Envision the allure of being in a location you cherish, whether for investment, vacations, or as a second home. This isn’t just a purchase but an investment in your lifestyle and a potential addition to your portfolio, promising a world of opportunities and experiences.
However, purchasing property abroad isn’t always as easy as it is within the US, and as a foreign buyer, you might find that your buying journey involves different restrictions, expectations, and imitations that can complicate the process.
This post will discuss some of the issues you might encounter and what you need to consider before purchasing a property abroad.
What Do You Want?
Before embarking on your search, it’s vital to comprehend your current and future needs. Are you seeking a permanent residence, a vacation home, or an investment opportunity? Your motivations for buying will shape your budget and the type of property you select, giving you the power to make informed decisions.
What Are Future Plans?
Now that you know why you are buying right now, you need to consider your long-term goals. Will you be looking to fully relocate to the new property, sell up and upgrade, or expand your portfolio? All of these are important questions to ask yourself as you need to be thinking of both now and the future to avoid making any property faux pas that can impact your end goal.
Why That Location?
Why do you want to purchase there exactly? Do you visit frequently? Is it a better investment opportunity? Do you have relatives or friends living there? Or do you want to move for career purposes? It’s all well and good loving an area, but you need to know why it should be a more permanent part of your life if you make carefully considered decisions if you don’t make a pretty expensive mistake or make it.
Research Local Laws
All countries have different requirements pertaining to international buyers. Some require you to be a resident before you can make a purchase. Other countries might have restrictions on the type of property you’re buying. For example, foreigners can’t buy property in the Philippines. In New Zealand, foreigners cannot purchase existing property but can invest in new developments, while Greece limits the number of properties nonresident buyers can own.
Buying property in a foreign country can be complex, especially when it comes to legalities. It’s essential to seek advice from a local real estate expert who understands the laws and regulations for nonresident buyers. This will ensure a smooth and legal purchase.
Research The Area
Just like purchasing a property in your home country, it’s crucial to thoroughly research the area you’re interested in. Understanding local property prices, potential for growth, crime rates, and amenities will ensure that your chosen location meets your needs, whether you plan to live there, rent it out, or use it as a vacation spot. This knowledge will instill a sense of security and confidence in your purchase.
Tax Breaks
You need to understand the tax implications when purchasing property overseas. Domestically, you might be able to claim the foreign tax credit to lower your tax bill, while you can claim Act 60 tax incentives if you purchase and reside in Puerto Rico, for example. Typically, the tax implications for both domestic and internal property purchases are the same when filing your taxes; however, you need to be aware of all of your obligations both where you purchase and at home to ensure you don’t get stung or miss paying for something that could land you in hot water.
If you’re in doubt, talk to an attorney in both locations to understand if you qualify for tax incentives or tax breaks and what you will be liable to pay both at the time of purchase and during ownership.
Zoning Rules
There could be rules against letting out your property if you wish or listing it as an Airbnb rental, for example. Some countries will have zoning laws that restrict certain types of activities for international or nonresident owners or domestic and foreign property purchases in specific areas. This can be to limit the number of people taking up property for a vacation rental, for example, or to avoid locals being priced out of the market. You must understand any laws before proceeding so you can do what you want with the property and not fall foul of the law.
Costs and Upkeep
You need to appreciate the cost of maintaining the property and paying local and utility bills associated with the purchase. You might find you have to pay increased insurance premiums, hire a housekeeper or security service if it is going to be occupied continually or identify what services you have, e.g., trash collection and recycling.
Additional Fee and Complications
Talking to an expert international real estate agent can help you uncover if you will be liable for any additional fees and what you can expect to pay to complete the purchase. The transfer tax can, in some countries, add up to 10% to the total cost of the purchase, which can be a significant sum. It might be that the title transfer takes longer than expected, or you’re used to it, it might take months or even years to complete, which can impact your plans.
Ask about anything that is different from what you’re used to when purchasing property at home so you know what to expect and aren’t hit with shocking bills or problems impacting your experience.
Also, if you’re considering permanently relocating, does the country you want to move to offer you residency permits or paths to residency as you’re already a property owner? You don’t automatically get granted these rights in Australia or New Zealand, but in Spain, if you purchase property over 500,000 euros, you get granted a 2-year resident permit.
There are many complexities involved in purchasing property internationally; however, if you do your research and know what to expect, you can make this process much more straightforward.
