This week, it emerged that TV stars Ant and Dec & Phillip Schofield will lose around £8 million in deposits following the collapse of a villa resort in the Algarve.
According to reports, Schofield is down £2M and the popular duo, Ant & Dec are at a loss of £3.1M each after the investment was sold to Brazilian financial firm, SRESPX.
The ongoing battle between the two parties serves as a timely reminder to any potential investors of the high risk associated with overseas investment.
According to personal finance experts money.co.uk, any Brits considering investing in a holiday home must look at both the benefits and the potential drawbacks of such a purchase, as well as being honest with themselves about the primary purpose of the investment.
James Andrews, personal finance expert at money.co.uk, said: “When buying a property abroad, it’s easy to get caught up in the potential commercial value of your holiday home, even if you initially made the purchase for personal use.
“Many buyers are sucked in by the attraction of purchasing a low value property with a high potential rental value, but that doesn’t mean it’s going to make you profit in the long run.
“Thanks to a combination of management fees, fluctuations in the exchange rate and random repair and upkeep mean there’s no guarantee that your rental income will cover the mortgage payments, even if you have a regular supply of tenants.
“If you do decide to buy property abroad, you need to ask yourself if you’re doing it primarily for your own use or for commercial gain. Both could work out well for you, but if you plan to make serious money renting your property out, you need to do the job properly – it’s not something you can take a half-hearted approach to.
“Running a successful rental property can be a full-time job, and if you’re trying to do it remotely at the same time as full time work at home you’re going to run into trouble. You can of course decide to go with a management company to handle the day to day issues, but this will ultimately add to the cost of running the holiday home, further reducing your profit.
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Notes to editors
money.co.uk is one of the UK’s leading comparison websites for financial services. We help consumers compare mortgages, loans, credit cards, bank accounts and insurance from more than 600 providers.
money.co.uk is fully authorised and regulated by the Financial Conduct Authority (FCA) and is owned by RVU, which also owns Uswitch.com and Bankrate.