Overseas House Renovation: A Simple Guide

Panoramic View Of City Buildings Against Clear Sky

Lock In Savings By Renovating An Overseas Property In 2023

A real estate market slowdown is the perfect time to do renovations. Speculative construction projects are grinding to a halt. Builders have less and less work. This means they’ll do your upgrades much cheaper than they would have just a year ago.

But beginning a renovation job abroad should never be taken lightly. Any construction job has pitfalls. Add to that the unknown variables of operating in a foreign country. Consider the following before you commit to an overseas renovation…

Who Are You Renovating For?

If the property is to be your retirement home, you can decorate it how you like. But bear in mind, the more personalized you make your home the smaller the future resale market will be.

An investment property must be designed to appeal to the broadest range of renters, so keep it impersonal and the colors bland.

Rentals can often benefit from more bathrooms and easy access security features like combination door locks or key lockboxes for ease of property management.

If it’s a rental property, the renovations must be appropriate for the market it serves. Will you be renting to expats, students, or the local market? You must provide levels of finishes appropriate for the market you are renting to.

Add Value To Your Property

Not all renovations will add value to your property. Painting and decorating are always a good idea, as are adding bathrooms or extra bedrooms as needed. However, updating your kitchen rarely adds any real value to your home or rental.

Talk to your property manager and local realtors and find out what adds value in the market you are in, and don’t spend money on vanity projects.

Energy Efficiency

This is the new gospel when it comes to renting or selling property. In most countries in Europe, you must have an energy rating to sell a house. Buyers or renters will consider the energy rating of your house before making an offer. This is especially true in these times of soaring energy costs.

Assess if additional insulation or a more efficient heating system like an air-to-water heat pump will be of benefit, and get your house energy rated.

Be Present During The Renovation

By being present you make sure that what you are paying for gets done, especially if you are getting structural work done. If remaining in country isn’t feasible for you, regular video walkthroughs with the builder to ensure all specifications are being adhered to is essential.

Planning Permission

I’m always surprised by how often folks think they can do major renovations abroad without getting the necessary licenses and planning permissions.

On many occasions small interior renovations don’t require any permissions from the local government. However, not getting the necessary planning permission before you begin might mean you have to tear out all the work you have done, or it could mean you cannot legally use new rooms as bedrooms in future.

Local Building Regulations

Like the planning permission issues above, there will be local building regulations that must be adhered to. In parts of Greece and Latin America the municipal sewage pipes are too small to take toilet paper. There’s no use in insisting on a standard American toilet if the builders can’t find them nor the sewage system connect to them.

Similarly, ensure any electrical work is done by a licensed electrician, so you can get an occupation license afterwards.

Know what’s legal before you start so you won’t be disappointed or run afoul of the building inspectors.

Listed Buildings

Make sure that the building you are buying to renovate isn’t a listed building, or protected structure. If it is, be absolutely sure that you know the restrictions on what you can do with the building before you begin any work, and get all the licenses you need.

Renovating listed buildings can be astronomically expensive, as you might have to use expensive specialist architects or builders, or you can be restricted with what you can do with the building, and might have to use antique or expensive building materials.

Find A Recommended Contractor

This is often the hardest step in the renovation process. Ask your realtor or lawyer for their recommendations. It’s a good idea to meet the local expat population and ask them for recommendations, too.

Cowboy contractors are everywhere and there may not be a builders’ association to complain to if things go wrong, so do your due diligence beforehand.

Availability Of Tradespeople

Take time to talk to several recommended contractors, and hammer out the best deal you can. You have more negotiation power when tendering for work during a market slowdown.

Structural Issues

Before you buy any old property, but especially before you begin any major construction work, make sure you get an engineer to review the structure of the property.

Hidden defects might be uncovered mid renovation that cannot be covered back up, and will have to be fixed at great additional expense.

These surprises can blow your budget or be so expensive that you cannot bring the house back into livable condition, and you’ll be forced to sell at a big loss.

A structural survey will give you an idea of what you will have to spend before you start.

Get Indemnity Insurance

Make sure anyone doing any major work on your property has professional indemnity insurance. While not necessary for painters, for example, anyone doing actual construction work on the house must be insured or bonded in case they damage your home while working on it.

Ask to see their insurance policy, have someone who reads the local language review it, and call the insurance company and check the insurance document is valid.

Language Barriers And Cultural Differences

These are a huge consideration when dealing with local builders.

On a job I managed in Belize I told the builder that I wanted the large garden shed built perpendicular to the house.

When we arrived back from a conference the shed was parallel to the house.

In the end the builder admitted that no one in the village “knew what a perpendicular was,” and he was too embarrassed to admit it, so he went ahead anyway and did it wrong.

Detailed Specification Sheet

You’ll want to specify in detailed writing everything you require done so you can be sure the builder is going to provide what you want.

What is a high-end finish? Make sure you define it properly.

You want wooden floors? Are they hardwood or just laminated chip board?

You want the windows to be from a quality fabricator or from a cheap discount depot in China?

The builder will provide the cheapest material he can get away with unless you specify with him what you want. It might mean going with him to the hardware store, or giving him a list of companies with products acceptable to you.

On another job I managed once for a client in Belize it took three weeks of site inspections arguing with the builder about putting in a window sill in a cottage. He kept getting it wrong.

In the end I realized he simply didn’t know what a window sill was, and I had to have a detailed drawing of a window sill created, including how to install it.

Drawings

Like the specification sheet above, and to avoid my mistakes with window sills and perpendicular garages, have a draftsman create detailed drawings for any structural work you do in the house (anything but painting and minor decorating work). It’ll cost a little more but will avoid costly mistakes and confusion after the fact.

Change Order Fees

Be sure you have agreed the price of every part of the renovation before any work begins.

Be aware that once the contract is signed, if you are fitting any cabinets or doing structural work, you can be charged a change order fee on top of the additional cost to vary anything in the contract.

Change orders are costly, avoid them if you can.

Weather

This can be a serious issue if you are doing outside work or replacing the roof. In hot, dry countries it’s usually not an issue, but bad weather can delay exterior building work for months. Many builders won’t even tender for exterior work unless it’s during the dry season.

Doing Some Of It Yourself

This can be a way of saving money, but it’s usually not worth the effort. Especially in lower-cost countries where you can pay a local worker a fraction of what it would cost back home. You should save yourself the backache and wasted time.

Tax Issues

These must be addressed before you begin the renovation. In many countries, the cost of renovating your investment property can be written off against future rental income. Tax breaks for rehabilitating old buildings also exist in many areas.

However, for this to work you will need to adhere to the local tax laws from the beginning.

In Ireland, for example, you can write off the cost of renovations of your rental property over several years against your rental income, but only if the work is done by a builder who is registered for VAT (sales tax). To use a non-VAT registered contractor or doing any of the work yourself means you cannot claim the value of that work or materials against your future tax bill.

Markets For Renovating Overseas

The best markets to be renovating in are markets where:

  • Run-down structurally sound buildings are available for sale, especially through bank auction. Historical buildings can be beautiful when properly renovated. I’ll cover buying at auction in a future OPA issue.
  • Suitable skilled builders and tradespeople are available at a reasonable price.
  • There is a good rental or resale market.
  • You don’t mind spending some time finding suitable construction crews.

Countries where I’d consider looking for a renovation project today:

  • Belize: Our recommended realtor in Belize will help you find a reliable fixer upper, contact her here.
  • Panama: Contact our local realtor who specializes in the resale market, here.
  • Northern Cyprus: Get in touch with our expert in Northern Cyprus for inexpensive renovation options, here.

Con Murphy
Editor, Overseas Property Alert