1 Legal advice

Whatever else you may decide, do not be tempted to dispense with the services of a lawyer. Strictly speaking, you may not need one to actually purchase a property (although I would recommend you employ one).

But at least consult one before you begin the process. If nothing else you will fully understand what is going on.

Unless you are an expert in a country's property law you will be very rash indeed not to consult a lawyer who is an expert in this field. Why? Well, read on and the answers will become pretty obvious.

2 Selecting an estate agent

It's probably fair to say that estate agents or realtors around the world are not the most trusted of professionals. Some of this reputation is, of course, undeserved. But, just as in any country, there will good and bad estate agents in the Eastern Eight.

The main difference in these markets, however, is twofold.

First, the property markets have been showing big returns for several years now and further booms are expected

Second, the markets are still relatively immature

Added to this there is the complication of some corruption in many of the countries.

These factors are going to attract some less-than-desirable operators.

If you do business in a system that depends on a certain amount of corruption to function, then such practices can and do rub off on business people. You have been warned!

This all adds up to a breeding ground for unscrupulous, get-rich-quick operators who are only too eager to grab dollars, euros and pounds from any unsuspecting foreign investor.

Well, it is, perhaps, not quite so bad as that.

Nevertheless, who you deal with when you decide to buy property is crucially important.

There are really only guidelines to follow on this, not hard and fast rules that cover all countries.

Only deal with well-established agencies who have been in business for several years.

Make sure they belong to the professional body governing their business. Do not just take their word for this. Check.

Insist on meeting other clients of the agency, preferably of the same nationality as yourself.

Make certain an agency's terms and conditions are completely clear before dealings begin - both for buyer AND seller. Get them in writing and make sure they are signed by both parties.

Make certain that you are reasonably clear about what the buying process involves before you deal with an agency. You will almost always have to pay a commission for buying a property - get the amount in writing.

Be specific about what kind of property you are interested in and make it clear if you are being shown inappropriate properties.

This almost certainly indicates the agency has nothing of the kind you are looking for on its books.

Be wary of ever paying any fees, charges or deposits before signing agreements.

Unless you are very clear about what a contract says, and you fully understand it, get a lawyer to check it. In many of these countries, contracts will be in the language of the country, not in English. I would advise getting a verified translation.

Be wary of being asked to deal in cash, unless you have proper receipts for your payments.

In some of these countries foreigners are currently not allowed to own land directly and need to purchase through a company. Beware of any other suggestions to 'get around the rules', unless you fully understand what is taking place.

3 Shop around - even if you feel comfortable with a particular agent, try others too.

These warnings probably make doing business in the Eastern Eight countries sound like a nightmare. You will be wise to be wary, but if you proceed with caution, this is not the case.

The main point is to keep common sense to the fore, do not take anything for granted, and do not expect proceedings to be the same as in the West.

Beware of what seems too good to be true

Because it probably is just that.

This may seem obvious, but in a trail-blazing market it is easy to get sucked into believing in unrealistic returns.

It's also worth bearing in mind that the best investment is sometimes attained by avoiding the herd mentality - in other words, steering clear of what seems to be the easiest way into a market.

For example, you can look at the market in Prague and see the obvious - that high-end apartments aimed at the corporate market have come down in value.

But examine the market a little more carefully and you can identify another opportunity - properties aimed at the growing middle class.

They may be more difficult to manage, but the returns will almost certainly make it more worth your while.

4. Be clear about your investment goals

It's important to understand your investment goals in order to assess whether a particular property is right for you.

For example, if your desire is to generate constant rental income throughout the year, then you may be better off buying an urban property rather than something in a seasonal tourist resort.

5. Restoration opportunities

Restoring a property that, although dilapidated, is full of character and original features, is a great way to get a good return on your investment - provided the project is carefully planned and managed.

Taking a large property and then dividing it into apartments is one well-tried method of boosting an investment return.

But before a project like this is undertaken it is vital to have the property properly assessed by a professional and to be sure of the amount of work you are taking on.

Also make sure that skilled craftsmen are available in the area to carry out the necessary work. Make sure you inspect their work on other properties.

Get detailed quotes for labour and materials and assessments of how long the job will take.

Do all your sums BEFORE you make an offer.

6. Rental potential

If you're relying on rental receipts to fund the purchase of your Eastern European property, you are going to have to carry out some detailed research beforehand. Anecdotal evidence will simply not do.

Generally speaking, if you need to rely on rental yield before you decide to sell a property, then I would recommend that you look towards the major cities.

This is where the consistently high yields are likely to be and, aside from temporary trend reversals, prices of property in these cities are unlikely in the short to medium term to stop rising in value.

In fact, they are the most likely properties to benefit immediately from the various boost stages we've talked about.

Right now, property price inflation in the medium term of around, or well in excess of, 15% per annum is not unlikely.

Then again, the downside to buying in the major cities, such as Prague, Budapest, Warsaw and so on, is that prices are already high. These are, to a certain extent, already tried and tested markets for foreigners.

For really big capital gains on your property, you will probably need to consider locations that are a little less discovered.

7. Check before buying

Don't, whatever else you do, be rushed into buying. Even if you believe you need to hurry to take advantage before an upward climb in the property price cycle, make sure you don't act in haste.

And ask the agent to show you which other properties they've sold in the immediate area and for how much.

Visit the property more than once and at different times of day. Check out the neighbours, what kind of people are they? Locals, expats? What kind of profession? What are nearby facilities like? Are there schools, shops, a hospital?

These factors may all be important to give you a flavour of the kind of neighbourhood you are in, rather than listening to an estate agent's selling pitch. And, if you care about renting, short or long term, then you should consider some of these matters.

8. Understand the tax implications of selling

Before you buy, you must make certain you understand the effects on your tax return if you sell at a profit. To a certain extent, this will depend on where you are living.

But, if your country of residence does not have a dual tax agreement with the country you purchase your property in, you could find yourself paying tax twice - once in the country you sell in and again in your country of residence.

9. Avoid being the first in an area

Unless you are truly confident you have got all assessments correct, or you are the kind of person who likes to play for higher stakes and does so with calm detachment, I would always try and avoid being 'the first'.

That is, being the first ex-pat to invest in a particular area or even a type of property.

The object of the exercise here is to be early, but not the very first to arrive at the party. That is if you want to minimise investment risk.

10. Can you fund it?

If you're buying to invest - pure investment, or with investment as the purpose above all other considerations - it is always best to take a cold hard look at what you can afford before you start looking at properties.

Sure, you may have made a decision about what you want to afford, or can afford, and then, once the hunt begins, you realise that you want to commit more funds to your investment. That's fine, if you are still swimming well within your depth.

Do not be tempted to over-extend yourself because you become convinced the returns, from either capital gains or rental, are pretty much guaranteed. They never are - not even in this exciting market.

11. Use the power of cash to get a better price

If you're property hunting with cash in your pocket, make sure you use this to your advantage.

If you are a cash buyer, you are at a huge advantage in any market. You are immediately massively more attractive as a buyer than nearly all domestic purchasers.

Why?

Because they will, in nearly all cases, be afflicted by those twin property buying headaches:

Finance and a chain.

By that I mean they will be buying with a loan and this will need to be approved for the property they want to purchase. And they may well have another property to sell before they are in a position to go ahead and finance any offer they make on a new place.

If you have raised capital either from savings, from re-mortgaging your home property, or from a pre-approved loan, then you are a cash buyer. You have nothing to sell and you don't have to wait for a loan approval.

So, how does this give you an advantage in reality?

It means that, as a foreigner, the Eastern European estate agent will see you coming. They will know that, if you are a serious buyer, you will have cash to buy. They will often allow for this by, in a nutshell, jacking up prices.

This can actually be to your advantage because it gives you a pretext to make low offers, perhaps 25% below asking price. The seller can always say 'no'. And you can always walk away.

Of course, however, you need to use common sense here. If you are negotiating a price in an area in which you know properties have exchanged for a certain price, you will not get very far if you make a very low offer.

Of course, being a cash buyer can also mean that you are buying with your own cash - completely.

This can make sense if you believe the prospect of re-mortgaging in the future is likely. But given the choice you should always use a loan to finance your purchase.

Why? Because you will basically be using someone else's money to make a profit - and the percentage profit on your capital will be considerably higher (see section 5.1)

12. Cut currency risk by ensuring that your loan and the income are in the same currency

Euro, dollars or sterling, currency fluctuations are unavoidable.

However, if you know that you'll fund your property from sterling or a dollar income, through a home re-mortgage, then a sterling or dollar-based loan will avoid any problems with changes in currency rates.

You'll be unaffected by currency fluctuations. Equally, if your property will generate sufficient rental income in euros (or the transaction currency in the country of your investment) to service a loan, then take the loan in euros.

Again, this will avoid any problems with currency fluctuations.

If you are taking a loan to make your investment, there is another distinct advantage in taking out one in the same currency in which you make your purchase. Basically, this way you will be protecting the relative value of your capital investment.

But at the same time you will not be protecting your loan repayments against currency fluctuations.