Overseas Property Investors, the challenges and tactics

Sitting on the runway, heading back to Scotland, here are my thoughts on last night’s talk with a lively group of Swiss property investors.

 15/05/2018  |  Chris Wood

Firstly, I had a blast! The group were a mix of German, SwissFrench, Australian and…..Scottish. Yes, one scot who now lives in Geneva and travelled the 3 hours to Zurich for the meeting. What a lovely bunch, very welcoming.

Interest Rates

What became clear is that the overseas investor face the same challenges as UK based investors but with extra constraints in the shape of high interest rates. They, like everyone, are trying to find good buy to let property opportunities but with an increased focus on yield.

When you have to pay high interest rates, without a high yield, the numbers don’t work.

Still, even with these challenges, I was really pleased to hear that deals have been done and more are in the pipeline. I’m confident that the passion for property I witnessed will win through.

Tactics & Property Investment Strategy

Many of the group have actually had some formal training in how to invest in UK property and kindly shared their tactics with me;

  1. Set up a UK based Limited company, with which to purchase property. I expect this is an SPV (special purpose vehicle) and solely for property investment.
  2. Open a UK bank account for the this new business, as you would have to anyway.
  3. Buy a property!

Number 3 is the clearly the trick but what I mean to say is that you must start the journey. You must get something bought, to show you have a track record. Getting a mortgage for a “foreign national” is possible but the interest rates are high (around 7% - 8%) and therefore it can be hard to make the deals work.

Yield! Again, this seems to be the most important factor in assessing the a property investment deal and, when your interest rate is so high, it must be.

Getting started is the key for, after 2 years of owning the UK buy the let, the said overseas property investor can start to enjoy a lower interest rate and over time this will only improve, as their property portfolio grows.

Start Small, and Build Muscle 

One of the clued up Swiss property investors I spoke to has just this week completed on a buy to let and….wait for it…..the property cost him £35,000. Of course he couldn’t get a mortgage for a relatively small purchase but at least he’s started and will start receiving around £425pm in rent.

Maybe for many, out of necessity, the tactic is to buy small before making larger investments with a reasonable mortgage interest rate in a couple of years. You can see the challenge but with a patient long term plan, success will no doubt follow. 

Reflection 

Yesterday, when taking off from Edinburgh, I wasn’t sure what I was going to find or if maybe taking this trip was a bit indulgent. You can read Zurich Baby! to get futher insight into my hopes and fears! Now, on the flight back, I am 100% certain it was the right decision.

Last night’s “talk” entailed me presenting and answering insightful questions for almost 2 hours so, after travelling and working all day, it was pretty exhausting. We even had time for a quick beer at the end! 

I’ve learnt something and hopefully have helped others learn too.

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