Advice on Buying an Overseas Holiday Home

My wife and I bought a holiday home in France 11 years ago as an investment “with benefits.”  The idea was that we would purchase a property in a market with strong capital growth, rent it out for as many weeks of the year as possible, and visit every now and then when it wasn’t rented out for a “free” holiday.

It’s worked out pretty well for the most part – at least until the recent recession.  When speaking with other second home owners, I think we did some things well.  We also made a few mistakes.  So here’s my advice if you are thinking about doing something similar.

Investment or Second Home

First, you need to decide what you want from this property.  Is this a place for you to vacation regularly and then help support the costs by renting it out when you don’t need it?  Or is this an investment first and if you get an extra holiday or two, then that would be a bonus?  The difference between these two approaches are profound – and so start here and don’t search until you have made a decision.

When we bought our place in France, we decided that it would be an investment first.  I researched the areas in France that had high tourism demand but with relatively low property costs.  The French Riviera has high demand but high property costs.  The Limousin region has low property values but also low tourist demand (generally speaking).  We selected the Dordogne Valley due to (at the time) a great combination of high tourism demand and low property value.  We had never been to the Dordogne, but it seemed perfect for what we were looking for.

If you are looking for a second home for yourselves first and not a pure investment, then you simply need to follow your heart.  Where would you like to spend the most time.  Ask yourself, if you had an opportunity to spend 3-6 months per year in that place – would you?

Once you have decided on an area or two, start to research property prices.  You need to become an expert on the market into which you are going to invest.  Use websites like RightMove.co.uk but also spend as much time looking for local agents as many of them will not list their properties on the larger sites.

Maintainability

When you are looking, please take “maintainability” into account.  This will not be your primary residence – not for a while at least.  It may be empty for months at a time.  You will have people with varying levels of care and consideration staying at your new home.  So make sure that you are not swept up by the charm alone.  We looked at the most amazing, beautiful and charming properties when we were searching for our home.  But we knew that many of them would be a maintenance nightmare (old roof with sagging timbers, etc.).

Curb Appeal

The other aspect you need to consider is “curb appeal”.  If you are planning to rent your property as a holiday home, then remember that it will need to compete with dozens if not hundreds of other properties in brochures and web sites.  You need something that will stand out in a photograph – a beautiful facade perhaps, an infinity pool, the views from the terrace.  If you don’t see anything that would make someone stop and look, then move on and find something that does.  There is a lot of competition for holiday homes and unless yours stands out from the crowd, you may have great difficulty in renting it.

Private Pool

If you are buying in a sunny location where a pool is expected, then please remember that people want a private pool when booking a self-catering holiday.  It is the most frequent question asked by our holiday makers – “is the pool private?”.   The worst thing for them is to book two weeks off at a cottage in France and to share it with another [potentially incompatible] family.

If you are buying in a complex where there is a community pool – then this is ok, as a shared pool would be expected.  But a country cottage in the south of France? no.

Furniture

If offered, don’t buy the furniture from the existing owners.  This is something we did and we regretted it many times over.  First, if you are getting a mortgage for this property – then the furniture will be deducted from the value.  Even if you “include” the furniture in your purchase agreement with the vendors, the mortgage company will say “non”.

We bought our place from a retired couple who were no longer able to visit the property.  The house was furnished and seemed to resemble most holiday homes in the area, so we agreed a purchase price that included furniture.  When we closed on the property, we had to find an additional £5,000 on top of the deposit of 30% to cover the portion of the price that someone allocated to funiture.  Money we weren’t expecting to pay and we replaced all of that furniture over the next two years anyway.

If you are planning to rent your house as a holiday home, then don’t fill it with cheap and old furniture.  It amazes me how badly most people furnish their holiday homes – garden tables for dining tables, conservatory furniture in the living area, old beds, etc.  Furnish it like you would your own home – you will enjoy it more when you visit, but so will your guests.  They will look after the house better (we have found) and you will get more repeat visits.

Estate Agent

If you are buying in a country where you don’t speak the language, then it is probably obvious that you should work with an estate agent that speaks your language.  Each country has different property laws and you will benefit greatly by having someone who can hold your hand through the process.

You should also educate yourself on the legal process for buying a property and the laws for property owners in the country you have chosen.  For example, some countries don’t allow foreign nationals to own property at all – but allow them to buy a 30 year lease.

This will be a large financial transaction, be smart about it and you won’t get ripped off.

Summary

We are really pleased with our holiday home.  We have people staying their next week who have been every year since we purchased it.  The property value has increased (despite the recent dips in the French property market) and the income from the holiday makers more than covers its costs.

I plan to write a “follow up” to this blog soon on the running/management of your new holiday home as there is a lot we have learned over the years that I would like to share too.