Costs to consider when purchasing real estate overseas

Wednesday, 06 March 2013 11:09

Work out your expenses carefully

Work out your expenses carefully

If you've decided to take the plunge and buy a property abroad, good for you! It's an exciting prospect and one that could prove lucrative if you go about it correctly. No matter where you choose to purchase real estate, however, there will be certain costs to consider.

While these may vary in the actual amount or percentage you are paying out, it's likely that you'll need to meet some or all of the following expenses.

Taxes

The majority of nations charge tax on property transactions, particularly if they are for a second home. The levies you have to meet will vary from place to place, so make sure you are aware of all your financial obligations before you sign on the dotted line. Typically, this will be a percentage of the purchase price or the property's value (these are sometimes defined differently, so make sure you know how it's worked out where you're buying).

Don't forget that in some countries, you'll also have to pay regular taxes to the government. The equivalent of council tax is one thing you ought to set money aside for, with Spain, Italy and France among the destinations where you'll be expected to pay this levy. Depending on the development you buy in, you may also have to splash out for an annual service charge to keep the grounds in order – check what this is before you agree to the purchase.

Notary fees

In some locations – most notably France – you will have to engage a notary to deal with your property transaction. These are impartial government employees who oversee all foreign real estate purchases. Their fees vary from one country to the next, so, as with the taxes, do your research beforehand to work out how much you can expect to pay.

Legal fees

Even if there is a notary involved in your overseas property transaction, you still need to hire a lawyer to look over all the paperwork for you and ensure it is in order. If you're buying real estate in a nation where English is not the first language – and you're not proficient in the local tongue – make sure you engage a bilingual lawyer who has experience of working on property deals.

A professional with these qualifications should be in a position to explain everything to you and will ensure the contracts and other legal documents are correct. Don't just settle on the first lawyer you find – speak to different legal firms to get the best rate on their services.

Foreign exchange costs

When you're buying a property abroad, you're unlikely to be paying the seller in sterling, so you'll need to change your money from one currency to another. If you complete the transaction at a time when the exchange rate is not in your favour, you could discover it costs you a substantial amount of money.

Your best option is to use the services of a foreign exchange specialist, who can get you the most favourable rates available at any given time and advise you about products like forward contracts that allow you to lock in good rates ahead of your transaction. This will not only mean you know how much the transaction will cost and can budget for it, but it could also save you a significant amount of money when you're transferring such a large lump sum.

Firms like Currency UK have specialist teams of advisers who work on a one-on-one basis with their clients to find the most appropriate foreign exchange solution for a given transaction.
 

 

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