Due Diligence
Comprehensive research into each and every aspect of your proposed overseas property purchase is vital to successful investment.
Belgrave Group’s careful due diligence procedure helps you with this research process, allowing you to make educated decisions about where and what to buy in order to best achieve your investment objectives.
We recommend that all investors perform two main types of due diligence:
1. Due Diligence - The Investment
Firstly, it is essential that the investment itself falls in line with your expectations and that you can realistically meet them with your proposed investment.
Return on Investment / Risk Level
Many shrewd investors seek to achieve the highest possible return on investment through buying early into emerging markets at low entry pricing levels. This allows them to buy at the lowest prices and generate the highest possible returns on investment; however, this can often mean taking on the highest levels of risk.
As Belgrave Group focuses primarily on property to be used as an investment vehicle, it carefully identifies the opportunities that promise to generate substantial returns for investors.
Once you have identified the country in which you wish to invest, Belgrave Group will help you to fully understand the entire purchase procedure from start to finish, informing you of exactly what funds are required and at what stage of the purchase. Should you so wish, we will recommend our professional financial partners to work with you on strategy calculations in order to obtain maximum financial leverage. Belgrave Group strongly recommends that every investor personally looks at their proposed purchase in detail, seeking advice where needed to ensure it fully satisfies their individual requirements.
Market Drivers
If a market is identified as having strong growth potential, as an investor, it is important that you understand exactly what the "market drivers" are for this growth. Below are some of the most common real estate market drivers:
· Location
The importance of location cannot be under-estimated when considering any property purchase as it is directly linked to the return on investment you can expect to achieve. Capital appreciation and rental yields will alter according to specific locations, so we recommend that you examine current property prices and rents in the direct and surrounding areas of your proposed investment. Where possible, you should personally visit the area in order to gain first-hand knowledge of representative prices in your chosen location.‚ If tourism is your target market for resale or rental, ensure your chosen property is within easy reach of an international airport and tourist amenities.
· Cost/Value
A property purchase is only a successful investment if it is bought at the right price. While calculating your investment, you should allow for its value to appreciate sufficiently in order to generate the strongest possible capital appreciation, often in addition to rental income.
· Infrastructure
A clear sign of an investment property hotspot is where there are considerable infrastructural improvements being made to an area, generally in the form of increased local attractions, services and amenities. As importantly, the improvement or creation of additional airports, sea ports and roads indicate imminent growth and a firm commitment by a local government to improve the prospects of a particular area.
· Natural Factors
Natural factors give many locations distinct advantages over others, often simply by virtue of the fact that they may enjoy excellent views or seafront locations. Good weather conditions, combined with stunning beaches, quality ski resorts or golf courses can also be important market drivers, but it is also essential to consider other factors in association with these.
· Tourism
Tourism is a driving factor for some emerging property markets. Increased international flight connections make many previously distant locations far more accessible. Several have become exciting new holiday and second home destinations, often offering a welcome alternative to the more traditional locations of recent years.
The emergence of all-purpose holiday resort developments all over the world, many of which are low density and eco-friendly, means that they fully satisfy the needs of today’s more exacting tourists.
· Stability
World terrorism is sadly an important consideration when investing overseas. There are therefore various political, religious and legal implications to carefully consider when researching the political stability of your chosen investment location.
2. Due Diligence – Developer / Constructor
Once you have fully examined the viability of your chosen investment according to the above criteria, you will need to be satisfied that you will receive your required returns on investment within the desired timescale.
As the investor, you must be sure that the vendor is reliable and secure: does the developer really own the land title for which they are taking your money Has building permission been fully granted Ensure that your developer has a proven track record in order to protect yourself from loosing all or part of your investment.
Belgrave Group works with investors to ensure that all recommended projects meet important criteria, thus ensuring security and optimum conditions to safely maximise your returns on investment.
Some of the checks we carry out are listed below:
· Building Licenses
These licenses are a legal requirement prior to the construction of any development.
Belgrave Group offers pre-release opportunities to investors, enabling the earliest possible entry into projects. Many developments work on a pre-release basis and building licenses may therefore not be in operation at the earliest stages of an investment. In this case, monies must be held in an escrow account or the client account of a reputable lawyer. They are only released to the developer when all the necessary building licenses are granted.
· Developer Background Checks/Track Record
Belgrave Group always sources projects from experienced developers with high standards and a reputation for completing on time. Amongst other things, we take a close look at previous projects as a good point of reference for future projects.
· Land Title Confirmation
In the past there have been cases of rogue developers taking funds from clients for properties without first possessing legal title to the land. However this is rarely a problem today and whatever the country you are investing in, land title is easily checked beforehand.
It is essential that you ascertain whether you are buying a freehold property and that the title of the land will be transferred upon completion.
· Re-Assignable Contracts
Although not as common as in the past, due to the relative risk factor of the investment, some investors look to operate a "Buy-to-Flip" strategy. This basically allows a minimum down-payment in order to secure an off-plan property. Investors then look to resell their unit(s) during the construction process, prior to completion. In order to do this, your contract must be re-assignable and any administration fees need to be highlighted. It is important to be fully informed of any potential hidden charges as, without these factors being fully clarified, your investment strategy could be rendered useless.
It is vital that you are absolutely certain you could, if necessary, raise the finance to complete the purchase of your unit(s), in the possible event that you are unable to find a buyer to re-assign the contract to.
· Fund Security
Belgrave Group examines the buying process, checking that it is legal and secure enough to ensure complete fund security.
· Build Quality Guarantees
All good developers offer a guarantee on construction along with detailed quality specifications, made available to you, the investor. Belgrave Group ascertains that these qualities and their offered guarantees are to the high standards we require.