Spain and other countries are attractive to property investors (Image: F.J. Jimenez via Getty Images)
Britons purchasing property abroad are repeatedly falling into the same trap, an expert has warned, whether they’re snapping up a modest retreat in Spain or a lucrative rental apartment in Florida. The financial expert cautioned that this blunder is costing buyers thousands, or even tens of thousands of pounds on a single transaction alone – and the most frustrating aspect is that it’s entirely avoidable.
He noted that the mistake was proving particularly costly at present, as currency markets were more turbulent than usual owing to the conflict in the Middle East. He also revealed that more Britons than ever are being caught out by it, as UK landlords, weary of the relentless financial burden, are increasingly turning to overseas properties as holiday lets.
“I’ve been helping people with their currency transfers for years and I’ve not been this busy for a long time,” said Tony Redondo, founder at Newquay-based Cosmos Currency Exchange. “It’s fairly well-known that many UK landlords are exiting the sector en masse, as the numbers just don’t stack up any more and the legislation being introduced by the Renters Reform Act is piling on even more financial and administrative pressure.
“But what’s less well-known is the sheer number of landlords who are selling up and then reinvesting their cash in rental properties overseas, where they feel they can get better returns. And while Spain, France and Portugal always prove popular, a growing number of Brits are being even bolder and looking to the US, with Florida becoming a hotspot for UK investors over the past year or two.”
Tony highlighted that the error many people make is neglecting to secure a competitive rate well in advance of their purchase, a practice known as ‘hedging’, as should the currency markets shift against them just days before the transaction is due to complete, they can suddenly find themselves paying thousands of pounds more.
Tony Redondo (Image: Tony Redondo/Newspage)
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He said: “By way of example, on January 29, the Pound to US Dollar exchange rate rose to its highest level since September 2021.
“A client of ours was looking to purchase two property rental units in Florida at the time to add to his portfolio and we suggested that, with the Pound so strong, he should consider locking into that exchange rate as it may not last for long.
Brits could lose a big chunk of cash (Image: Jose A. Bernat Bacete via Getty Images)
“With the use of a flexible forward contract, I secured my client the rate with a small upfront deposit that would be refunded when the transaction took place.
“The transaction happened at the beginning of April and, as the Dollar has been very strong of late, saved my client a massive £63,500 had he purchased Dollars then.
“Fail to prepare and, in the forex world, the message is very simple: prepare to fail. Sadly, too many people self-serve through their banks when exchanging currency and end up paying through the nose.”