Buying a home abroad in Ten Easy Steps

Buying a home abroad in Ten Easy Steps

There is a gimmick that is still popular. It involves giving advice in a certain number of steps. Why this should help attract readers I don’t know, but apparently it does. So I may as well climb on this particular band-wagon..

Firstly, a quick call on why my advice is good. Maybe I can do that in ten silly steps as well.

  1. I have bought and sold property in nine different countries over a period of forty years. I have long term experience.
  2. I have called the tops and bottoms of the UK and Spanish property markets with 100% accuracy over the past forty years.
  3. I issue an annual property analysis. I have been doing it for thirty-five years. I have never been wrong.
  4. I’ve written books and articles on real estate for over twenty years, appeared on radio and t.v. in several countries, and have clients in 70 countries.
  5. Good grief, I even invented buy-to-let back in 1991, and wrote a book about it in 1993.
  6. I’ve got bored. Oh well, perhaps this should read: Why My advice is Good in only Five Steps

On to my ten tips

>>>>> 1 Work out what the heck you’re trying to achieve to start with. That is prime. Why are you buying? Anyone who doesn’t start with this question and kick it around for a year or so is asking for trouble.

Do you want a holiday home or a retirement home? If the former, why? Why would you always want to take a holiday in the same place? Work out what it will cost, including taxes, repairs, and everything else. Then add in the opportunity cost (the cost of not having the money you just used up). Even if you put that in at 5%, you need to put it in, and if you only get 5% on your money you need to talk to me because you are screwing up really badly. Now check rental costs, and do a little subtraction sum. Now start thinking!

If you only want a holiday home it is much cheaper to rent. However, you may want a retirement home. You can book a one bed apartment for €75 a week. Three apartments out of every five are empty. Buying is idiotic. A three bed villa with a pool in the Algarve will cost you about €800 a month on a long-term contract. Heck, I know. Last year I was renting out one for precisely that figure. I repeat, buying is idiotic. If you want some of those deals all you have to do is contact me.

I know most people can’t do maths, but here are some very simple sums. Try and commit to memory. Rental cost = €800 a month = €9,600 a year. Purchase price for 3 bed apartment (let’s say) €150,000. Taxes and maintenance and insurance: €3,000 (that’s probably a bit low, but let’s be generous). You now do not have the €150,000 but you do have the house. You can get 8% return on investment pretty well anywhere in the UK property market. I usually get anywhere between 12% and 20%. But if you invested that money you would get an income. 8% of €150,000 = €12,000.

Let’s resolve the above figures. Buy the house which comes with a €3,000 a year running cost. You now don’t have the money. Alternatively rent a place for €9,600, and invest the €150,000 bringing in at least €12,000 a year. You’re roughly €6,000 a year better off, and you don’t have the worry about maintenance, or selling when you change you mind and want to return to the UK.

The re-sale market is excruciatingly slow in a tourist zone, which is why you should always buy in or close to a normal city.

If you are buying for retirement, or because you want to live somewhere else, check that it suits you. Flights need to be frequent and cheap for getting back to see the kids. Cheap living perhaps? Warm sea. Plenty to do. Good climate. And talk to the locals, and read the letters expats write to the newspaper to get a feel for the place. Then check the property sales section to get a more realistic feel for prices.

>>>>> 2 Always spend time living in the target area before buying. Three months minimum. And check out whether it’s for you. DO NOT UNDER ANY CIRCUMSTANCES RELY ON PROMOTIONAL TV PROGRAMS.

>>>>> 3 Work out (from tip 1) where would suit you best. Town, country etc. Close to shops and all amenities if you are old or frail.

>>>>> 4 Now check property prices using the local press. Do not under any circumstances go into an estate agent’s office to check prices. They have nothing to do with reality. And check prices against the local economy. See tip 5.

>>>>> 5 Now do some proper research. What’s the average wage? Property turnover? Rental returns, and so on? If the average wage is €1000 a month, what should the cost of an average home be? Maximum 4.5 times income + deposit. Answer, about €60,000. That’s what the locals are paying. Why should you pay more? The real answer to that question would have to be “Because you’re daft.” That’s what you should pay. Add no more than 50% for a top quality area. If the cost is more than that then you are being screwed. I dont care what anyone else says, I say you are being screwed, and I can get you a better deal.

>>>>> 6 If prices are too high, wait, and think whether you should be renting instead of buying.

>>>>> 7 The rest is the same as for buying in the UK. The only difference is the currency choice for any mortgage. The euro has strengthened against sterling rather badly over the past few years. That has affected not just the amount someone would pay in sterling on a euro mortgage, but the conversion of pension funds. This latter point is crucially important. Generally speaking, get any mortgage in the same currency as your income. And remember your pension is at risk if you live in a different currency zone. If sterling crashes you will get seriously poorer.

>>>>> 8 If you are buying for a holiday home, take a course in elementary maths first. The holiday home market has crashed all over Europe. I dont see it recovering any time soon. If you buy you will be buying into a falling market. You will also find resales in tourist areas are difficult. You should preferably buy into a normal market not a tourist market. Those deals hold up in bad times a lot easier. But, and this is the crunch, it makes no economic sense to buy. It’s cheaper to invest in something that brings you in an income, and then use that income to pay rent. Now you’ve got the home and still got the money.

>>>>> 9 One further point you should consider when buying abroad. By buying real estate you are investing in a country. Would you invest in a company that was going. broke, or was not performing well? Of course not. Investing in a country is no different. Do not invest in under-performing or broke economies. You should under no circumstance invest in politically unstable countries either. That rules out Turkey. Forget Greece and Cyprus, they are bankrupt. Forget Italy, Portugal and Spain. All these countries are in dire economic straits. You have been warned!

>>>>> 10 Call John Clare and get his personal advice. I’ll save you tens of thousands of pounds. I’ll charge you peanuts.

john

Mr Henderson’s Railway Part 2

Mr Henderson’s Railway Part 2

 

From the main road turn right, over the level crossing, then turn left, and there is this new town. It looks rather nice. As new towns go I wouldn’t mind living there myself.

Castellar new town
And the station is just a hundred yards down the road.

The new station
But up in the hills is another Castellar, dating back to the old stone age, 25,000 years ago.

This neck of the woods has a rather ancient history. It is listed as the last great rain forest area in Europe. It also has a more primitive form of pine tree still growing in the mountains. Not only that but there is evidence of human habitation going back 30,000 years in this valley. And if you follow Mr Henderson’s railway line a little further north you can see the cave drawings.

But I’m getting ahead of myself. Let’s carry on up to the roundabout, and take the turning to old Castellar.

This winding road takes you through a raised area, and then skirts the side of a pinnacle of rock on which stands the old castle which is the guts of this very old village.

Village houses

Nowadays it looks out to the northwest across the new reservoir. However, the views are spectacular in all directions. Initially I felt quite giddy walking along the battlements of the old castle and looking out to the east across the sierra on the other side of a great valley, the floor of which was alarmingly distant.

Castle walls

As I said, human habitation goes back quite some way into pre-history, but the more modern history of this site starts with the building of the castle in the tenth century. It was enlarged during the thirteenth and fourteenth centuries. This was civil war time with the Christians and Muslims at it hammer and tongs over control of southern Spain, with the frontier moving backwards and forwards throughout the whole period.

Village inside the castle walls
The castle formed the whole village as was common in feudal times. The main building was the military complex with the lord’s private quarters tucked away somewhere inside. Beyond the central military complex was a honeycomb of homes huddled together for protection within the castle walls.

Castle walls

Castellar was a complete ruin by the nineteen seventies, with only a handful of people living there. The government took possession of the whole area in 1983 and declared it an historical and artistic monument. A new town, Almoraina was built in the valley next to Mr Henderson’s railway, and a new station built. The new village had all mod cons, including running water and sanitation, and was altogether more convenient a location than the old castle-village.

What had been an advantage during the period of the religious wars was now a positive disincentive to living there. Eventually the houses were taken over by artists, and there are still artists there, showing paintings, glass work, artistic work using cork, and painted tiles.

There is even one of the houses for sale. Here are the telephone numbers if anyone is interested.

Village house for sale within castle walls

There is also a restaurant in one of the houses with an enterprising menu. The eating area is a small couple of rooms and is a bit cramped, and to my mind it doesn’t help to have canned music belting out in such close quarters. Please note restaurateurs, the piped muzak turned away a potential customer. Those of us (10-15% of the population) with tinnitus have problems with that particular racket. That means if we eat in muzak-drenched surroundings we cant take part in conversations, which is part of the reason for eating out. I know it may sound odd, but some of us come for the food, not for your crummy record collection.

With the wind blowing a gale and the clouds gathering we drove round and down to the main road, and turned towards Jimena. We’ll reach there next week.

john

Invest in Wine

Invest in Wine

A short continuation of my alternative investment list for those who are interested in such things. Investing in wine is a lone way from real estate, but if you sell up that holiday home and move into a hotel you will be able to afford the better things in life.

I have in my mailbag a reminder that investing in fine wines is very lucrative. It’s something I invest in myself, and have done for decades. I invested heavily in the 1981 clarets, and then added the 1982s and 1983s. They soared in value. As I like fine wine I have been investing ever since, and it is nice drinking a class wine knowing that if you could buy it in the shops, which usually you cant, a bottle would cost anything from £60 to £300 whereas I bought it for £6.

In fact I was invited out to sunday lunch last week and I took a top of the range 1999 burgundy and a 2000 claret. They were gorgeous. If you’d invested in those wines when they were en primeur you would have bought them at a serious discount to today’s prices. I checked up on some of them over christmas when I was drinking an absolutely superb 1999 Beaune. I cant remember what I paid for the bottle eleven years ago, but it was around £16-18. It’s over £300 now.

Fine burgundies

I buy to drink later, but you can buy the good vintages and never take delivery. The wine is professionally stored, and sold at auction when ready to drink, usually 10-12 years after purchase. The returns can, as you can see from my examples, be pretty good. The investment leaflet I am looking at projects increases of 30% p.a. Sounds about right to me.

As usual I dont actually endorse these investments I’m just letting you know they exist, but I have to say I do like this one, but then I am rather biased. Let me know if you want me to send you contact details, but do check the small print.

john

Sell Detroit, Buy Brazil

See you in Brazil.

It’s interesting that the property markets in the the USA are dominated to a great extent by the drive to sell cheap stuff in Detroit and Florida.

I dont want to talk about Florida, which is a confusing enough place without me adding to the background noise, but Detroit is an interesting case study.

We are being told that Detroit is cheap. Detroit is going to be saved by the government. Detroit is going to get zillions in aid. Detroit is about to be regenerated.

It’s odd, but haven’t I heard all this before? I vaguely remember going to Detroit forty years ago. It was in the throes of being saved by the government, getting zillions in aid, and was in the process of being regenerated.

Hands up those who remember President Johnson’s Model Cities Program? Hmm, not many. It was supposed to be a great experiment in urban planning aimed at improving the lot of black folks in the city.

About half a trillion dollars was poured into the city. Over the next two years a quarter of a million folk moved out, and Detroit started its long decline. Over the last forty odd years Detroit has lost about half its population.

Over a thirtyfive year period it seems the Model City area lost 63% of its population and 45% of its housing units. The place is in fact a model disaster area.

There is a little saying about learning from one’s mistakes. However, no-one mentions what it is that one learns from one’s mistakes. I vividly remember my cousin’s mistakes. I dont want to slag off poor Jeremy. He’s a nice guy, and his mistakes were thoroughly understandable, but his kind of mistake is just what we are all up against at the moment.

Jen was a radio ham. He was seriously into short wave radio, and had masses of gear. He used to subscribe to the right magazines, and used their instructions to build his own radio equipment. Invariably the machines didn’t work. However, he learned from his mistakes. He built bigger machines. They didn’t work either.

One day the penny dropped, and he actually admitted to me that his machines never worked because he just kept trying to make them bigger. I have never come across a politician who admitted a similar mistake.

Central planning didn’t work in Detroit. Okay, tough shit. We’ll make it work this time by spending more money and making everything bigger.

Okay, so it doesn’t work this time, so next time we’ll have to try even harder and spend even more money. No-one seems to get the message that the schemes simply dont work. Making them bigger only makes a bigger mess.

Welcome to the latest spend-out in Detroit. My guess is things are about to get a lot lot worse.

There seems to be a lot of it about. We have similar problems in Europe. There is a problem with little old Greece. The Greeks are bust. Now, let’s count, how many times have they gone bust since independence? Is it ten times, twelve times? I dont know. I forget. They are so regularly bust one cant keep up.

Economically they represent 3% of the eurozone. However, the governments of the eurozone are there to help. They have just pulled out a stupendous amount of money to save 3% of the zone, and in the process, put the whole zone in jeopardy, and so the euro tanks at an alarming rate as more and more businessmen lose trust in the currency, and decide to sell their goods by using alternative currencies. After all, who wants to be paid in three months time an amount which is now 5% less than it was when you signed the contract?

More to the point, who wants to use a currency which supports a country which has been on the fiddle for the past decade. All fiat currencies are paper based. Paper is not worth a lot. The value of paper money is based on trust. Support those who fiddle, and trust goes out the window.

There is a promise on sterling notes. “I promise to pay the bearer the sum of…..” and that promise is signed by the governor of the Bank of England. I dont reckon that promise is worth too much, but it is there, and there is a Bank of England, and a governor. And despite the idiocy of Gordon Brown the UK does still have a few gold bars somewhere in the vaults.

On the other hand, if you get out a euro note you’ll find there’s nothing there. It’s just a bit of paper which is worth what people think it’s worth. In times of crisis, that isn’t going to be much. After all, we dont even know who issued the note. It is a piece of paper backed by a dream.

So, once again, we have a small problem which has been turned into a huge problem by government trying to make things better.

If the wise man does learn by his mistakes, the question is: where is a wise person to be found?

The next question is: will there be a eurozone in five years’ time, and if so, what will it look like?

The third, and most alarming question is: what will there be in those countries where there is no longer a euro? What will their puny little currencies be worth? And what will the local houses then be worth?

See you in Brazil.
john clare

Introduction

Hello Folks,

I am going to start putting excerpts from my Newsletters into this blog so you can comment if you wish. We can then enter into a dialog.

If you want to suggest topics, then please do so, and I will do my best to say something useful.

john