WITH eurozone interest rates at a five-year high, the latest rises have started to affect the finances of overseas property investors and even frighten less experienced investors out of the property markets.

However with some prudent planning there are ways for investors to reduce the impact of interest rate rises and safeguard their investments.

Too many people investing in the same over-hyped locations is a major weakness in these markets that could lead to problems. The majority of overseas property bought by Irish investors has been financed by equity release as a result of favourable interest rates in years gone by; in areas where a lot of Irish have bought there may be many people that are under the same pressure to sell.

When they do we may see a domino effect; this shouldn't panic people out of the overseas property market, but just make them realise that they need to reassess their investment options and with a few careful steps they can avoid any problems and reduce the risk to their finances.

Investors should always be reviewing and analysing their financing regularly to ensure they are getting the best deal and maximising their returns.

Investors should look to invest in other property sectors where the yields remain higher than the interest rates being paid on their finance.

Too many investors focus on residential or tourist sectors that are swamped with other investors and provide lower yields. Instead investors should broaden their horizons and diversify their portfolios into other property sectors such as retail, office, leisure uses or even nursing homes.

In the current climate investors should look to take advantage of currencies with lower interest rates such as the yen and use these currencies to help finance their overseas investments. For instance, the Japanese base rate is currently 0.5% and as long as it is monitored carefully, and you have a rate at which you will exit, this can provide significant financial advantages to investors.

This is something experienced investors in the money markets have been doing for years, but there is no reason why it can't be more widespread.

Join a syndicate. More investors are now clubbing together to buy overseas; this provides them with more buying power, allows them to gain economies of scale and means they can also do better deals not only on the property sale but also when negotiating finance.

Look to invest in countries outside the Eurozone that have lower interest rates (or better forecasts) and importantly where there are not a lot of Irish investors that are under the same financial pressures.

There are some very close to home such as Sweden or the UK, while further afield South Africa, China, Brazil, Australia and New Zealand are all possible alternatives.

Where available, go 'interest only' on your mortgage when investing abroad . . . if your foreign property is a pure investment then capital appreciation should be your main aim; this is where seasoned investors tend to blossom. You can have a much better cash flow position by having an interest-only mortgage, because your repayments are lower so it is easier for your rent to cover your costs.

However, certain investors are more comfortable with repaying the capital for peace of mind or other personal reasons and there is nothing wrong with this approach.

Wherever possible, investors should source their finance locally, ie, in the country where they are investing.

Banking sectors in certain foreign countries are more competitive than in Ireland and, therefore, better rates can be attained . . . this is particularly true in the UK, where the banks are quite aggressive.

Michael Bolger is director of Empire Consulting, a new Dublin-based independent consultancy that sources and analyses overseas property investment