Maybe you want to make your favorite vacation destination your retirement home. Or perhaps you’re attracted to the low cost of living some foreign countries offer, or you’d like an investment property you can use as a retreat when you want and otherwise rent out. Whatever the reason you want to do it, buying foreign real estate differs in important ways from purchasing a home in the United States. Let’s look at navigating “expat” home ownership.
Hire professional representation
If you want to buy foreign real estate, you need professional help. The purchase and mortgage process will be different than in the U.S. A good real estate agent in the country where you want to live is a must. What is true here is doubly true there: An agent will know the market and understand market demand, pricing and the buying and closing process. You should also hire an attorney to help you navigate the laws in a foreign market. Many countries place restrictions on foreign ownership that you need to know about before you sign on the dotted line. Make sure all real estate documents are translated into English and that you understand what they say.
If you have traveled to a country where you now want to buy foreign real estate, you already know the tourist travel requirements. Now dig deeper for residency requirements. Consult with your attorney in that country. Read up on the immigration web page for that nation. The U.S. State Department will also have good information.
Analyze the financials of foreign ownership
Go online and look at real estate in the country and city to which you are drawn. Compare house prices, but don’t stop there. You should also consider the price of nearby amenities and entertainment, as well as costs for food and utilities, sales taxes and other daily living expenses. Depending on where you are looking, you may be pleasantly surprised at how far your money goes when you compare the overall cost of foreign real estate to U.S. prices. Housing and living costs in Asia, Central America and the Caribbean may be very affordable by American standards. European countries will be closer to what you would pay in the U.S.
Immigration regulations in some nations will require you to show a source of income in order to become a resident. Retirees moving to some countries must show immigration officials that they receive a pension, 401K distributions or Social Security in order to be accepted.
It’s very unlikely a U.S. mortgage lender will finance your purchase of foreign real estate. If you are not paying cash, you must seek a mortgage in the destination country. Lenders there do not know you, don’t take into account how much money you have in a U.S. bank, will not use your U.S. credit score, and will likely want you to make a more substantial down payment than is expected in this country. This will vary by country.
Taxes with foreign real estate
The tax man knows no borders. If you plan to work in your new country, you may end up owing income taxes both in the country where your foreign real estate is located and in the United States. Some countries charge a sales tax, such as 10 percent, on real estate transactions. You may owe annual property taxes on foreign real estate, although they may be more reasonable than in some states back in America. Again, consult with a professional.