The most common mistakes when investing in foreign real estate: Facts, figures and how to avoid them π‘π
Investments in foreign real estate have been on the rise in recent years. In 2024 alone, the volume of Czech investments in foreign residential real estate increased by 18% year-on-year (source: Deloitte). Nevertheless, up to 37% of investors admit that they have encountered unexpected complications that cost them time and money. What are the most common mistakes and how to avoid them?
1. Insufficient knowledge of the market and location π
Statistics:
For example, in 2023, property prices in Dubai increased by 16.9%, while in Bulgaria by only 4.2% (Knight Frank, 2024). Yet many investors choose a destination based solely on popularity, not on real growth potential.
Mistakes that are often repeated:
- Investing in βtrendyβ destinations without analyzing long-term trends
- Underestimating seasonality (e.g. in Croatia the average occupancy of apartments is 62% per year, in Thailand 78%)
- Ignoring local infrastructure and planned projects
Recommendation:
Always check:
- Average annual price growth in a given country over the last 5 years
- Occupancy and rental yield in a specific location
- Planned investments in infrastructure (e.g. airports, highways)
2. Underestimating legal and tax aspects βοΈ
Facts:
- In Egypt, the property transfer tax is 2.5%, in Spain it is up to 10% (depending on the region).
- In Albania, it is necessary for foreigners to verify ownership rights up to 3 generations back due to historical restitutions.
Most common mistakes:
- Purchase without due diligence and legal audit
- Ignorance of local fees and taxes (e.g. in the UAE, the annual property management fee is up to 2.5% of its value)
- Underestimating the need for a local lawyer
Recommendation:
- Always work with a verified lawyer and tax advisor in the country
- Request a detailed breakdown of all fees and taxes before signing the contract
3. Unrealistic expectations of revenue and occupancy πΈ
Statistics:
Average annual income from short-term rentals in tourist-attractive areas:
- Cyprus: 5.2%
- Spain (Costa del Sol): 4.8%
- Thailand (Phuket): 6.1%
Errors:
- Counting on 90β100% occupancy (in reality it is 60β80%)
- Ignoring seasonal fluctuations (e.g. in Bulgaria the summer season is only 4 months)
- Not including management, cleaning and maintenance costs (which account for an average of 15β20% of revenue)
Recommendation:
- Work with conservative numbers (count on occupancy of max. 70%)
- Include all operating costs in the return calculation
4. Investment without personal visit and inspection ποΈ
Facts:
Up to 22% of investors who did not inspect the property in person later discovered hidden defects or an unfavorable location (source: Savills, 2023).
Errors:
- Relying only on photos and videos from the developer
- Absence at the handover of the property
Recommendation:
- Always schedule a personal inspection, ideally with an independent inspector
- Request a detailed technical report on the condition of the property
5. Underestimating liquidity and exit strategies π
Statistics:
The average time to sell a holiday property abroad is 6β18 months (depending on the country and location).
Errors:
- Investing in illiquid markets without an exit plan
- Failure to take into account sales fees (e.g. in Croatia up to 3% of the sales price)
Recommendation:
- Find out the average sales time in a given location
- Have a strategy ready for a potential quick sale
Summary: Success is in the details and data π
Investing in foreign real estate is not just about beautiful photos and promised returns.
The key to success is:
- Market analysis based on real data
- Legal and tax certainty
- Realistic revenue expectations
- Personal inspection of the property
- A well-thought-out exit strategy
Invest smartly, with data and without unnecessary mistakes! π