Buying a property abroad should be the most exciting thing you ever buy, but ensuring it stays a pleasure will depend on it staying affordable. You need to keep a level head and plan for the continuing and hidden costs of buying overseas.
Don’t let the thrill of finding your perfect overseas home distract you from the running costs that could come with it. On top of the initial purchase fees, it’ll cost you just to visit from the UK and you’ll have ongoing bills to pay too, some different to what you’re used to. Covering these will require budgeting and keeping your foreign bank account topped up…
Travel and transfers
Second homeowners should investigate the typical cost of flights out to their nearest airport. Do that for both the high and low seasons. It’s worth checking what the low-cost carrier options are, such as charter flights from tour companies. As a rule of thumb, it’s unwise to rely on just one carrier t your destination. Companies like Ryanair apt to drop routes at a moment’s notice.
Car hire
We all know what a hassle and expense it can be to get car hire each time you go abroad. The costs can really mount up too, often being more than the flights out there. So what can you do? Firstly, when choosing a property consider how important it is to you to have public transport easily available. It’s easy enough to check timetables online these days.
If you really can’t avoid a hire, look for good deals on online car hire brokers like Holidayautos.com. You’ll often find that renting a car local to your property is far cheaper than at the airport. Although that does leave the problem of getting from the airport….
Utilities and household costs
Water and electricity usage are charged along the same lines as in the UK. Whether you have mains gas will depend on where you are, but you’ll soon get used to bottled gas. Expect seasonal spikes in bills, depending on when your property is used. Unsurprisingly, bills at the end of the summer quarter are typically higher, thanks to air conditioning usage and power used by the pump of your pool, if you have one. Don’t forget to include annual buildings and contents insurance in your budgeting.
Council tax
The good news is that you’ll probably be paying much less than in the UK. Our bills are more expensive than virtually all other European countries. However, council tax still exists abroad and it needs to be factored into your annual running costs. Your estate agent should be able to give you an indication of what it is for each property you view. In some countries, it is split into two or three payments throughout the year.
Community fees
In popular holiday areas, especially in Spain and Portugal, it is common for properties to be located within clearly defined complexes or larger residential communities. These will have communal areas and facilities, including gardens, pools, parking areas and gyms, all of which require maintaining.
To pay for this maintenance homeowners will have to pay monthly community fees, which are pooled and overseen by a designated committee of owners. The larger and more elaborate the facilities and grounds, the more expensive the monthly fees. Note, these are different to council tax.
Annual tax return
If you let your overseas home to holidaymakers, then you will need to file a tax return and pay any income tax due on your rental income. It is often easier to hire your lawyer or property management firm to file your return for you. In some countries, including Spain, even non-resident homeowners who don’t rent out their property need to file an annual return and pay something called imputed income tax. Although this is a small amount, not paying will catch up with you, especially when you come to sell.
Key-holding and management
It’s common for second homeowners to use a management company to manage their holiday lets. Even those who don’t rent out their property might choose to one for key-holding and general maintenance. This comes at a cost – management firms can charge anything from 10-20% of the rental income for their services. Or a flat fee just for maintenance, which could include looking after your pool and garden.
Keeping your account topped up!
Crucial to covering all the above costs is keeping your foreign bank account suitably in credit. For most owners, this means transferring funds over from the UK, in the process exchanging funds from sterling into the local foreign currency, typically euro. Avoid using your bank to make these transfers – you’ll be offered a poor exchange rate and likely have to pay commission or transfer fees.
Instead, make the most of the service offered by your Personal Trader here at Smart Currency Exchange, who will work with you find the best solutions for sending money into your foreign account safely. This includes securing an exchange rate for regular transfers over a fixed period with something called a ‘forward contract’. This means that for an agreed period, transferring a fixed amount of foreign currency will cost you the same in Sterling each month, regardless of how the exchange rate fluctuates. They will also give you the option to pre-fund your account, so that your money is ready to go as soon as you need it, without worrying about daily limits for international transfers from the UK when you first move over. To find out more, simply call your Personal Trader on020 7898 0541today, orregister for an account today.
