Many Germans decide to buy a property abroad. The triggers for this are manifold: living where others go on holiday, good climate in the south, holiday home, retirement home and secure investment. The decision to buy a property is positively influenced by the low interest rate policy of recent years. But to make the dream of a house abroad not a nightmare, you have to do some thinking in advance.
Purpose of a foreign property
The basic question that must first be asked is: how should the property be used? Depending on what the answer is, there are different things to keep in mind:
- Own use : If you decide for a private use, you should clarify whether this should only serve as a holiday home or a permanent move to the episode. Especially with emigration plans you have to be very precise about permits, residence and the like. inquire. But also the emotional and social bond to the old homeland should not be underestimated. If, for example, you do not want to do without German-speaking radio stations despite emigrating, a practical and small world receiver is the right choice, no matter where you are. In this way you take a piece of the old everyday life with you and do not have to change everything from scratch.
- Letting and asset accumulation : If the purchase is for the purpose of letting and asset accumulation, then you should first think about possible returns, taxation and additional costs. There are provisions in some places that do not allow re-letting without mandatory permits. This means that you have to be fully informed about the legal situation of each country. For a successful rental also the attractive location of the object plays a crucial role.
Location of a property
Especially after a dream vacation, the decision to buy a property can be quick and careless. Caution and rational thinking are required here. Market prices vary not only between countries, but also between different regions of the country. It is always true that the more attractive the situation for tourists, the more capital one has to take in hand.
In addition to the financial aspects, there are also other criteria in the location selection. These may be, for example, special climatic conditions, geographic location by the sea, existing infrastructure, personal interest and needs and the like. Ultimately, the place is also dependent on the purpose of the purchase of a property.
Visit on site
The rule of thumb in the real estate industry is: No object purchase before inspection! Despite the great effort, this is extremely important, especially when buying a property abroad. As these are lucrative and capital-intensive businesses, there are also many fraudsters in the industry. These try with false pictures, descriptions of location and below-average prices to bring good faith foreigners to the purchase.
Apart from intentional fraudsters, construction defects can be detected during an on-site visit. Ideally, you should visit a desired property with a surveyor who speaks the local language. Again, it is important to know the legal situation of each country. For example, in Spain, verbal pledges for real estate have a legally binding effect.
Information about the legal situation
As already mentioned, one must be careful even before the conclusion of the sales contract and know the legal situation of the respective place. Since the purchase of houses and land is not regulated at the European level, the national regulations must be observed. There are also countries, such as Austria, where real estate acquisition is regulated at the federal level .
It is best to consult with a lawyer or notary who knows the legal situation very well. The questions of usage and transit rights, building restrictions, land charges and mortgages must be clarified before the conclusion of the purchase agreement. It is recommended to record everything in writing and to register immediately after a purchase in the real estate register.
In addition, it should be clarified in consultation with local authorities, if the property is all right and legally built. It is equally important to thoroughly review the ownership and to exclude a mortgage.
The cost of real estate loans is currently particularly low due to low interest rates. Nevertheless you have to pay attention to a lot here as well. Loans for the acquisition of foreign real estate are much harder to get than for domestic properties. Even with a commitment, you have to expect higher credit costs, as the bank risk is higher.
You can also get a loan from a foreign bank on the spot. However, one has to be careful here, since the legal situation, conditions and contractual provisions are different than in Germany. In addition, several banks should be compared in terms of maturity, interest, amount of funding, repayment installment and constraints.
When considering how much debt and equity one must have, one should also think of the ancillary purchase costs (land transfer tax, brokerage fees, etc.) and the consequential costs (installation, maintenance, insurance). It is also advisable to keep sufficient reserves for unpredictable or in reserve.
Property taxation is basically where the property stands. Rental of real estate incurs rental and lease income that is taxed as income. The double taxation agreement prevents income tax being paid twice. But there are countries with which there is no double taxation agreement.
Again, it is important to know the legal situation and to seek expert advice in order to avoid mistakes. The tax rates differ depending on the country. In addition, you should consider even before the purchase, which costs may arise in subsequent sale or inheritance.
If you want to buy a property abroad, you have a lot to consider. In particular, the prospective buyers must bring a lot of patience and carry out each step conscientiously and with accuracy. In addition, it is important to act rationally and not impulsively, although a foreign property may also be associated with a lot of personal emotions.