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Last Updated: Jan 10th, 2006 - 20:06:32 |
This is a true case history detailing the purchase of a holiday home overseas. By describing a real-life experience of buying a home in Spain we explain why people buy property overseas and show how to buy an overseas property with minimum outlay.
Mr and Mrs Jones bought an apartment in Spain in 2002 for 107000 euros. It is a lovely three bedroom apartment only 10 minutes walk to a beautiful beach. They had it valued recently (October 2005) for 155000. An increase of 45% over three and a half years. The reason they had it valued was because they wanted to remortgage. In fact the mortgage company's valuer was over-cautious because an identical property next door was recently on the market for over 200000 euros. So the real increase in value is probably even greater than 45%. If the apartment was sold today it would almost certainly fetch more than 155000. The main point here is that it is worth a lot more now. This reason alone is sufficient incentive to buy a home overseas. It is simply a great investment!
The second benefit of owning a home overseas is that the owners stay there, free, whenever they want. All they pay is the flight, car hire, and a payment to the caretaker to prepare and clean the apartment.
The third point, and this is an important one, is that the owners did not actually pay 107000 for the property. No, they paid only 20% and borrowed the rest through a mortgage in Euros at a very low interest rate. So they only had to find 21400 euros plus around 10000 euros for solicitors fees, taxes, agents fees etc.
The fourth point is that the property is rented as a holiday home (short term lets in summer and long term lets in winter) when the owners are not using it. The owners get an income from holiday lets of around 5000 euros per year which pays the mortgage !!!.
So, to recap, Mr and Mrs Jones spent about 32000 euros (21400 deposit plus costs) for a home overseas. The mortgage and running costs are paid for by rental income. The owners get to stay there whenever they like (usually about twice a year). In 15 years time when the mortgage is paid off Mr and Mrs Jones will own an asset worth, at today's prices, at least 155000 euros. In 15 years time it will probably be worth much, much more!
This is why people buy a home overseas!
Today, Mr and Mrs Jones have remortgaged their overseas property for the maximum amount based on the recent valuation. Guess what they are going to do with the released equity? That's right! They are going to use it to buy another property near their existing overseas property. Soon they will own a second overseas property without having to spend any of their own money. the first property paid for the second one!
Copyright 2005 Hugh Griffin
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