We’ve all seen the ads – luxury properties in idyllic locations, it’s so easy to dream of escaping once or twice a year. But there are many pitfalls that may lead it being an indulgent folly.

That’s not to say there are some advantages in buying property overseas. Affording the opportunity to diversify, favourable exchange rates and often much cheaper prices offering good ‘bang for buck’ as some of the pluses.

There are a number of motivations that lead people to buy overseas and as we all buy with emotion, oftentimes, people choose to invest such property to use as a holiday home or a place in which to spend their golden years. As a bonus, they also choose to simultaneously rent out the property when it is vacant to generate an income.

But there are also a number of pitfalls that may lead to buying overseas being nothing more than an indulgent folly.

Lack of strategy

To invest successfully, thought should be put into what your aims and objectives are. Is your end goal to secure a long term investment for capital growth or is your primary aim to fund your retirement home by generating rental income?

First and foremost, knowing what you wish to achieve will help you to devise a strategy where the property you choose helps you to achieve your goals.

Lack of research

One of the biggest factors which make overseas investments fail is the failure to undertake enough research before committing to a purchase. In addition to understanding the local market conditions at your chosen location, it is essential that you are aware of the macro factors in the wider economy which may impact you in both the short and long term.

For a successful long-term investment, it’s essential to gather as much information as possible, not just on your initial investment costs, but longer-term associated costs such as the costs to let, manage and even sell your property.

You should also research the firm’s marketing the project and the developer undertaking it to get a good understanding of their track record and reputation.

Wrong location

There is a good reason why one of the most popular property TV shows is called ‘Location, Location, Location’. Because when it comes to property investment, it’s all about location. Put simply it is the prime consideration. For people investing in a country in which they are less familiar with, undertaking research into your chosen location is even more vital.

Consider what you want from your investment. If you are looking to rent to professionals, consider the employment data within your chosen location and how accessible your investment is to business centres. Conversely, if you are looking for a long-term holiday home, is there an airport in a convenient nearby location or do you have to take a smaller charter flight or boat to get to the property.

Tax implications

This is one of the most common mistakes for investors who “go it alone” make when purchasing offshore. It’s vital to understand all of the implications when investing in a foreign market. Legal structures and taxes vary hugely across the globe, so you need to make sure that you are fully aware of taxes and laws around income, capital gains and also ongoing costs such as local taxes or taxes on foreign owners.  It is also very important to understand the tax implications that overseas ownership may have on you in your domiciled place of residence too.

So whilst one can easily be seduced by the romance of buying property abroad, you need to be aware of the pitfalls above to ensure you mitigate your risks, of which there are plenty.