you can use the same amount of money to travel the world dozens of times and own a few retirement homes overseas?
Property investment and property ownership is a different game.
I have been tossing around this idea for long, but I know buying a property overseas, be it for retirement or holiday home, has different considerations.
Since I am not a property investment specialist, I consulted Cheyenne Hollis from Dot Property, who has six years’ experience covering real estate and lifestyle in Asia. Being the Communication Director and Editor in Chief of Dot Property Magazine, Cheyenne Hollis shared a lot of his wisdom.
If you want to consider an overseas property for retirement home or investment. Here are 5 key considerations.
#1. Location – look at bigger picture
Location is the dominant factor in real estate and this remains true when considering the purchase of a retirement or holiday home overseas. Not only are you investing the unit, but you’re also investing in its location.
Buying a house overseas is different from buying one in Singapore. It is not just about near a shopping mall or MRT. You’ve got to choose the right city.
A holiday home in a location that is not popular with tourists means you won’t see any return on your investment. Alternatively, places like Phuket in Thailand and Cebu in the Philippines continue to welcome a record number of tourists who will need a place to stay.
This holds true for retirement homes as well. You want it to be in a location where property values are likely to appreciate. Although we may not like to think about it, our children are the ones most likely to come into possession of the property and it is important to leave them with a strong investment they can either sell on, or use to build their own real estate portfolio.
#2. Property Management – more important than you think
Apart from location, obviously, the other most important factor when considering the purchase of a retirement or holiday home overseas, is who will be managing the property.
A well-known or respected property management company will not only add value to the property, it will also ensure your experience there will be an enjoyable one.
Before buying a retirement or holiday home overseas, make sure to find out more about the company tasked with managing the property. Search for other properties they manage as well as what services they offer, and look for any online reviews.
Many buyers get caught up with the beauty of a retirement or holiday home overseas, but fail to conduct due diligence on just what it will be like when they are spending time there.
#3. Legality and Buying Restrictions – get it wrong and your money is gone
Buying real estate overseas is filled with potential pratfalls that can derail your purchase before it even gets started.
Once you have found where you want to buy your holiday home or retirement property, you need to research whether or not the country imposes any stamp duty taxes, buying restrictions and minimum purchase requirements.
In some countries, it is illegal for overseas buyers to buy certain types of real estate or in certain locations. Due diligence is key to avoid troubles.
#4. Rental Scheme or Return on Investment – do your homework
Another consideration if you are keen to purchase a retirement or holiday home overseas is just what type of return on investment you can expect from your property.
You’ll also want to know more about the rental scheme used if you don’t plan on living at the property full time. The good news here is that many developers in Southeast Asia are offering buyers guaranteed returns for the first 3-5 years of the project being open. Returns do vary, but most projects guarantee 5-8 percent with some projects even offering as much as 10 percent rental returns.
However, the rental scheme is just as important as the promise of returns. More developers are opting for the “pool” approach whereby all units are pooled together and then the revenue from this is divided out equally to every owner participating in the scheme.
The upside of this is that you don’t have to worry about whether or not someone is actually using your unit on any given night. That being said, you will still find plenty of properties, especially more upscale ones like beachfront villas, where there is no rental scheme and you will need to have someone staying there to see any returns while you’re away.
#5. Title and Lease – not everywhere is the same as Singapore
Don’t overlook the title of a potential retirement or holiday home. These can vary between freehold and leasehold depending on the country, city or type of property.
Most people find freehold properties to be more desirable in Singapore, but it may not be possible when purchasing the overseas real estate. For example, Leasehold projects in Thailand can last up to 99 years, but this is usually broken up into separate terms. Usually, the lease will be valid for 50 years, with an extension available for the remaining 49 years.
If you do find a home you like that is only available on a leasehold basis, be sure to understand all of the terms, including lease length and terms for renewal. Many leases can be complex and may involve multiple renewals in order to get to a full term.
I hope this article gives you a quick idea about how to consider an overseas property. I will gather more information for you in the future posts. If you like this article, share it and subscribe to my newsletter for future updates.
There are more.
Country culture: Japan is a monologuous country where it is proud of its culture and less likely to learn other languages. Very few Japanese learn English. As such, communications such as contracts are all in Japanese. Ditto for Cambodia and Vietnam. In Vietnam, foreigners can only own 50 years leasehold, and when the property is sold to a local, it becomes freehold again! It is also very rules-based requiring owners to sign documents in many situations. How many of us like to fly up and down to sign this and that?
Opening of banks account: many countries adopt an unfriendly attitude towards non-resident foreigners by creating barriers such as opening bank account necessary for tenants to bank in. In Japan and Philippines, agents got to telex consolidated rents every three monthly to owners as a result.
Taxes and cost: They vary widely countries to countries. Many of them are bias towards foreigners owning a piece of their real estate. Purchasing taxes such as stamp duties, Income taxes for rent and Capital Gains Tax on selling and estate duties on death of owners are all very important matters. Anyone happy to pay 5-7% sale commission and rental management fees of 8-10% monthly to Australian and Pinoy agents?
Thank you for sharing. Are you a frequent traveller?