The first step to successful overseas property investment, is knowing your goals. What is that you’re after? Too many people are day dreaming when it comes to overseas property investments. They see themselves sitting in the sun, by the pool, with an ice cold drink – and they’re not clear to themselves about why they are investing.

Many people end up being disappointed with overseas properties, because they lost focus of what truly matters to them. Just search for "property forum" on Google and you’ll find thousands of people lamenting the fact that they ended up in the wrong overseas investment. They didn’t have a strategy and fell for sales hype.

Three Reasons To Invest In Overseas Property

Most reasons people have for buying overseas property boil down to the following:

• To use as a home for vacation and/or retirement

• To make money by renting the property to others

• To buy the property to flip and release capital before it is built up (also called the off-plan investment)

I will briefly review each reason below.

Home For Vacation And/Or Retirement

If you are looking to buy property for vacation or retirement, you’ll have some thinking to do. Probably, you will want to have privacy, quiet and nice surroundings, and access to facilities like health care and shops.

Do you want your home to be near the golf course, near the beach or somewhere else? Can you pay the mortgage from your pension or will you continue to work? If this is going to be your home, do you really want tenants in it while you’re gone? Is there family you want to be near to? And, last but not least, will you want to spend your holiday in the same place every single year?

Rental Income And/Or Capital Appreciation

If making a profit is your object, you will have to clarify whether you want a steady rental income, capital appreciation, or some kind of combination between them.

If rental income is your goal then, besides the popularity and the rental prices, you have to take the length of the tourist season of your target country into account. If it’s too short, you may not have enough income. This is often true for beach and skiing areas.

If you’re mainly after capital appreciation, then investing in popular tourist areas or in emerging tourist markets. It’s crucial to keep an eye on your competition then. In hot areas, each new development will be put on the market by highly professional local companies that have access to the best customers. You will have to outmaneuver them in some way. The alternative is investing in a development company that does the work for you.

Off-Plan Investments

Off-plan investments are investments into property that has yet to be built – it’s on the drawing table of a development company.

If you manage to pick the right development project, then you, as the investor, are able to earn a substantial profit. Especially if you’re into the game early, you may get a discount of up to 15%. Upon signing the contract, you will only have to pay 10% of the price. The rest you will pay in (usually) monthly payments.

However, it isn’t easy to make a profit. There are serious dangers here. If the project goes bankrupt, your 10% initial payment is down the drain. Prices have to rise fast after completion of the project, or you won’t make a profit. And if the locals cannot afford the property, you can only sell to foreigners. That’s why it makes more sense to invest in the development company, instead of the property.