Buying overseas property Overseas property as an investment

You might be planning to use the property during the summer and rent it out the rest of the year

If you want your property abroad as an investment, make sure you are thinking long term.

You may be able to find bargains in countries where prices have fallen dramatically. These include Spain, where the housing market has taken a big hit and many people are trying to sell – although you must tread carefully with property in Spain thanks to problems with illegal building and ‘land-grab’ issues in some areas.

You may also be able to find good deals in France and Portugal. However, property markets are now more uncertain, so it’s wiser to buy in the more established ones. 

Letting your overseas property

If you’re planning to let your property when you’re not using it, it’s important to bear this in mind when you’re hunting for your new holiday home.

Make sure it’s in an easily accessible location with good local amenities and in an area popular with tourists. You should also investigate the competition – find out what the going rate is for rental on similar properties to get a realistic idea of how much you could make.

Don’t forget to take into account the holiday season in the area – many tourist destinations virtually shut down when it comes to the end of the season.

It can be a good idea to market your property through a local estate agent but you will need to take its fees into account, especially if you want the agent to manage the property.

Cheaper marketing options are dedicated holiday lettings websites. Word of mouth through family and friends is another good way to find potential rental income. But attracting business and managing the property yourself could be difficult, especially if you're in the UK most of the time.

You will also need to make sure the property is up to a certain standard and factor in cleaning costs and repair or replacement costs should anything get damaged by a careless tenant.

Rental income

You must pay income tax on rent you receive. You are liable for tax both in the country itself and in the UK – although there are national agreements that mean you shouldn't have to pay the same tax twice. Visit our guide to how rental income is taxed for more information.

You can deduct some expenses from your rental income to reduce taxable profits, but only those that relate to your lettings business (not to personal use).  

For more on property and other types of investment, also see our book Save and Invest.