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Investing in property abroad: Pros & Cons

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Are you staring out the window, looking at grey skies and drizzle? On a miserable day a holiday home in the sun might be just the tonic. But is it a sensible investment? We look at the pros and cons of investing in property overseas.

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Overseas property, view of outdoor living space and sea in background

A holiday home in the sun might sound like a cure for all your ills but all the admin and tax might give you a headache. Get the lowdown on investing in overseas property with our guide.

Why invest in property overseas?

Overseas property can be an attractive option for those looking to make an investment and, potentially, earn higher rental yields than buy-to-let property in the UK.

You also get the added benefit of owning a holiday home which you can use when it's not being rented out. 

Make the most of your tax-free ISA allowance.

Weigh up the pros and cons of overseas property investment

Owning a holiday home in the sun is a dream come true for many of us and the fact that it can earn you rental income while you’re not using it, makes it all the more appealing. However, there are plenty of downsides you must consider before you get on a plane and start your property search.

Pros and cons of investing in an overseas property

Here's what will you get by investing in property overseas:


  • Your own personal holiday destination booked and ready for use all year round

  • The chance to feel part of a new community because you return regularly to the same area

  • Envy from your friends and family

  • A higher letting value per week than with a standard residential lets


  • Two significant debts to manage if you have a mortgage on your property abroad as well as in the UK

  • A potential shortfall if your rental income doesn'y cover the mortgage payments

  • Extra maintenance costs

  • Uncertainty over the costs and returns due to fluctuations in the exchange rate

  • A feeling that you're obliged to holiday in the same place each year

  • A dependence on a management company - or understanding friends - to handle payments, cleaning and maintenance of the property.

  • A tax bill on your rental income

Where should you invest when buying an overseas property?

Some property ‘experts’ or commission-hungry estate agents may try to impress you with new markets they deem to be ‘investment hotspots’ and you might be able to pick up bargains in countries where prices have fallen. 

However, if you’re considering buying property overseas it’s important to think long term and do your research. This includes the location and how well other holiday lets in the area perform.

There may be cut price bargains to be found in some spots, but over the long term you may find it easier to let a property in a more established market. 

Exactly where you buy will be a very personal decision, however if you want to earn a good income from it you will also need to consider its letting potential as well as your own personal preferences. 

What to consider when buying a property overseas?

There are a number of factors you will need to think about before settling on a location and a property:

  • Will you be happy to return there year after year?

  • Will it be a popular spot with other holidaymakers?

  • How long will it take to fly there?

  • Is it close to the airport and well served by a number of airlines?

  • What are the local amenities like - are there shops, bars and restaurants within walking distance?

  • How long is the tourist season? Consider how long any property is likely to be empty.

How is overseas rental income taxed?

You should also think about the tax you will need to pay on rental income from an overseas property.

Tax on overseas properties works the same way it would if you'd bought a holiday home in the UK.

First up you need to tell HMRC about any overseas property you own. Then you need to calculate the profits you make and deduct your expenses.

Assuming the property is furnished, you may be able to claim capital allowances for investments against your rental income. Any investments made into your property such as improvements are classed as capital expenditure, which can be offset against your capital gains tax (CGT) bill when you sell the property. 

You pay income tax on any profits at your normal rate. When working out the UK tax, you normally use the exchange rate when the rent was paid. 

Are there any other taxes I need to pay?

Investing in overseas property will undoubtedly complicate your tax affairs. In addition to tax on your rental income, you may need to pay capital gains tax when you sell the property.

Depending on where you buy there may also be other local taxes to pay, for example purchase taxes. There may also be a foreign tax on your letting income, however this should be deducted from your UK bill so you shouldn’t be double taxed.

Inheritance laws are likely to be different to the UK too and there may be rules stipulating who inherits the property if you die before it is sold.

For these reasons it always makes sense to get advice from a tax specialist in the area you are buying in.

How is Brexit affecting travel to Europe?

Although Brexit has been in effect since the start of 2021, the impact of the COVID-19 pandemic means it's difficult to fully assess the impact of leaving the EU on travel. This has caused some Brits to be cautious in purchasing holiday homes in the EU.

The potential effects of Brexit could include:

  • Fewer flights to the UK from small EU airports, changes in flight paths and price rises.

  • Difficulties securing a mortgage.

  • Having to pay more tax.

  • Fluctuation in the GBP exchange rate.

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