Alternative Methods of Purchasing Property Abroad
It’s no secret that the property finance landscape has changed dramatically in the last six months and that we are all suffering the knock on effects of what has been dubbed the ‘credit crunch.’ Mortgages are now far harder to come by, lending criteria and borrowing restrictions are far harsher, and anyone considering buying a property abroad to take advantage of falling prices is struggling to raise the finance they need to purchase a home or an investment property outright.
It’s ironic that 2009 could well be the best year to buy real estate abroad thanks to the drop in asking prices of many homes across the world yet at the same time the worst year for those who need to raise a mortgage to purchase! What’s more, even those in a position to lay down cash to meet the full asking price are reluctant to do so because the pound is currently languishing in a weak position against many international currencies.
Fortunately however, the construction and property development industry is well aware of the restrictions facing potential purchasers, and the strongest, wealthiest and most influential companies are also those in the best position possible to adjust their sales methods to make buying homes abroad easier. There are now a series of tried and tested, highly flexible and well-developed alternative purchasing methods available for those who want a home or an investment property abroad. Methods such as fractional ownership, buying shares in a development or even buying hotel rooms are beginning to be explored by greater numbers of people, below we look at some opportunities available.
Fractional Ownership
Fractional ownership is also known as asset-sharing; it’s a straightforward and cost effective concept that allows the buyer to get the very most out of a property investment abroad by only purchasing the share of time that is required by them from the property. James Wyatt, Managing Partner at Barton Wyatt International explains: “Both the benefits and the costs of the property are shared between a fixed and limited number of fractional owners. These owners buy a share of a property that is probably worth far more than any property that they would want to afford as an individual. This effectively means a buyer gets a lot more for their money. What’s more, the property is managed by a professional team year round, meaning that as an owner you arrive for your fixed weeks’ occupancy and the property is clean, properly maintained, the gardens are in order and there is fresh linen on the bed. While you are not using the property you are not paying for it, yet at the same time the home remains well looked after and in a pristine state, ensuring that the underlying value of the property, and in turn your capital share, can rise in line with market conditions.
“At Amendoeira Golf Resort in Alcantarilha on the Algarve in Portugal we are marketing a fractional ownership scheme, and many buyers are opting in and beginning to benefit from this fabulous golf resort which is just 35 minutes from Faro airport. Fractional owners have all the benefits of complete access to the resort’s two excellent golf courses its clubhouse, onsite bars, cafes and restaurants, the PGA Golf Academy, tennis courts, football pitches, bowling greens, pitch & putt, swimming pools, saunas and a kids’ club. Properties available include 2 and 3 bedroom luxury apartments with access to a communal pool, 3 bedroom villas offering spectacular views, or stunning 4 and 5 bedroom villas with private swimming pools and landscaped gardens. Prices start at €450,000/ £426,294 and range to €1,800,000/ £1,705,178.”
For more information please contact Barton Wyatt on 01344 843000 or visit www.bw-international.com.
Buying Shares
For a buyer who prefers to maintain a greater level of control over their property asset and in turn a greater level of responsibility for it, a direct share ownership approach to purchasing can possibly work best. In a project such as the award winning Limpopo-Lipadi Game and Wilderness Reserve in Botswana, a shareholder who is passionate about the outstanding environmental and ecological work that the Reserve staff is undertaking and who also wants to own a unique investment abroad has the option of owning direct shares in the entire project.
The buyer effectively benefits from having direct involvement in a project about which they are likely to be personally passionate, and they have an incredible property based investment asset in one of the world’s most exciting real estate ventures too! At Limpopo-Lipadi there are philosophies and practical guidelines in place to ensure that anyone who pays for shares in the project is not just merely providing passive financial benefit to Botswana and the native people who work within the reserve, rather the investors at Limpopo-Lipadi are encouraged to be passionate about the reserve, the wildlife and the environment too. They can receive training to become game rangers for example, they are given the freedom to create their own bush experience and they are encouraged to be fully involved in the reserve’s activities and in important decision making processes – so much so that Limpopo-Lipadi becomes not just a valuable investment asset, but a passion for every single investor! As a shareholder in the project you co-own the game and wilderness reserve which is at an exciting point in its development; you will be able to visit the reserve as often as you like, be part of the decision making process of the reserve or just simply enjoy the many diverse ecosystems when you visit. There are different levels of investment involvement that you can commit to – from a purely financial point of view, entry level investment is $195,000, but in terms of the difference that you can practically make and the benefits that you can personally witness and enjoy, they are limitless with this share purchase approach.
SIPPs
SIPPs, or Self Invested Personal Pension funds in the UK are now allowed to invest in qualifying commercial property projects. As a result, this method of investing money in property to diversify pension funds away from the more traditional stocks and shares approach to retirement saving has attracted the interest of many British investors.
Mark Andrew, MD of Emerging Earth comments: “to purchase an overseas property through a SIPP the property needs to be designated as a commercial entity. An apartment within a condominium hotel complex such as the luxurious Caracola Beach and Spa Resort on Isla Margarita that we are marketing therefore qualifies. The benefit of buying a property in this way, i.e., through your pension fund, is that you have tax free purchasing power. What’s more, at Caracola properties also come with an insurance bond backed guaranteed rental income of 7% for 10 years. Purchases at Caracola are also packaged to give owners relief from income and capital gains tax, and all in all Caracola provides a superb investment opportunity in an increasingly attractive emerging market.
“Any buyer will ultimately own a potentially high returning, capital appreciating, tax enhanced commercial property asset in one of the best beachfront locations in the emerging Caribbean, where onsite amenities for guests are five star and high-grade ensuring this development stands out for the long-term. Onsite facilities include multiple swimming pools, a beach activity area, spa, nightclub, fitness suite, duty free shopping zone, sauna, kids club, conference rooms, beauty salon, restaurants, bars and cafes.” Owners can earn a rental income, they can benefit from capital appreciation, they can enjoy the property themselves – and all the while the benefits are wrapped up in a SIPP to provide for a potentially handsome pension income.
For more information, please contact Emerging Earth on 0845 604 1208 or visit www.EmergingEarth.com.
Buying a Hotel Room
Another method of purchasing property abroad is buying a hotel room as opposed to an apartment, town house or villa. This novel idea is in fact incredibly rewarding when you look closer at the investment concept, and allows entry into a commercial asset that is normally only open to large corporations
Joseph Upchurch, Managing Director of Aston Lloyd explains:
“The market was screaming for a low-entry level investment opportunity that allows buyers to enjoy the rewards of both rental income and real capital growth – this is why we are guaranteeing a 6% return in the first 12 months for those who invest in our latest hotel development, The Aston Sofia. We’re confident in our research and the returns.
The Aston Hotel Sofia allows buyers to purchase a stake in a hotel room or suite in one of the fastest up-and-coming business districts in Sofia, the capital city of Bulgaria, where major international hotel groups are currently unable to meet the intense demand for accommodation.
What’s more, the hotel addresses the lack of conferencing and business amenities in the city with a 400-capacity conference complex that will well and truly meet this demand.”
For more information call Aston Lloyd on 0845 260 0646 or visit www.astonlloyd.co.uk.
Rental Pools
Finally, for those who want to buy a strong property asset abroad largely for investment purposes, the approach of targeting a globally branded project such as the Champneys Marbella Spa Resort and placing your investment into a managed rental pool might be the ideal way to invest. Julia Norton, Sales Director of Champneys Marbella says that the rental pool scheme they offer is a very good way of ensuring maximum return on rental income for investors, whilst at the same time preserving flexibility for owners. She explains:
“The rental pool is the best way for investors to maximise income from tenants and for second home buyers to also profit from their holiday home asset. For example, if an owner occupies their apartment for 6 weeks a year leaving 323 days free, with an average daily let of €500 and a conservative 65% occupancy rate, the return on your investment can be between at least €54,437 and €65,325 per annum. Naturally this could be more for an investor who places their apartment in the pool for the entire year.
“Even with this very modest occupancy average in my example you can see that this represents a return of approximately 8% on your total investment per annum. This makes investing in Champneys Marbella and participating within the rental pool an excellent way to maximise your returns." The Champneys Marbella Spa Resort benefits from the global brand behind the project, and owners or tenants of the stunning apartments and penthouses for sale and for rent in the exclusive luxury resort can enjoy the spa with its heated indoor and outdoor pools, twenty five therapy rooms, a manicure salon, sauna and Turkish baths, a Jacuzzi terrace, a fully equipped gym and an exercise studio. There will also be a juice bar, cafe restaurant, some relaxation areas, as well as a Champneys shop, conservatory gardens, sun terraces, water features and a plaza with hanging gardens. Prices start from €696,358 for 2 bedroom apartments, €971,729 for penthouses and €1,700,000 for duplexes.
For more information contact Champneys Marbella on 01442 291200 or visit www.champneysmarbella.com.