How to make a profit by renting out overseas property

When you’re not investing on home turf you may seem to be working from a disadvantage. But being an outsider can also give you a fresh perspective and help you spot opportunities.

Either way, having a firm grip on the financial side is essential. There are two elements to making a profit - income and expenditure. 

Here are our tips for finding the value in property overseas.

Are you looking to make a steady income from renting out your property?

Or are you hoping it will rise in value over time, what’s also known as capital growth? 

Most investors want a blend of both capital growth and high rental returns, but a clear primary goal is the best strategy.

Regular income

If it’s income, you’ll be more focused on year-round demand, rental yields and occupancy rates. A return (the difference between all your costs and all your income) of around 5% to 7% is considered good. 

Calculate your income over the whole year, not just a few weeks in summer. A buzzing city centre might not be as glamorous as a coastal villa, but it could bring in more consistent rental income over the course of a year.

Capital growth

If it’s capital growth, the key decision will be buying in an area with strong long-term potential.

You might think, “I’m buying in Paris, of course it has long-term potential!” But maybe you can find a corner of even a well-known arrondissement that has new infrastructure in the pipeline, such as revived transport links or a major tourism project.

Such properties might have unspectacular rental returns, but the real return comes when you sell. 

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Like any business, understanding your target market is half the battle. Are your tenants going to be summer tourists, long-term expats, students or digital nomads?

Each group has different priorities. Holidaymakers want easy access, pools and Instagram-worthy interiors. 

Digital nomads want Wi-Fi speeds and co-working cafés, while expats usually opt for something unfurnished but near schools, transport and services.

But don’t just think about the international market – local people are your most obvious market

Now look at what’s being advertised locally. What’s booked up and what isn’t? Speak to local agents or management companies. Maybe the market is saturated with sellers or maybe you’re in there first.

Now you just need to ensure that your profit doesn’t disappear out of the window. Let’s look at keeping costs down.

When negotiating to buy an investment property, start by understanding trends. 

Are house prices going up or down? Are properties selling quickly – a seller’s market – or sitting for months in a buyer’s market? Are asking prices being met or are buyers getting cheeky offers accepted?

Just like you’d search for UK house prices on Zoopla, there are other places to get this information overseas. For example in France, notaries (notaires) must be involved in every property sale and they give market data on their websites.

In Spain, a valuation organisation such as Tinsa has market reports. 

The UK’s own Royal Institution of Chartered Surveyors (RICS) offers market reports on many other countries too.

Then there are official statistics agencies and government reports, and even updates from the European Union.

Don’t forget that property professionals are usually the most knowledgeable about their local market. Online research can’t compete with an estate agent’s on-the-ground expertise.

Knowing the market conditions helps you make smarter offers and avoid overpaying.

An early decision will be whether you’re paying in cash or taking out a mortgage. 

This might depend on whether you will live in that country or not, as overseas mortgages often have stricter rules and higher interest rates. Residents of that country tend to get better finance deals.

Some investors choose to release equity from their UK home instead. 

A word you might’ve heard is “leverage”, which means using borrowed funds to finance an investment. Your returns can be magnified, but in a declining market your losses will be greater too - as many people discovered in the financial crisis of 2008-10. Still, it’s an option.

Let’s say you’re buying in euros, but you earn in pounds. A 5% swing in the exchange rate between paying your deposit and completing could mean thousands lost, or gained.

The same goes for ongoing costs: property management fees, repairs and taxes all hit differently if the pound wobbles.

That’s why many overseas buyers work with a currency specialist rather than just using their bank. Tools like forward contracts let you lock in a rate for the future, so you know exactly what you’re paying even if markets move.

Roof tiles after a storm, repainting to keep things fresh, replacing broken appliances, dealing with leaks…there’s a rough rule in property investing: budget 1% of the property’s value each year for maintenance. 

So if your overseas property cost €200,000 to buy, budget around €2,000 a year to keep it in good shape.

And remember: maintenance might cost more abroad. If you're in a remote spot, getting tradespeople or parts might take longer and cost extra. 

Overall, keeping your place well-maintained protects your investment and keeps tenants happy. That’s especially vital when a negative online review can wreak havoc with your overall rating.

Making a profit from property investment can be an adventure. You can fall in love with a place, but you’ll enjoy it even more if it’s doing good things for your bottom line.

So do your homework, get expert advice and treat your overseas investment like the business it is. 

That way, you’ll be in a stronger position, whether you're toasting to your first let or cashing in after a smart long-term hold.

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