For many people, buying property overseas is the ultimate goal. Whether it will serve as a vacation destination or become your home when you retire, buying overseas property lets you secure a piece of your dream today.
US citizens buying property abroad aren’t uncommon. However, many aspiring buyers struggle with how to buy property overseas. Whether you’re buying property in Costa Rica, Italy, Thailand, or anywhere else, the process is often more complex than you’d expect.
Thankfully, by learning about what it takes to purchase homes for sale overseas, you can be ready for the challenges. You’ll be able to navigate them with greater ease, all because you were fully prepared.
If you have your heart set on buying property abroad, here are some dos and don’ts to help you on that journey.
Buying Property Overseas Dos and Don’ts
Do Explore the Total Cost of Living Abroad
When you’re living overseas, you may have to pay far more than you’d expect. There are many expenses to living abroad that take first-time buyers by surprise. Sometimes, this involves hidden costs of living abroad. In others, it’s the costs of daily living.
Before you start looking for homes for sale overseas, spend some time learning about the costs you’ll encounter. That way, you can be fully financially prepared.
Don’t Assume That Overseas Financing Matches What You Find in the US
Most people buying real estate overseas are at least somewhat familiar with mortgages and similar forms of financing in the US. But, if you’re relying on that knowledge, you may be surprised to discover that overseas financing options don’t necessarily look the same.
In many cases, foreign banks require larger down payments. Additionally, you might face higher interest rates. At times, getting specific kinds of insurance that aren’t necessary in the US – such as a life insurance policy that can cover your mortgage – is mandatory in other countries, too. There’s also a chance that an overseas bank won’t provide financing to people who are citizens of other nations.
If you plan on financing the property, spend time learning the rules in your destination country. That way, you can figure out if using a local bank is a viable option or if you’ll need to look at alternatives.
Do Learn the Tax Rules
Buying property overseas can come with some tax implications. You may have to pay taxes at the time of purchase and cover a recurring expense that’s similar to property taxes in the US.
As with other aspects of buying property abroad, the rules vary from one country to the next. Your experience may look different if you’re, for example, buying property in Italy instead of choosing a similar property in Panama.
Since taxes can be a short- and long-term financial obligation, learning the rules is essential. As with all parts of the process, preparation and knowledge are keys to success, so do your due diligence before you begin your home search.
Don’t Start Without the Right Permits or Registrations
Each county has unique rules for non-citizens buying property in their nation. Foreign ownership laws often make acquiring special permits or completing certain registrations necessary. Without the right permissions, you can’t complete the purchase.
In most cases, it’s best to take these steps early. That way, if there are wait times or processing fees, or the need to appeal a denial, you can handle all of that before you fall in love with a particular property.
Do Plan Your Exit Strategy
While it may seem odd to start thinking about selling before you even finished buying a property in Spain, Greece, or elsewhere, it’s a wise move. In many countries, selling takes far longer than you’d expect.
Additionally, local market volatility can vary. Some nations experience larger price swings than others or may see values shift far more often.
In the end, you don’t want to get trapped in a property you no longer want. That’s why understanding what it would like take to sell is so crucial. It lets you figure out what your exit strategy needs to look like, ensuring you aren’t caught off-guard should you need to sell the property.
Don’t Buy Before You Get to Know the Area
In some cases, people are enamored with a particular country or city after a single visit, and they immediately start focusing on buying retirement property overseas in that region or securing a nearby vacation home. The problem is, you only got a glimpse of what living in the area is like, and that may not be enough to make a smart purchase decision.
Before you begin searching for homes for sale overseas, spend time getting to know your target area. Visit it during different times of the year and stay for long enough to move beyond being a tourist and getting closer to experiencing life as a resident. Speak to locals to learn additional details and gauge their receptiveness to having foreigners in the area. That way, you can discover things you may not have noticed during a shorter stay, making it easier to decide if a particular neighborhood is right for you.
Do Research the Property Carefully
Once you spot a property with potential, research it carefully. Like homes in the US, liens or other liabilities may be attached to the property. If the house serves as a rental, you need to know if there are current tenants, the conditions of the lease, and how local tenant laws impact the situation.
It’s also wise to research the zoning laws that may impact the property. In some cases, you may be barred from using the home in certain ways. At times, you – and your neighbors – may be allowed to do nearly anything. While this may seem like a positive, it could lead you to wake up one morning only to find that the house next door is now a dance club.
In certain countries, if you don’t live in the property full-time, the government may even be able to force you to rent the home out if there is a housing shortage in the area. If you were only going to stay at the property part-time, that could derail your plan.
With research, you can figure out what does or doesn’t affect the property. Then, you’ll know what you need to navigate if you want to move forward with the purchase.
Don’t Buy Property Sight Unseen
In most cases, whether you’re buying property overseas or locally, making the purchase sight unseen is incredibly risky. There is always a chance that property photos and descriptions are inaccurate, leading you to buy a home that’s nothing like what you thought you were getting.
Additionally, buyer protections about misleading information vary by country. If you’re buying in an area where the protections are minimal, you may struggle to break the contract even if the property is far different than what was portrayed.
Do Confirm What’s Included in the Sale
What’s included in the sale when you’re buying overseas property can differ depending on several factors. In some countries, leaving all of the appliances and furnishings is common. In others, the former owners may keep everything that isn’t a permanent part of the structure, including light fixtures, cabinetry, sinks, and other items that most US buyers would never expect.
If you’re looking at a home that’s under construction, the same rules apply. Not all new builds will include everything you would find in a US property. Instead, it may largely be a functional shell, featuring only hookups, connection points, and space for critical amenities like the bathroom or kitchen fixtures, air conditioning, and more.
Before you move forward with a contract, get a written list of everything that is and isn’t included. That way, you know what you can expect to see when you prepare to move into the property.
Don’t Forget to Check for an HOA
The US isn’t the only country where a homeowner’s association (HOA) may have a say over your property. Additionally, HOAs overseas may have more power than you’d expect, as what they are allowed to do varies based on local laws.
If you’re considering a property – especially in developed communities or apartment buildings – get all of the HOA documentation before you commit. Learn about the rules and fees. Research their financial statements. Confirm that the HOA is registered in accordance with local law.
In the end, you want to be able to make an informed purchase decision. By learning about the HOA, you can do that with greater ease.
Do Have a Plan for Managing Your Vacation Home
If you’re only planning on staying in the property part-time, you’ll need a plan for the rest of the year. You may have to hire someone to care for the house, for example, just to make sure it stays in good shape.
While you may want to rent it out when you’re away, you need to make sure that is an option in the area. Zoning rules may prohibit short-term rentals, or you may need to sign a contract with (and compensate) a local property manager to make renting it out viable.
Again, it’s better to figure this out in advance. That way, you can create a reasonable plan before you commit to a property.
Don’t Forget About Your Car
If you’re looking at a property in an area where owning a car is a must, you need to make sure you’ll have a place to put it. Not all homes or apartments will come with parking spaces or garages. If that’s the case, you may need to rent a parking spot or use public parking options.
Make sure you look at the parking situation before you buy. That way, you can figure out if there will be an additional cost or hassle you’ll need to navigate if you move forward.
Do Work with the Right Real Estate Company
The real estate broker you choose plays a big role in your experience. By partnering with a broker like Global Property Systems, buying a property in Italy, Belize, the Caribbean, and many other locations is significantly easier.
Global Property Systems does more than support US buyers; they also partner with local experts in overseas countries. By working together, they can help you navigate the various laws and rules that impact your purchase, ensuring everything is handled correctly and in accordance with all applicable regulations, both locally and internationally.