10 Vital Questions for Second Home Purchasers

10 Vital Questions for Second Home Purchasers

Think of buying a second home aboard? There are many factors to take into consideration and the process can be bewildering!

At MEPM we have the solution! Managing Director Edward Hill shares with you his 'Vital Score Sheet' to help you make that all important decision.

Edward Hill says 'When purchasing a second home abroad vital 10 questions need to be considered'. Here we share with you how to evaluate each vital criteria. The “Vital Score Sheet” approach does most of the work for you; just answer each of the questions at the bottom of each sections and calculate your total to see how your proposed investment stacks up.

1. How Tax Efficient is the Purchase Going to be?

Most people are so taken in with the setting of the property or the actual development itself, they never consider the taxation element.  It can destroy the dream of a second home in a nano-second, when huge unexpected tax bills start flowing in from both your home country and the country where the property is located.  European properties are typically hopelessly tax inefficient whereupon Egypt, Emirates, Channel Islands are very tax efficient.

  • The purchase and resale costs  are less than 5% of  the purchase price  (+10 Points)
  • The purchase and resale costs  are more than 5% of  the purchase price  (-10 Points)
  • The annual taxes are less than 0.01%  of the purchase price (+10 Points)
  • The annual taxes are more than 0.01%  of the purchase price (-10 Points)

2.Does the property have good transport access?

That wonderful island just off the Grenadines might seem like a good idea at the time. You might also have forgotten that it took you three different flights to get there. Many golf developments have been put in places where the local air carrier doesn’t allow the carriage of golf clubs! Always remember that wherever you buy, you must have DIRECT international air links. A potential purchaser of your property might not share the appreciation of “airline adventure” that you showed when you purchased.

  • The international airport is within a taxi drive (max 35 minutes) distance and is serviced by reliable airlines. (+10 Points)
  • The airport only has a Ryan Air connection. (They pull out of routes as quickly as they start them off.) (-5 Points)
  • There is Fast Rail and Motorway access. (+5 Points)
  • It is an island destination (more pricey to reach) (-3 Points)
  • There is an additional flight or sea journey required to reach the property: (-5 Points)

3.What is the Climate?

What is the weather really like when you want to use the place? Also what extreme weather or natural phenomena could affect the property and your ability to insure it?

The property has:

  • Guaranteed Winter Sun (+10 Points)
  • Dry Heat in Summer (+5 Points)
  • Humid Heat in Summer (-5 Points)
  • Hurricanes/Typhoon/Seismic paths (-20 Points)
  • Monsoon Periods (-5 Points)
  • Guaranteed Snow (+10 Points)

4.How far is it from your home base?

On average most people are prepared to fly up to 5 hours on a low cost carrier. After that, tickets start getting pricier and visiting friends and relatives get fewer.  Also, jet lag is a huge reason why older people no longer wish to fly horizontally around the world and they therefore end up selling their properties in far flung places.

Travel time to the property is:

  • Less than 5 hours (+10 Points)
  • More than 5-8 hours (+3 Points)
  • More than 8 hours (+2 Points)
  • Jet Lag: Time Difference is:
  • Less than 3 hours (+10 Points)
  • 4- 5 hours (-5 Points)
  • 6-10 hours (-10 Points)

5.Is the location politically stable?

Political Stability is Crucial. However, bear in mind their might be a labled Dictator or a perceived undemocratic system but the real bench mark is how stable a regime is.

  • Normal Democratic Government (e.g. France, Spain, UK, USA)- Regular elections: (+10 Points)
  • Weak democratic but elected governments: (e.g. Italy, Greece, Balkans ): (+3 Points)
  • Iron Fisted Dictatorships/Military-  (e.g. UAE, Egypt) (+3 Points)
  • Dictatorships or Regimes likely to fail in next 15 years (e.g. Cuba, Central America)  (-10 Points)

6.Does the property have clear title and is the countries administrative and legal system safe and controlled?

The legal system of the country where your property where your property is located is crucial for your enjoyment of the place. Many countries have very complex hidden laws which can make property ownership a legal nightmare. Processes can slow, planning can be corrupt.

  • English Common Law- (e.g. Gibraltar) (+10 Points)
  • US law (+7 Points)
  • Napoleonic Code (+2 Points)
  • Spanish, Portuguese, Greek Legal systems (-8 Points)
  • Middle East (-10 Points)
  • Central Africa/South America (-30 Points)
  • Any Country where foreigners cannot have title (-20 Points)
  • Others: No legal system is perfect so (-5 Points)

7.What is the risk of oversupply in the area?

Most people do not work out how many other similar units are available in that area or country. This clearly affects resale value and can also be an early indication of some kind of property slump. For instance, Spain has 3m properties for sale whereupon Portugal only 300,000. The best way of gauging is to go onto a well-known portal such as Rightmove or Zoopla and see how many properties are on their site in the area or country on offer.

Inventory for Sale within the region

  • Less than 100 (+20 Points)
  • 100-500 (+10 Points)
  • 500- 1000 (+5 Points)
  • 1000-2000 (+1 Point)
  • 2000-10,000 (-5 Points)
  • 10,000 -100,000 (-15 Points)
  • 100,000 or more (-30 Points)

8. Does the Developer have a track record?

90% of people who lose money in property abroad are victims of developer negligence. Choosing a developer is always a huge risk. Marketing brochures say one thing but the reality is another.

  • Developers less than 1 year in operation (-20 Points)
  • Developers with a track record of more than 15 years (+10 Points)
  • Developers where you have witnessed their work or been recommended by an impartial third party (+5 Points)
  • Developers who are listed on a stock exchange (-5 Points)
  • Developers who offer escrow accounts (+10 Points)
  • Developers who link payments to delivery (+5 Points)
  • Developers who give you a clear, well specified contract (+5 Points)
  • Developers who will not guarantee service charge levels (-10 Points)
  • Developers who offer annual returns of more than 6%: (-20 Points)
  • Developers who incentivise 100% upfront off-plan payments (-10 Points)
  • Developers who can not show you a sample development (-10 Points)
  • Developers who insist you use their lawyers (-20 Points)
  • Developers who offer a hotel rental management programme but will not commit to a Hotel/brand name: (-10 Points)
  • If they commit to a hotel / brand name: (+5 Points)
  • Developers who when researched online or through other methods have poor records for Snagging and After Sales Care: (-20 Points)
  • Developers who when researched online or through other methods are involved in Class Action law suits for non or poor delivery: (-20 Points)

9.What is the currency risk?

How stable is the currency and what are the likely fluctuations, within reason. Also will there be issues in exporting the currency should you sell your property.

  • Stable and fully transferable /Convertible (+15 Points)
  • Unstable but fully transferable (+5 Points)
  • Stable but Nontransferable (-15 Points)
  • Totally Unstable and Nontransferable (-100 Points)

10. Is it safe?

Most people point to the Middle East as being an unsafe place due to terrorism risk and yet totally ignore violent personal crimes such as theft, assault, mugging and house break-ins.

  • Southern Europe (-10 Points)
  • Caribbean/Africa (-20 Points)
  • USA (-10 Points)
  • Far East (-10 Points)
  • Middle East (-10 Points)
  • Switzerland (+20 Points)
  • Northern Europe UK/Benelux/Germany (-5 Points)

 

HOW DID YOUR PROPERTY PROSPECT SCORE?

SCORE 20+

Purchase it right now, however, it will be very expensive and less likely to give a roaring return. e.g; Switzerland, Hong Kong

SCORE 0-20

Sensible well-timed purchase but will not go up hugely in value. e.g  Jersey, Gibraltar, North Europe, Australia

SCORE -20 to 0

Still worth purchasing but do the paperwork. Might make a good return. e.g - Montenegro,  Portugal

SCORE -50 to -20

Fairly Risky. Needs careful thought e.g -Greece, Spain, France, Italy

Score -150 to -50

Very Risky. Only if you really, really like the place and are prepared to lose all or part of your investment e.g- Cuba. Thailand. Certain Caribbean States.

Score: -150 or less

Don’t touch with a barge pole. You will not only lose all your money but you will have high stress levels every day you own that property. e.g- Central Africa (except Gabon/Luanda). Bolivia

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2 Bedroom Mangroovy Apartment in Beach Front Development

Mangroovy, El Gouna, Egypt

2Bedroom(s)
2Bathroom(s)
16Picture(s)
105.85
Visits:39

For sale in the prime beach front development of Mangroovy Residences a two bedroom apartment on the first floor. The apartment offers 105.85 m2 of living space plus loggias & balcony of 10.9m2

A masterpiece of nature-conscious architecture and luxury, Mangroovy is a lavish seafrontcommunity, blessed with El Gouna’s most desirable 360 meters of sandy beaches.

$224,740

3 Bedroom Mangroovy Apartment in Beach Front Development

Mangroovy, El Gouna, Egypt

3Bedroom(s)
3Bathroom(s)
16Picture(s)
171
Visits:35

For sale in the prime beach front development of Mangroovy Residences a three bedroom apartment on the top floor. The apartment offers 177 m2 of living space plus loggias & balcony of 33.53m2 as well as roof terraces of 88.5m2

A masterpiece of nature-conscious architecture and luxury, Mangroovy is a lavish seafrontcommunity, blessed with El Gouna’s most desirable 360 meters of sandy beaches.

$405,946

1 Bedroom Mangroovy Apartment in Beach Front Development

Mangroovy, El Gouna, Egypt

1Bedroom(s)
1Bathroom(s)
17Picture(s)
62.55
Visits:38

For sale in the prime beach front development of Mangroovy Residences a one bedroom apartment on the first floor.

A masterpiece of nature-conscious architecture and luxury, Mangroovy is a lavish seafrontcommunity, blessed with El Gouna’s most desirable 360 meters of sandy beaches.

$126,302

1 Bedroom Tawila Apartment with Private Garden

Tawila, El Gouna, Egypt

1Bedroom(s)
1Bathroom(s)
13Picture(s)
80.86
Visits:34

For sale a 1 bedroom apartment located in El Gouna’s new development Tawila. This unit offers 80.86 Sqm of living space and a private garden. Tawila Apartments come in two interior design choices. Pick from either Chic Hues or Earthy Flair.

Nestled amidst the azure blue waters is Tawila, a picture perfect masterpiece waiting anxiously to be captured.

£67,000

2 Bedroom Tawila Apartment on 3 Levels

Tawila, El Gouna, Egypt

2Bedroom(s)
2Bathroom(s)
13Picture(s)
100.72
Visits:37

For sale a 2 bedroom apartment located in El Gouna’s new development Tawila. This unit offers 100.72 Sqm of living space and a roof area of 26.50 Sqm. The apartment is designed over 3 levels. Tawila Apartments come in two interior design choices. Pick from either Chic Hues or Earthy Flair.

£125,000

2 Bedroom Tawila Apartment with Large Roof Terrace

Tawila, El Gouna, Egypt

2Bedroom(s)
2Bathroom(s)
13Picture(s)
93.07
Visits:40

For sale a 2 bedroom apartment located in El Gouna’s new development Tawila. This unit offers 93.07 Sqm of living space and a large roof terrace of 69.50 Sqm. Tawila Apartments come in two interior design choices. Pick from either Chic Hues or Earthy Flair.

Nestled amidst the azure blue waters is Tawila, a picture perfect masterpiece waiting anxiously to be captured.

£125,000

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