Investment: Closer to home

Beware exotica - your money may be safer in Britain, says Chris Partridge

Property investor Simon Previtt is bringing his money back home. He's selling his foreign investment properties and looking to build a UK portfolio instead. In doing so, he's bucking the trend for buying in ever more exotic locations, from Bulgaria to Bali. The main reason, he says, is to regain control of his investments and make them work harder for him.

So, it's out with Spain and in with places where rents are higher and tenants easier to find - London's Docklands, for example.

Buying in rapidly developing areas abroad where all the units are similar and have similar facilities makes it very difficult to differentiate your property to enable you to charge higher rents, Previtt found.

"I made money on the asset value, but there are so many rental properties there that customers have a lot of choice. I was doing silly deals sometimes just to get someone in," he says.

You are entirely in the hands of local agents, and the service can be abysmal. "Once, the agents in Spain sent a repair man to deal with a complaint that the washing machine didn't work, only to find that someone had stolen all the insides," he says. Previtt then discovered that every villa on the development had the same model, so a neighbour may have taken an innovative approach to mending his own machine.

"The management company in Spain was hopeless; very aggressive on the sales side but no back-up," he says. "I was lucky enough to be able to buy in cash; if I'd had a mortgage I would be really sweating.

"And in the USA,unless you have a very good management company to fill in the gaps, it is very difficult to make a decent return," he says. "Running a villa incurs on-costs of more than $800 a month, so you must let it for 35 weeks in the year or it will not make a profit."

Having decided to bring his money home, Previtt started his research. "I looked around London and came across the Royal Docks," he says. "It is a fabulous place, everything is there, and it has access to everything." He bought two flats in the Sargasso Tower at Capital East, a Barratt development overlooking the Royal Victoria Dock. Previtt is confident he has made the right move. "I know the UK rental market will work," he says.

The investment adviser and property entrepreneur Ranjan Bhattacharya of yourpropertyempire.com believes investors should not only stay in Britain, but stick to their own back yards. "My philosophy is to stay within one hour of where you live," he says. "The extra costs you will incur in managing and controlling your property will outweigh the benefits if you are any further away."

Don't confuse owning a holiday home in the sun with investment, he says. "If you have property abroad, have it for your own pleasure and not as an investment.

Investors abroad can be naive. "I met a man at a seminar who wanted to invest in Latvia. I asked him if he had been there or had family there, and he hadn't," Bhattacharya says. "But I have a Latvian builder on my team who says the reason he's here is that he got fed up with giving kickbacks to mafia goons in Riga."

Evicting bad tenants can be very difficult in foreign courts, where you may be seen as a rich foreigner exploiting local people. Borrowing costs are higher abroad, and a large cash deposit is needed. The tax situation can be unpredictable "A lot of people don't realise how good we have it in the UK. We have unrivalled access to finance; you can buy a £250,000 property by putting down minimal funds; there is a terrific rental market; and there is no wealth tax as there is in many foreign countries," Bhattacharya says.

Investing in Britain also avoids the vagaries of the holiday market, where tenants have to be found every few weeks and even short voids can devastate returns. "In the UK, you only have to find a new tenant every six or 12 months," he says.

Bhattacharya has set up a website - called www.succeedinproperty.com - where would-be investors can learn the tricks of the trade. It contains an audio library of seminars, talks and audiobooks on property investment, which can be downloaded on to an MP3 player or burnt on to a CD.