9 things to consider when purchasing an offshore property investment

For South Africans, investing in offshore real estate can be an enticing prospect. In today's unstable market, the opportunity to own a rental property in another currency can offer a straightforward and tangible solution to offshore wealth generation. Buying international real estate is a way to build your offshore wealth portfolio and leave a legacy for your loved ones by owning a brick and mortar asset which can be passed down for generations.

Offshore property investment also offers you the chance to own a piece of the UK, Mauritius or any other part of the world. Therefore, it is very important to seek professional advice and to understand the real estate markets in different locations so you feel comfortable with your investment. Here are a few of the factors we suggest you consider when choosing an investment property.

1. Invest in a foreign, stable currency

Choosing a property in a place where there is a strong and resilient currency can protect your wealth. If you invest in well-considered property abroad, you can increase your wealth through capital appreciation and protect your money by holding an asset valued in Euros, Pounds or Dollars. With a portion of your wealth in a foreign stable currency, you strengthen the security of your wealth, insulate yourself from the volatility of the South African economy and currency, and enjoy more global mobility with a monetary presence already established elsewhere.

2. Low–interest rates on loans and mortgages

Low-interest rates on loans, in some countries, make buying property abroad an appealing option for a buy-to-let investment. This is when either an individual or a company purchases residential property with the intention of renting it out to tenants. The advantage of this, for those with limited funds, is the availability of mortgage finance to cover most of the purchase price. With the right investment, you can achieve positive net returns from the outset.

3. Investment property purchase structure and tax

It is important to understand the various risks associated with making an investment abroad. Understanding these risks is what allows an investor to make a fully informed decision. The different rules and regulations each country has around purchasing property.

The purchase of offshore property should factor in the four potential tax expenses: transfer tax, property tax, income tax, and capital gains tax. It is essential that you have assistance from a cross-border investment professional to make your investment tax efficient and in line with your goals.

4. Supply and demand

There are a number of factors that influence property prices, availability, and investment potential. Stable capital growth, higher rental returns, and fewer vacancy periods are usually associated with locations where supply fluctuates and demand is high. Therefore, it is important to target areas that experience a high demand for property on a recurring basis, such as university towns, popular vacation spots or well-known city locations.

5. Location of the investment property

Examining the history of a place can help us better understand how prices have previously performed and identify any external factors that might affect future prices. Demand for housing in a particular location could be affected by investment in the location, changes in infrastructure, or changes in the workforce.

It is important to consider the area where you are buying property and assess whether the area will be in demand in the future. The team at Sable can assist with investment locations and property options. Some signs which suggest a thriving investment market include the following:

• Major infrastructure improvements
• Government regeneration
• Increased rental demand

6. The resale value of the investment property

To plan ahead properly, you must identify your potential resale buyer or tenant before you buy a property. If you are looking for a low-maintenance investment property, consider a new project from a reputable developer. By opting for a new build instead of converting or renovating an existing building, you can avoid cost uncertainty and secure a long-term tenancy from the outset. At Sable International, we will identify areas where we note considerable regeneration, infrastructure improvements or other reasons why demand should increase and drive rental demand which would also put upward pressure on property prices.

7. Tenant profile

Tenant profile is one of the most important aspects of investment property ownership. It is vital to ensure that you buy property in a location with an active rental market. There are many established systems in place in primary real estate markets to assist with tenant selection and ongoing management of the property. Evaluating the quality of potential tenants is vital to securing a consistent and predictable rental income.

Different tenants require different amenities and services. A good tip is to talk to locals before you invest, as they can give you 'inside information' about which areas are best suited to the type of property you want to invest in and the tenant you want to attract. We are able to provide this ‘inside information’ through our experience on the ground and via select partners who live in these areas and understand them deeply. It is also advisable to consider the extent to which your property depends on tourism and whether it is year-round or seasonal. Professionals may be looking for a property near a city, students near a university and holidaymakers near a resort. These differences need to be considered before investing in offshore property.

8. Property management

It is important to make sure your investment is handled by a trustworthy company, with sufficient experience in dealing with the many facets of property management. Established investor markets should allow for a hassle-free process in this regard. A less established investor market will require you to do more of your own work in organising the property management, although in some cases this may have a cost advantage. We can provide advice on which option makes sense for you, this will depend on your risk tolerance and available time.

9. Expert investment advice

Avoid using search engines as a channel to do this process on your own. Without in-depth knowledge of the real estate markets, investment process and after-sale considerations you can easily become victim to over-inflamed property prices, poor developer reputation and misinformation. Another common mistake you should beware of is using real estate companies that have an interest in selling you a particular property that may not be suitable for you. We provide advice that is separate from the bias of a real estate company or developer and will work to find the investment that best fits your vision.

How Sable International can help you invest in offshore property

We offer a bespoke overseas investment advisory service. With our extensive knowledge of the international property market, we can help you diversify your wealth through a portfolio of offshore properties.

We aim to offer you the best possible properties in cities that we have identified as safe markets based on extensive research. Each jurisdiction has its own agents, developers and specialists with whom we work to ensure we find the right property for you.

As part of our approach to offshore property investment, we:

• Collaborate with you to determine your offshore investment strategy
• Conduct extensive research and due diligence on all properties
• Manage all facets of the transaction within Sable International

Whether you are looking for an investment property to build a property portfolio, a new home or a holiday home abroad, we can guide you through the process and take care of all facets, including ownership structure, taxes, foreign exchange and property purchase advice. Get in touch with us at rei@sableinternational.com or call +27 (0) 21 657 1570 (SA) or +44 (0) 78 438 00079 (UK).