By now, we all know that real estate can be one of the best investments you ever make. But what about investing in real estate abroad? That's just impossible and you shouldn't even dream about it, right?
Investing in international real estate is not only possible but also potentially very lucrative if you know how to do it right and do your due diligence.
There are shelves of books and even magazines (not to mention thousands of websites) devoted to buying property overseas. So, today we're just going to give you an idea of what to expect when you first start researching this exciting investment. We'll cover more topics in articles to come.
With that in mind, keep reading, whether you're dreaming of a country home in Provence or a commercial development in Central America.
Why Invest in International Real Estate
Chances are you're considering investing in property overseas for one of two reasons: You want to either live abroad full or part time or make some cold, hard cash.
The cost of living in the U.S. continues to rise, and many Americans realize they may not have enough saved to live comfortably in retirement. So, a record number of retirees are choosing to move abroad. Expats enjoy the stimulating adventures of exploring a new locale and learning another language. And they're saving a boatload of money when it comes to housing, food and even health care.
As for the cold, hard cash… well, property appreciation overseas can fast outpace that back in the U.S. The middle classes are growing in many developing countries. And these people want nice places to both live and work.
4 Questions to Ask Yourself Before Investing in International Real Estate
So maybe you absolutely love visiting Cancun and can envision yourself living in the Yucatan Peninsula forever. Or maybe you realize there's tremendous opportunity in getting in on a condo development in Rio de Janeiro.
Even if you think you've done your homework, there's probably more you need to research before taking the plunge. Here are the big considerations to keep in mind when beginning your international real estate adventure.
#1: Is It Legal for an Expat to Own Property?
It may seem strange, but believe it or not, there are some countries where it's illegal for noncitizens to own property. Still others put tight restrictions on what sorts of properties you can buy and where the properties can be located.
Sometimes, there are ways to get around these regulations. For instance, you can establish a business entity such as a trust or a corporation. But that's a hassle and headache you may not have factored into the monetary and emotional costs of buying property.
The best thing to do in all cases is hire a local lawyer – and perhaps a local accountant too. They can be your advocates, investigate the regulations and requirements, and be there on the ground when you can't be.
#2: What Are the Tax Considerations?
There's no simple answer to this question. Every country has its own laws about how you will be taxed on your property. And these can vary with your use of the real estate. Commercial properties have different tax implications from homes. And houses that you live in only temporarily might be taxed differently from a building in which you live 365 days per year.
Again, the best solution is to hire a local accountant and/or tax attorney to make sure you understand and comply with tax laws in the country in which you wish to invest.
#3: How Will You Finance the Purchase?
Here in the U.S., buying a property is generally simple. If you don't have the cash on hand, you simply apply for a mortgage. And there are dozens of types of mortgages you can use.
Unfortunately, you likely won't have that luxury when buying property overseas. Don't count on being able to receive a mortgage if you're a non-citizen. In fact, in some countries mortgages are practically unheard of. Paying with cash can also be a challenge when exchange rates zigzag all over the map.
Do careful research to make sure you have a method of securely buying the property. Again, a local professional should be able to help. We'll talk about this further in a future article.
#4: How Will You Manage the Property When You're Not There?
Unless you plan on living on the property year round, you need to consider how to manage it when you're not there. After all, you can't just hop in the car and head over to fix a leak at 2 in the morning. How will you keep your property secure from trespassers and weather events such as hurricanes? And if you need something fixed, how do you deal with contractors or handymen who don't speak English?
Here, a good boots-on-the-ground property manager or management company is key. However, there's also a growing number of gated communities geared toward the expat. They can handle maintenance and security issues for you.
International real estate can be an extraordinarily rewarding and potentially lucrative investment. But it's certainly not without its risks. Make sure you do your due diligence — and consider these questions — before diving in.