There are a variety of reasons a person may wish to consider buying foreign real estate. With the U.S. market teetering, real estate abroad looks tempting as an investment option. Additionally in some parts of the world the buying power of the dollar gives you much more house than you might otherwise be able to afford on your own turf. Having said all that think long and hard about this decision and do your research! Foreign real estate transactions can be very complex and each country has different laws that pertain to exactly how you go about securing your new property.
Step one in buying foreign real estate is asking yourself where you want to invest. Hey, its a pretty big world. Part of determining that where, however, is also considering how you plan to utilize the property. If youre buying so you have a vacation home abroad, it makes sense to look in areas where you enjoy vacationing. If youre seeking real estate abroad solely as an investment, you want to look at regions that offer growing real estate markets so you can resell at a profit in the future. If youre looking to rent out the property, you want to consider locations where folks hope to find a home away from home for a period of time.
Once you begin narrowing down some options, step two is taking a long hard look at the potential country and/or cities reviewing their economy, culture, safety, tourism, regulations, and of course exchange rates. Note that when we say exchange rates we mean over the LONG haul. You want a solid feel for trends so that you can buy low and sell high. As for regulations, be aware that many countries are nowhere near as regulated as the real estate market in the United States. Agents often need no licensure to do business, so there is a greater possibility that you can fall into a scam. For this reason, its essential to hire a legal counsel who is fluent in the language of the country where youre looking to buy, and who is familiar with the legal necessities for property acquisition.
Having said that, there are some real benefits to buying abroad. Some countries have no capital gains taxes. Others have no property tax. Others still are offering incentives to specific groups of people looking to invest in foreign real estate. Just be aware that tax laws, like any others, are subject to change. Youll likely want to get in contact with a tax advisor before you buy to see how this impacts your income tax reporting at home too!
There is no question that buying foreign real estate can be risky. If you get antsy about playing the lottery, youre not the best person to be buying abroad. If, on the other hand, you hope to diversify your investments and limit yourself to using only money that you can afford to loose if something goes wrong, then real estate abroad may be the perfect fit.
When you get to the point of thinking seriously about this leap, remember a few rules. First, its very unwise to buy where youve never been. The best research is up close and personal. Get those feet to the foreign country in question, the potential cities, and do your ground work. Secondly no matter what the real estate agent, developer, or ad reads look at the property. You get what you see no matter what other add-ons a seller may brag about (i.e. if that Olympic size pool is not there when you sign on the dotted line its unlikely to ever appear).
Third, if youre planning to buy the house and use it for yourself even part time wait until youve spent a significant amount of time in that area. Take a few months off and rent. You want to buy with insider knowledge not as a guest / visitor.
Fourth, dont let anyone sweet talk you into more house than you want or need. That mansion on top of the hill with easy highway access might look lovely, but you wont be making much on resale. Go for the bungalow on the dirt road instead. You can improve it, and when the area begins to grow, so will your investment.
Lastly be prepared for a potential loss. Even the most prime real estate (note California as one example) can become over-valued or experience a tumbling market. Thats why you never put more into the house than you are willing to loose period. Take a look at the housing trends to know when its best to buy, and then buy smart.