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Expat Investor : March 2008
Fast Facts 33450 PROPERTY INVESTMENT March 2008 EXPAT INVESTOR 23 Going, going.... gone to the well-prepared expat property investor There's no quicker way to buy a property than at auction. You won't be part of a stressful and slow- moving chain and great deals can be secured. Once the hammer goes down, the sale is set and there can be no re-negotiations. People who come back to the UK specifically to buy a property may find this the best option, especially as there are no chances of being gazumped. From the outset, you will know the date of the auction and the timescale for completion is fixed and legally binding for both buyers and sellers. Bidding at an auction is a simple process but it's vital that rules are followed. Many expats are confused about what they must do, even after they've made a successful bid. Do your homework beforehand and ensure you have your finance in place. The seven points below will help inexperienced bidders avoid the most common pitfalls: Be prepared If you've never been to an auction before, sit in on one first before you start bidding. Request a catalogue from the auction house. Most print them a few weeks in advance of the auction. If there's a property you like Buy-to-let landlords are optimistic about the next 12 months, with 71% seeing their overall prospects as good or very good, according to research from Alliance & Leicester Mortgages. Over three quarters of landlords (77%) claim they are making a profit out of their properties, with 22% of these able to save some of this income and boost their savings. Landlords with properties in Central London believe rental yields can be as much as four times higher (44%) than buy-to-let properties in the neighbouring South East of England (10%). In other regions, landlords believe that Scotland will generate a five per cent increase in rental yields next year, and the North just a four per cent increase. They also believe that Wales is the least likely to produce high rental yields, predicting just a one per cent increase. Jeremy Claridge, Head of Specialist Mortgages, says, "It is encouraging that buy-to-let landlords indicate they are feeling buoyant about the outlook for 2008. Regardless of a tough financial year, it is clear the buy-to-let property market is still healthy for longstanding landlords, especially for those in the South East of the country. "Our research shows that landlords believe London will produce the highest rental yields in 2008 and remain very popular as investment areas, but it is the North of England and Scotland that are expected to expand most rapidly over the next year in terms of projected net growth." "Landlords with only one or two properties expect their investment to break even annually. The long term view is positive house price inflation will yield a positive return over the investment period. Smaller landlords should continue to carefully consider the economics of any investment and ensure that they plan to deal with extended void or less profitable periods." Fast Facts 33452 There is an increasing trend of expats bidding at property auctions to secure a good deal and a quick completion. Irene Thomas, Operations Manager at North West company Auction Finance, offers advice for the uninitiated planning to buy under the hammer. What is it about Brazil's property market that has so many international buyers hot under the collar? According to Steve Worboys, Managing Director of Experience International, Brazil is ticking every box in terms of desirability, accessibility, affordability and stability -- and many believe it could present property investors with one of the best chances to profit substantially over the short to medium term. Mr Worboys highlights essential fundamentals supporting the appeal of Brazil's property market, which include the fact that the government and economy in Brazil are stable and that the government is behind a sustained effort to improve the nation's appeal for tourism and to promote Brazil's virtues worldwide. "Their efforts are already paying off as the World Travel and Tourism Council has reported that tourism growth rates in Brazil are almost 3% higher than the global average." The most beautiful, temperate, exotic and desirable region of Brazil is its north-eastern state of Rio Grande do Norte. The good news is that this part of the country is accessible from the UK and mainland Europe, under eight hours flying time -- and now the UAE international air carrier, Emirates, is in on the market offering direct flights from Dubai to Brazil, which should expand potential tourism and property investor traffic to the region. 10 steps to making a purchase Experience Inter national recommends: 1) Find an estate agent with experience in the market to help you with your property search. 2) Appoint a reputable lawyer to guide you through the purchase process and to handle checking the title deed of the property, confirm there are no financial liabilities outstanding on the property and to draw up and check contracts. Your lawyer can also help with the payment transfers and ensure the property is registered in your name. 3) Make an offer on your preferred property -- if you're buying a new or off plan property, the price is generally fixed and the amount you have to pay up front will depend on how far along in the construction phase a given property is. 4) Get your Brazilian CPF number -- which is like a social security number -- everyone has to have one of these to buy a property in Brazil and the process is straightforward. Apply for a form online ttp://www.receita.fazenda.gov .br/Aplicacoes/ATCTA/CpfEs trangeiro/defaulting.htm 5) Pay a non-refundable deposit and wait for the sales contract to be drawn up and checked by your lawyer. 6) Sign the contract or, if you have given your lawyer power of attorney, they can do this for you. 7) If the property is completed both money and title transfer occur at this point -- if the property being purchased is under construction it's usual to begin making stage payments and the title will be transferred upon completion. 8) Budget for at least 7% of the purchase price for costs and fees, which are as follows: stamp duty of approximately 2--5% of the purchase price, registration fees of 2%, legal fees of 1--2%, possible import tax on the transfer of funds from abroad of 1%. 9) With your CPF number registered you become liable for income tax on the profits derived from renting your real estate in Brazil. Brazil has many double taxation treaties in place, ensuring you won't pay tax both in Brazil and in your home country. 10) Currently there is capital gains tax to be considered in Brazil when you come to sell your property and repatriate the profits. This tax can be legitimately avoided if you reinvest in property in Brazil the look of, arrange a visit and if you want to buy, contact a chartered surveyor and have a homebuyer's report carried out. Getting a survey done will ensure you don't get any nasty surprises when you've made a successful bid. It will also give you a basis on which to bid, meaning that you'll know your mortgage limit and how much deposit you will need. Stay cool Never spend more than you've budgeted for. It's easy to get carried away but just because someone is bidding higher than you that doesn't mean that the property is worth the extra. If you're nervous about doing the bidding yourself, you can ask your solicitor or surveyor to do this on your behalf. Ta ke the correct forms of identity If you're a successful bidder, you must provide photographic identification, such as a passport or UK driving license, and proof of address, such as an original utility bill or bank statement that has been issued within the last three months. If you're bidding on behalf of someone else, you'll have to provide the documents above for yourself and the named buyer, as well as providing a letter from the bidder stating that you are bidding on their behalf. Check legal documents thoroughly Legal documentation for each property will be given to the auction house in advance of the sale. This includes special conditions of sale, leases, planning permissions and searches. If you're interested in a particular property, arrange with the auction house to see this legal documentation before the auction. Always seek independent advice on the legal documentation. Research the area Ask local estate agents or neighbours what the area is like and, if you have time, arrange a viewing. Make sure you familiarise yourself with the local market. Look on websites such as www.landreg.gov.uk to find out how much similar properties in the area have been sold for. Get your finances in order As soon as the hammer has fallen, you are contracted to buy and will need to pay a 10% deposit, an administration fee and show your proof of identity immediately. Cash will not be accepted, so make sure you have enough cleared funds in your account. You will also have to sign the Sale Memorandum before you leave. Following this, completion usually takes around four weeks, although be aware that it's sometimes as little as ten days. The seller is also legally bound to complete on the day, so rest assured that your sale will go through quickly. Honour your bid Failure to honour a bid can have serious consequences. You will lose your deposit and the seller can also sue you for any losses they incur through your failure to complete. The claim will usually be handled by the auction house, who can also sue you to recover any of their own costs. Find out more through the fast facts number below. Landlords optimistic about buy-to-let prospects in 2008 Ten easy steps to buying property in Brazil
January February 2008