By Ashley Osborne | Head of UK Residential & Managing Director – International Properties

 

Investing in property overseas requires planning, research and most importantly, strategy. It is only with a well thought out strategy that you can achieve your desired return on investment.

We categorise property investment strategies into two approaches:

  • Passive approaches involve lower maintenance. This is the optimal choice for investors unwilling or unable to spend much time or money to actively enhance and maintain their investments.
  • Active approaches often require the investors to spend a lot of time and money to obtain higher returns.

Over and above that, property investment strategies can range from low risk, low effort, and low return to high risk, high effort, and high return. Below are the three most common strategies:

1. Buy-to-Let

The most passive property investment strategy is to buy a property and rent it out for a monthly rental income. This is a low risk type of investment and won’t take up much of your efforts, as compared to an active strategy. Bear in mind, however, that the standard costs involved with a property investment still apply, which include maintenance, insurance, and mortgage costs. One key advice to keep in mind when using the buy-to-let strategy is to budget for the additional costs that may occur. For instance, if you choose to have an agent manage tenant acquisition or property maintenance, you will have to incur additional fees.

If you are looking to invest in an unfamiliar overseas location, we advise you to diversify. Avoid purchasing too many properties in one city, and instead explore other cities which may present higher opportunities for returns. Of course, this will require you to spend more time researching different cities or countries as well as their investment potential.

2. Short Term Investment

A more active strategy for investment is buying a property, renovating it to ensure an appreciation and reselling it in a short period of time to enjoy a higher return.

The most important aspect to keep in mind with short-term investment strategy is the potential for the property to appreciate in value. While overhauling a property can help secure a higher value in the future, you may also choose to invest in properties in emerging locations or safe havens to ensure a higher jump in value. Finding properties that have the potential to appreciate is challenging but also very rewarding once you secure the right buy.

One thing to consider is that some countries have rules against short term investment, and set a minimum time for properties to be in your possession before you can put it back on the market. Before deciding on a city to invest in, we suggest you to look into their regulations on property buying and selling to ensure that your short term investment strategy would work in that market.

3. Wholesaling

Wholesaling is an active B2B-type strategy which involves selling the property to another investor under a contract for an agreed fee.

This can be favourable to investors, since as a wholesaler, you are not involved in maintenance or renovation work for the property – this is up to the person you resell it to. This also means you spend less time on the property since there are no landlord responsibilities.

The downside to wholesaling is the amount of time spent on finding the best properties to sell so that there is a continuous flow of cash. This makes it one of the most hands-on property investment strategies since it is more or less a full time job to become a profitable wholesaler.

As an investor, it is important to think about the time and resources available, the level of risk you are willing to undertake and your investment goals, before committing to one specific property investment strategy. Once you have decided on the ideal strategy for your needs and resources, whether it is buy-to-let, short term investment or wholesaling, you can proceed to determine the type of property to invest in.

Access more tips and advice on overseas property investment from Colliers International to help you make the right decisions. For those who are new to property investment, refer to our Tips on Property Investment for Beginners.