Global property hunters risk making mistakes in chasing sparkling returns, writes Laura Slattery.

Irish investors' love affair with bricks and mortar has turned into something of a long-distance relationship in recent years.

Having either exhausted the well of opportunities on Irish shores or missed the boat, property investors are now looking to dip their toes into more exotic pools, from London to Cape Town, via eastern Europe.

But some investors have been accused of complacency, while more still have found the strain and cost of keeping tabs on their investments is more hassle than it's worth.

Newly converted overseas property enthusiasts run the risk of making several mistakes in their pursuit of sparkling returns.These include:

paying over the odds for properties;

relying on the rental yield to cover the cost of the mortgage;

using the family home as security for an investment property;

discounting the possibility that the property bubble could burst;

failing to get independent advice;

paying above-average legal fees, maintenance charges and transaction costs;

not being flexible enough on the term of the investment;

ignoring local tax and legal considerations or alternatively investing somewhere purely on the basis that the tax regime is favourable.

So how can people firmly committed to buying overseas property make it work?

First, as far as residential property is concerned, it is important not to assume that you can treat a holiday home as an investment property or vice-versa.

Idyllic places where you can spend a month in the sun every year might not generate the best all-round returns, while properties tipped to appreciate massively in value may not be located in spots amenable to family getaways or short-term lets.

According to Mr Paul Coghlan, chief executive of property advisers the Prestige Group, overseas buyers are becoming increasingly pragmatic. "The blinkers are off Irish investors now. They're ready and willing to go for any opportunity, even if they can't touch, see and feel it every day of the week," he says. "It's a financial decision."

Some years ago, much of the hype was about Prague. Now property agents are moving onto the Bulgarian capital of Sofia, Cape Town in South Africa and euro-friendly Belgium. Most, however, are buzzing noisily in a small circle around Budapest.

The Prestige Group, which has invested €150 million in British residential property on behalf of clients and €27 million in Budapest, says the market in the Hungarian capital is still gathering pace, as Irish investors line up to take a bet that Hungary's status as an accession state will prompt huge growth in capital values.

There is opportunity in Budapest, Mr Coghlan says, provided people treat it as a medium- to long-term investment. "It's not a get-rich-quick scheme."

With such a high supply of properties, rents in Budapest may not be quite so easy to come by. Even where there is a rental guarantee on a property, it is often built into the price. Once it runs out, there may be few chances to let.

"Hungary is a relatively poor country by our standards. You wouldn't have a huge amount of local people wanting to rent from you," says Mr Declan Hynes, head of the investment division at Aquarius Properties. Irish investors would be relying on business people, embassy workers and students for rent, he says, with the latter group only seeking a nine-month let.

"You have to be very, very careful about what districts you buy a property in. It could be beside a power station or a large block of apartments," Mr Hynes adds.

Rental yields in Budapest and Prague are running at about 4 per cent, according to Mr John Lowe, managing director of Providence Finance Services, "just a bit above here".

Language barriers, legal quirks, cultural differences and geographical distances can all get in the way of successful overseas investment. It is one thing to know where the Foxrock of Budapest is, but another to know how to go about investing in it astutely, Mr Lowe believes.

"At least in the UK, you know exactly what you're getting. You know there will be 1 per cent stamp duty, you know the yields and, if there's a problem, you can hop over there," he says.

"In eastern Europe, people are taking a punt. It's a gamble. Hungary is not going to be moving to the euro for at least five years. You have to wait until then before you know what kind of return you're going to get."

Currency considerations will come into play with any property investment. For example, the weakness of the dollar at the moment means it is "an extremely good time to buy" in the US, according to Mr Hynes.

A three or four-bedroom condominium in Florida could have a price of $150,000, but this is less than €125,000 at current exchange rates. The rental market is strong, as "third-age" Americans nearing retirement age head south rather than fly, he says.

Meanwhile, back in the euro zone, Spain is still the main destination for Irish holiday home-buyers who fancy putting their names to their own little shaded corner of the Costa del Sol.

It is here where the line between holiday home and investment is most frequently blurred.

"The first thing we ask clients is do they want to use this themselves or do they want it purely as an investment," says Mr Hynes.

"Some clients might have very small children of one or two years of age and they don't want to bring them to Spain now, but they might when they are five or six."

Such clients might consider signing up to a bank-guaranteed rental programme for five years. Here, the developer might guarantee the purchaser a rental yield of 4-5 per cent, keeping any excess rent income as profit.

These agreements usually allow people to access their property during the off-peak season.

But people who want to spend some weeks on the Spanish coastline every summer and perhaps a week at Easter might be better off just paying for a holiday to the area, Mr Hynes advises. By breaking up the letting periods, they risk leaving the property unoccupied for several months.

A persistent fear among those who do want to spend time in their Spanish villa is the thought that they could bump into half their friends and relatives just by strolling down to the beach.

But overcrowding and oversupply of properties can have more serious consequences than the Little Ireland effect.

"There might be 200 units in a block and 80 of them could be owned by Irish people. The competition from other investors means you will have grave difficulty selling," says Mr Peter Bastable, managing director of Simply Mortgages.

Drive through the most popular Spanish resorts and you will see thousands of similar second-hand apartments for sale, he says.

"In Spain, people should seriously consider going for the higher quality units, that is pay more for it," Mr Bastable says. "Premium product will always be in demand."

Sometimes, the most glamorous locations are far from being the most lucrative for investors. Mr Bastable is particularly sceptical about "the lure of doubling your money" in eastern Europe.

"Take any city in the UK - say Hull. You'd probably get a better deal in Hull than you would in Prague. So why don't you invest in Hull? Because it's not sexy, that's why."

As billions of Irish money continues to float overseas, economists whisper that property markets will crack dramatically under the strain of speculation.

At the Prestige Group, Mr Coghlan refers to such suggestions as scaremongering, but cautions that investors must still be prepared for returns to fizzle out.

"I don't believe there is a property bubble, but what drives a bubble is unrealistic expectations," he says.

"We're very, very conservative. One of our biggest challenges with clients is to say, 'let's be realistic here'."