In addition to acquisitions made purely from an investment point of view, typical investment properties are located in familiar holiday destinations, such as Spain or Turkey. These are then used within the family for vacationing and rented out to others. Nearby markets, such as Estonia, Latvia, and Lithuania, have recently become increasingly popular, especially after the price plunge brought on by the financial crisis.
The acquisition of an investment property abroad requires you to study the local market meticulously and focus on your selection with extra care. What is most important is to know the local market, legislation, customs, and culture. Long term residency or a local expert comes in handy. The importance of a thorough analysis of the investment property and expected costs and profits is multiplied with foreign investments. As you make a decision, consider that there may be locally applicable fixed costs related to the sale and e.g. expenses related to upgrading the apartment. Your investment calculations may assume a substantial increase in value that may not be realized due to the country-specific market situation. You should also have a close look at local rent prices and their expected development.
Foreign investments may come with unexpected risks. These may include things like extreme weather that may cause exceptional circumstances and thus, exceptionally large expenses. You may also accrue costs from insurance policies safeguarding you from these risks. Local legislation and rental practices may be quite different from what you are used to in Finland. Make sure to familiarize yourself with local legal peculiarities and application of law. For instance, in Estonia, a rescission and eviction process due to a payment default is much more complex and has more stringent criteria than in Finland.
Also, housing companies, a very common form of property ownership in Finland, may not exist at all in the target country. In such cases, the management of the property will be different from what you are used to. For instance, maintenance work that a housing company takes care of in Finland may in another country be a responsibility for the owner. There may also be restrictions on foreign ownership. And permit processes may vary depending on whether you are buying an existing apartment or an apartment from a building yet to be constructed.
However, contrary to the above, some foreign legislation and practices may favor the landlord who is used to Finnish policies. Such instances may occur e.g. in common regulation concerning sales, taxation, and business operations. Knowing your target country and its property market enables you to maximize the potential of these benefits.
Please note that legal advice provided to the members of the Finnish Landlord Association only applies to domestic legislation (the Act on Residential Leases and the Act on Commercial Leases). Unfortunately, we cannot provide legal advice on leases governed by foreign legislation.