Property viewing process

For my real estate business, viewing trips, sometimes known as discovery tours or inspection trips, are a key part of the due diligence and decision making process for my customers. This is the time that we should really invest wisely our time and money in the buying process.

Many people go on them, but many participants do not maximise the opportunity they offer to improve investment success.

Viewing Trip Preparation

Most people like to have some information on the properties they wish to view before traveling. It is important to have undertaken some pre selection work as it is not possibe or indeed sensible to view everything for sale.

Too much choice does not help our purchasing decisions and this is where property pre selection process is so important. With my clients we discuss how much of the due diligence work is available for each property and we review locations and prices. We then discuss which properties fulfill their criteria.

At this stage I send the PVP sheet (Property Viewing Process) sheet for an inital review of their chosen properties. This can help establish which developments and locations will not be of any interest and frankly a viewing will be a frustrating and unrewarding experience. Once we have between two and six developments to view on this sytem some morre details can be added and an adneda put together.

Second Viewing

Not everyone is the same for viewings but consider how much staminer you may have in the heat of the day and be sure to stop for lunch. Ideally allowing a week to view which would include the first day to relax and just get the geography sorted and enjoy the visit then the next two or three days with two viewings per day.

By the second day of viewing you may already be there and decided. However, before committing then remember to go back and view your top two favourites with an eye on the specific units.

We ask all our clients to provide their feedback on viewings and their thoughts on property.

Why do I do this? Very simply we have all found that it makes for better property investment decisions from clients and, at the same time, it helps us improve our service for you as we optimise the balance between location and value for money and risk.

The Property Viewing Process (PVP). This simple 10 point tool I developed for my own investing when I discovered too late that I had made a mistake by not being able to recollect the properties I had viewed.

I also found it can be hard to always remember exactly why you preferred another - and for what reason. It also helps our investors to be sure they have made the right decision taking into account price.

1/   general pros (+ve points) and cons (-ve points) of each property

2/   rate your own view on property location (marks out of 10 - for example 7/10)

3/   rate on perceived design (marks out of 10 - for example 7/10)

4/   rate on expected build quality (marks out of 10 - for example 7/10)

5/   rate on rental prospects (marks out of 10 - for example 7/10)

6/   rate on capital appreciation prospects (marks out of 10 - for example 7/10)

7/   rate on perceived value for money (marks out of 10 - for example 7/10)

8/   rate for personal own use, i.e How much would you like to stay in the property and development yourself?  (marks out of 10 - for example 7/10)

9/   rate property overall on how close the property matches your personal buying criteria (marks out of 10 - for example 7/10)

10/ rate for exit strategy - how easy will it be to sell  (marks out of 10 - for example 7/10)

add your own notes to explain rating in more detail and add comment on each viewing itself.

If you have your own viewing system or have any comments then these are very welcome.

Property contract - am I bothered?

Today I heard about an off plan property investor in Egpyt who found out that they were not going to receive the free kitchen they thought they were entitled to. He realised after he had signed his purchase contract for the off plan property, that the free kitchen as per his agent’s web site, was not now included as part of the  in the apartment fixtures list in the contract.

The contract he had signed had no mention of such kitchen, and the buyer felt hoodwinked by the agent. I felt it time to get more bothered about what’s in off plan contracts.

Disclaimers

Ever seen disclaimers on web sites? You will note that most real estate agent web sites have a disclaimer page, or link. The property brochures will also have comments to indicate that images and the details are for illustration and indication only.

Pretty pictures of pyramids, golf courses, svelte sunbathers, infinity pools are all there to attract your attention. So do you think “Great, that’s all the info I need, where do I send my reservation monies for this dream Santiago island, Dubai IMPZ (delete as appropriate) luxury property?  The property web site implies its next to a pyramid / golf course”.

On the same theme, the CGI’s (Computer Generated Images) will show all sorts of unrealistic backgrounds and perspectives. Rely on them for accurate information, and you’ll be in for a surprise come viewing day.

We are all bombarded with information. Unless I see some colourful, inspiring and uplifting image, along with some snappy catch phrase, I might never look twice at the property offering. Disclaimers are there to say that this is all a guide or, rather more accurately, its all an advertisement. Let’s treat it like one then.

Contract Focus

So when buying an off plan property, anywhere in the world, the main focus is on the contract we sign. The natural reaction will be to pass this to a lawyer and, if he says OK, then it must be OK. This is where I see we need to change out way of thinking. Its basically wrong to always take your lawyer’s advice. We need to acquire the skills to manage your lawyer effectively.

The first task is to understand your lawyer’s perspective. Believe me, your lawyer does not read agent’s, or developer’s, information sheets. He, or she, is unlikely to print out brochures from your agent’s web site and check that all the fixtures, fittings and facilities that are part of the online specification are then placed in the sellers contract. Buyers must undertake a thorough check of what is included and what is no, and then advise the lawyer.

My mistake once was to assume that obvious things, like doors, like attachment of heating system and similar items, that would normally hardly be worthy of a contractual mention, would not necessarily appear in the contract. Best to accept that it probably will not be there at completion if its not specified.

I ask my lawyer to confirm that the translation from local language to, typically English, is accurate and for them to certify it is indeed correct. Important, because In case of dispute, its the local language which legally will prevail.

Kitchens

Kitchens seem to rank as the top area for dispute. So here are five tips when looking at kitchens in off plan contracts:

1/ What literally translates as a “kitchen box” is actually not a nice set of units (in Bulgarian translations) - but means an area to put your own kitchen in. Check and certify all translations.

2/ Local builders standard kitchens can be very nasty. There is often zero value to having them installed. Unless you are really sure, buy without kitchen so you can coordinate with furniture.

3/ Design your own kitchen to ensure some simple, but practical, touches. For example, add an eye level space for a microwave so it is away from work surface, design a refuse cupboard or even add a dishwasher for larger properties.

4/ Don’t think that if your overseas property is a load cheaper than a similar one in your home country, that the kitchen and furniture should be loads cheaper as well.

6/  Check your kitchen design with someone you know who has experience of such matters. If you are a stranger to cooking in your own kitchen be wary of your own design attempts. Find out what makes an attractive kitchen area.

5/  If you have no kitchen in your apartment as part of the contract, don’t fret too much if you are buying in a new emerging market. In the most part, that could even be good news. If you thought you were saving a load of money by having it included, you probably were not.

In emerging markets, such as Egypt, Bulgaria, Cape Verde, Turkey, Romania etc, its common not to have kitchens included. Why is this? Historically the only previous sales will have been to local buyers. Builders would have, in the past, built mainly for locals and locals often buy unfinished apartments. They want to get the home the way they like it. Its also the low cost option. Typically, labour is cheap in emerging markets and local buyers know that they can supervise the work and get exactly what they want.

Moving on from whats included, to other brochure talk such as “private beach access” and “free use of spa”. assume nothing will be free unless its documented in the contract. Indeed, free facilities may not be so good as, if its a pure investment property, you may prefer your tenants to carry the costs of the facilities.

When can I view the purchase contract?

Generally, buyers receive the purchase contract, (sometimes referred to as the buyers agreement or preliminary agreement) after paying the reservation fee. Buyers then start their property due diligence immediately after this, including receiving the agents contract.

I have to say that I do not like this practice, so I am negotiating with our developers to produce contracts for common availability and full disclosure of such contracts before payment of my clients’ reservation fees.

I will often be able to provide the contract before you have to make any purchasing decisions - just ask me. As more developers fall into line my hope is that more buyers in general will be able to assess upfront what they are getting.

My final point is that in some markets, like Egypt, a long contractual negotiation is unlikely. The culture can be quite different to what we are used to. It’s often a case of “take it, or leave it”.

A developer may not want to have many different purchase contracts to manage - so if you are buying in a popular project in an emerging country, with brisk sales then trying to extend the negotiation period may mean you lose your reservation.  All this needs to go in the mix of information for assessing the risk of commencing your investment.

Careful due diligence is clearly vitally important. Do please remember to register to download my free due diligence guide on home page to start equipping yourself as a savvy investor. Read this, and you will have many of the skills required to make a knowledgeable overseas property investor. Agents may well be helpful but, if you remember that they are introducing you as buyer to a seller, and its the seller’s contract you sign, then this may remind you to always put marketing material in perspective.

In my capacity as a real estate agent, I have acted in good faith by passing on the information provided by a developer in response to questions from buyers. It has happened that these answers are found not to be supported by the contract wording. This eventuality is annoying for agents and investors alike and provides more evidence, if required, that we need to be very bothered about that contract.

Finally in these money saving times, a reader asked why there were such large price differentials when comparing several properties? Remember the saying “you often get what you pay for”. Raw material costs have risen sharply, and even doubled in some cases. A full blog response on this will be posted soon.

However in some countries, where material supply is dominated by just a few companies, then this will be particularly true. What will these cost increases mean to the final property construction? Its commonly known that its the finishing of a property that costs much money, and it is here where corners may be cut the easiest. Sub standard quality, could mean facing up to a reduction in rental occupancy and speed of resale in future years.

Please comment on this blog article, and do please share your property buying experience to enhance the resources here for overseas property investors.

Zina Heights, Hurghada

Zina Heights Review

I have been often reticent when recommending some Hurghada properties, as I have uncovered due diligence issues or do not get answers to simple questions. Sometimes however, its just that the uncertain rental prospects concern me. This may be ok in some places but here in Egypt - let’s face it, there is plenty of desert to build on.

Zina Heights Deluxe Resort development falls into the category of minimal ownership hassle. With a hotel like design and facilities in a central location, in new Hurghada, Zina Heights has the added bonus that work has already commenced BEFORE launch.

With the market volatility and general economic concerns, the main focus of investors right now should be on the reduction of investment risk. Its what I’m searching for all the time for my clients and this is one opportunity that will set a standard in the area for others to follow. So I know Zina Heights has already started construction, what else makes this one to consider?

Rental Guarantee

Investing in Hurghada usually means no rental guarantees. However with Zina Heights there is a three year rental guarantee scheme in place of 6%, 7% and 8% each year, and an excellent payment plan spread out over two years. Zina Heights is positioning itself as one of Hurghada’s most prestigious tourist and business hotels

Egypt in general

I used to think of Egypt as being all about Pyramids and the Nile and all the other ancient history wonders it is home to. However, its now also gaining an excellent reputation for the value for money resorts and hotels located along the turquoise waters of the Red Sea coast.  The fantastic climate that exists there all year round means that you get guaranteed sunshine.

With unspoilt coastlines, coral reefs, year round sunshine, and golf courses nearby, it is the fastest growing tourist destination in Egypt. Hotels in Hurghada are already reporting 85%-90% occupancy all year.

I recommend everyone who is not sure to take a trip there, I’ll be glad to put a relaxed property viewing schedule together for you.

Facilities

This luxury hotel development is located within walking distance of the town centre of Hurghada and a few minutes from the beautiful white sandy beaches in Hurghada. The  master suites are located within a Deluxe Hotel resort and these residential apartments have the benefit of a range of generous and exclusive hotel services and guest amenities located on the ground floor, to include a range of fine dining restaurants, spa, boutiques, bars and concierge services.

Prices

Pre launch prices for Zina Heights start at €39,900 for a pool view up to €50,000 for seaview apartments, there is a wide choice of apartments available for the 330 total.

Tourism

Tourism is becoming Egypt’s most lucrative industry and according to the U.N tourism organization, tourism in the country increased by 20% during 2007, which is excellent news for the buy-to-let/tourism rental market.

The government in Egypt is doing a lot to encourage international companies and individuals to take advantage of the new tax laws to purchase properties there. Buying property in Egypt is quite simple with relatively low purchase costs and most importantly for investors there is no capital gains or inheritance tax.

Flights

Flights are readily available from all major European destinations, and with new initiatives, including low budget airlines like EasyJet commencing flights to Hurghada it is expected that tourism figures to Egypt will reach 14 million people by 2010.The collapse of XL airways is a temporary blip in capacity which will be soaked up by Thomson airline and others.

Summary

Yes, this review is more positive than other new offerings in the region, but also because I believe Zina Heights to be a better rental proposition than most others in the area.

Zina Heights goes further than most to lower the investment risk. In my view, this is achieved because of the experience of the developer in building and managing other hotels, the quality of materials used, the integral boutique hotel, facilities and the offering a three year rental guarantee. These are my views,  but please can you comment to let me know what you think.

Oh and finally… its called Zina Heights because Mr Adley’s daughter is called Zina, so now you know.

If you are interested in finding out more about Zina Heights or investing in property in Egypt be in Cairo, Sharm Al Sheik or Hurghada, do email me on lance@overseaspropertytalk.com or call +44(0)113 3131000.

Property in Hurghada

More House Price Falls

Well I have to say that my last comment about the US economy was over optimistic. Fannie and Freddie will not be enough to see the return of optimism. With Lehman Brothers gone I think we can be sure of another Bank ceasing to trade. There will be bank mergers as well and a fair bet that many of the investment Banks will end up being owned by the proper Banks - following JP Morgan Chase lead with JP Morgan merging with Chase Manhattan.

However, not so widely reported was the 10% fall in oil yesterday, its now under $100 (approx $93) and looks set to go much lower, laws of supply and demand are working.

Oil will be the catalyst for recovery

I see this oil price slide as the start of a long process of recovery. More falls will temper inflationary pressures, stimulate demand and, combined with interest rate reductions, set the US and the rest of us for recovery. My main fear is the housing market in both UK and US. Demand for houses has yet to start up again and further house price falls are most likely. Negative equity is going to be an issue, its possible there will be a million homes in UK in negative equity. This means that bankruptcies will sharply increase and further test their liquidity. Its going to be tough times

What about overseas property?

There is no doubt that overseas property demand is linked to the economy. However, in the same way people are downgrading from branded to won label goods so I am seeing people search for low prices outside traditional markets.

The reason is simply to do with price. Why pay 500,000 euros in Spain for sea view when the same thing can be had for under 80,000 euros in Hurghada Egypt? The difference is that large.  When investors think that there is no “off season” for rentals in Egypt then they start to understand that this cheap option is one which has more than just price upside.

So house prices in certain overseas markets are attractive and I predict that more people will be making the effort to search them out. Its really the same process as paying a thrird of the price for own brand beans or tomatoes. You get pretty much the same thing and save a whole load of cash.

12 Reasons - Why Hurghada?

1/ Strong economic growth in Egypt - 5.9% forecast for 2008

2/ Infrastructure good but with more investment from the government improving

3/ Lots of facilities, diving, snorkeling, windsurfing, kitesurfing, historical and cultural attractions

4/ No capital gains tax

5/ No inheritance tax of British residents

6/ Improved purchase process

7/ Warm climate with virtually no rain. Year-round tourist season

8/ Many airlines fly into Egypt and Hurghada from many countries

8/ Low cost destination and low cost of living

9/ 9.8 million Visitors to Egypt in 2007, forecast to double to 16 million visitors by 2014

10/The property market in Egypt is developing fast - low prices capital appreciation are likely

11/ 35Km of sandy beaches

12/ Developments in great locations with 5 star facilities.

Before investing anywhere overseas, be sure to register for free Guide to Due Diligence.

Is Buyer Confidence returning in the US?

I pose this question today as I think the UK will lag the US as it did when we entered into the current house price decline. I think we could be getting close to the bottom across the pond for three reasons:

1) Lower home prices - yes, prices are going down in the US like here and stock levels remain high. However, lower prices are creating buying opportunities which we haven’t seen in several years and a base price is in site.

2) Interest rates are coming down. With lower monthly payments which accompany lower interest rates, homes are quickly becoming more affordable. The major snag of course is that credit is less available. The upside here is the larger deposits and stricter lending terms, reduce the likelihood of future repossessions.

3) There are signs of buyer confidence is returning. Confidence is low right now, but the change to optimism can be quite sudden .

Almost like a cloudy day autumn there will be almost disbelief when we see that almost warm sunshine. When more start buying homes there will be a positive can have a positive effect on consumer and home buyer sentiment.

4)  Fannie and Freddie (the twin mortgage buyers) nationalised yesterday. Good news to bring rates for the credit worthy down.

We may not be not out of the woods yet, but i predict the US will lead the charge soon but it could get worse before it gets better. However, we’ll watch sentiment change in the UK remarkably quickly if it changes in the US. What do you think, am I too optimistic here?

Bulgaria Real Estate up by 30%

Bulgaria Real Estate up 30%

This was the news from Knight Frank today:

“Bulgarian home prices gained more than 30 per cent year-on-year in the second quarter of 2008, placing the country atop the global index of UK-based property consultancy Knight Frank, released on September 2.

Meanwhile, the number of countries with a price decrease is increasing. Price growth is slowing down in Western Europe, unlike Asia and Eastern Europe, which have been enjoying an upward trend.

Bulgaria topped the ranking in terms of housing price growth for a fourth quarter in a row.

This result clashed with Bulgarian real estate agencies’ data on a price slow-down since early 2008……”

Lower down on the Knight Frank list of price growth were Slovakia, with 31 per cent, and Russia, with 26 per cent. Second-quarter housing prices in the Czech Republic and Hong Kong rose by more than 25 per cent.

My take on this is that prices have stopped growing, on average, in Baulgaria. However not everywhere over the last year has grown. The market on tourist new builds can show divergent trends - some prices up and some down.

For example, prices in Bansko have gone down over the last 18 months and ironically over the next 24 months we may see the biggest rises here as the resale market quickly develops and the tourist numbers will be growing very fast. Owners here may like to get some renting tips, as well as renters to pick up a rental bargain here.

For those looking for long term investment in any market now is a great time to start your quest. Sellers expectations have been suitably, modified and there;s a willingness to accept offers. Bulgaria is experiencing labour cost increases and build costs are now substantially higher. This means new builds will have to be priced higher to make a new project worthwhile.

Altrenative Bulgarian strategy is to speak to e regarding some land deals, fairly priced and good for long term investment as by my reckoning land prices in Bulgaria are still substantially lower than many other places. Email me at info@jet2letproperty.com for more.

Welcome To Overseas Property Talk

Hi, I’m Lance Nelson and welcome to my Overseas Property Talk blog. Here I anaylse and review new real estate news and property launches from Brazil, Bulgaria, Egypt, Cape Verde, Cyprus, Dubai, Turkey, USA and others. From large front line luxury resorts to town centre investment property and giving my views as to how properties stack up for investment. Lets face it, there are plenty of areas to fall foul of and I aim to uncover the stars from the dogs.

With many years selling real estate in emerging markets I hope to offer opinions which will stimulate.  You will find a growing list of resources available to all subscribers in addition to the ones on this site. An updated series of ten articles on “How to conduct Due Diligence” will be emailed to you. My aim is to help more people to make good decisions when entering the overseas property markets.

Credit crunch times for sure, but arguably the best time to be seeking to make exceptional returns from property investment. Why? Quite simply you can buy for less and buy well. If you buy wisely now then you’ll not only have a great home for rental, own use or retirement, but also a sound long term investment.