Purchasing real estate overseas or foreign investing is actually a complex process. Of course, there are universal issues that are related to buying real estate including the style and size of property you are searching for, price range, and location. However, with real estate overseas, you should also factor in all issues that are related to making international purchase, as you are a foreigner in this case.
So here is our list of the top 10 things to before buying property internationally.
1. First and foremost, can you own property in that country
For example, if you are from the United States. What are the laws about property ownership where you are buying. You could not own land in Vietnam as a U.S. citizen, but you can in Costa Rica, also Mexico. But even with Mexico it is a tricky process depending on how you set up the structure of you S.A. or the location of the home or land. Is it close to the water, more inland, as these things makes a difference in Mexico. While we can't go into the details for every country. You need to do your due diligence because this can get really strange in some countries.
2. If you buy there can you even live there.
So congrats, you just bought land or a home in another country. But you find out you can only live in it half the year. This can happen in places like Europe, who allows some citizens of other countries to only stay for 180 days out of the year. This is fine if you can afford a second home, but say you sold everything to move there and now you are homeless for the other days you can't stay past your visa. Looking into visa laws is important, some countries will give more living rights if you invest more or have a verifiable proven income of a certain amount. Places like Mexico, you can live for 6 months, leave for 2 days or so and come back for another 6 months. So that option isn't too bad, it all depends on the country and where you are from. So do your due diligence.
3. You're in another county so don't get screwed over.
100% you should get two local professionals who can help you with foreign investing. Hire a local lawyer who can guide you throughout the legal matters for foreign investing. Then, you should also use local international buyer’s agent. This professional will help you get started, stay organized, explain the market for you, and help you get the best deals. This isn't always the case though, some people are desperate for money so take your time, use a few agents and make sure you get a good deal. Also in some counties you may pay and not even own the land after dishing out $300k. Super unfortunate cases but we have seen it, seek an attorney, title insurance and any other means possible in that country to protect yourself. It is always best to make sure the people you are working with don't know each other. Also you never tell them who you are reviewing things with either. Unfortunately, some people will wipe you out clean so they can live better.
4. How is the property calculated.
Ensure that you understand what is in square foot calculation. When purchasing property overseas, you should be aware that a square foot measurement frequently includes outdoor and indoor space including balconies, walkways, and patios. Are the land boundaries correct, are you crossing over into someone else's land. Is this in Hectors or Acres, how to calculate the cost and size difference for these. Is there an HOA, what are your property taxes, is there any other costs you should know about. You need to ask questions like these before you are surprised later down the line.
5. Visa, Fees and Required Medical Items.
Majority of countries have some kind of fee to enter or visa to acquire. There are times that this fee should be paid before you leave your home country or you can get turned away. It may also at times be paid upon entering your preferred destination country. So, make sure to do a research about this before you travel. Hopefully, and most likely you know this stuff before you buy a home there. But there are cases where people get overly excited and buy something within a week. Then they run into the visa issue or fees, this means things like saying over your visa. They can ban you from the country for around 2 years in some places for this. Imagine that, you bought a home you won't see for two years. Also can you get medical care, do you need shots first or can you get your medication. You don't want to buy there and find out you can't get your medication to survive.
6. Be Aware of Tax Rules
Make sure consult with a local tax professional in your country to ensure you’re FATCA compliant. If you don't comply with FATCA, there are big penalties. We won't go over this much but talk to your financial advisor and make sure if any foreign property costs effect your local government you know about it first. This can really burn you, you don't mess around with breaking tax laws.
7. Squatter Rights
Yes, strange thing right. Well you better know about that especially if you have land or no one looking after your property. If someone decides to build on your vacant lot, which you paid $100k for. Then they live there for a while because you never checked on it. Some counties, they now have some ownership rights to your land. Know these laws, hire a property management company or someone to look after your investment.
8. Water Rights, Power and Emergency Issues.
Strange as it sounds you need to understand ownership of these. Say you bought a home in a place like Costa Rica. Everything is fine till the water is all of a sudden shut off. Well, in some cases the owner of the land who has the water well supplying the area has all the rights. So they could play hard ball and refuse to turn it on unless cash is paid to them. Or even worse, they squeeze you to sell the property to them. If you have no other way to access water, your property may become useless to those buying. So you end up cutting the price 50% and the owner of the water well buys it. Turns the water back on, and sells it for a nice profit. Once again awful and rare, but it does happen in countries where the legal system is not to high standards.
9. Title Insurance.
Yes, 100% get this if you can. This makes sure you own the land or house in the books and backed by a top reputable title company. In the U.S. there is a better deed system but in some other counties, like we said previously. Someone can sell you land they don't own.
10. Legal Differences
You should know the differences between civil law and common law. Depending on the kind of law that the country follows, it will affect foreign investing. It’ll affect households, land, and condominiums. You should know the differences of the law where you want to buy a property. Under the common law, you have titles and in terms of condominiums, you basically have strata title. Oftentimes, common law is used in countries including Cana, Australia, Great Britain, US, and so on.
When it comes to civil, you actually have a horizontal property regime. You will get escritura publica, which is a deed. Mostly, civil law applies in Latin America and Europe. Almost every country in such regions follows civil law.
Owning property in another country is amazing and thrilling. But don't take it lightly when buying in another country. Yes, there are very easy safe countries to buy in as a foreign investor. But there are also exotic locations that have you dreaming big, but can leave a poor taste in your mouth down the line. This article is written with experience and we have seen some sad things happen to others who dreamed big and moved overseas. If you do your homework and get the right people, you will be fine. But slow down, don't get too excited and make good decisions.
