Buying Real Estate Overseas
I’ve gotten a handful of inquiries about buying overseas. The US Dollar is strong and goes farther overseas than it has in recent years. Certain foreign countries (Greece, Spain, etc.) are absolutely beautiful with depressed economies, leading to bargains for those with cash. Also, many Americans are working to offshore assets as a hedge against turmoil, to diversify holdings, or as part of a tax mitigation strategy. AnnaMaria Andriotis and Laura Saunders wrote about this in the Weekend Investor section of the Wall Street Journal on May 24/25 2015. Found on Page Bp, “Thinking of Buying a Home Abroad?” is an excellent beginning primer if you’re thinking about something outside of the United States.
First, a quick legal disclaimer: I am a Real Estate Broker licensed in the state of Wisconsin, United States of America. Those considering purchasing foreign real estate should consult carefully with a tax advisor / CPA, attorney, and real estate broker in their home country and in the country where they want to purchase property. Nothing in this blog post should be considered legal advice. I can help refer you to competent real estate agents around the world. Please contact me if you have questions or need a referral to a competent foreign real estate agent. Agents who speak English fluently are not a problem!
Some good general advice:
- Research the foreign country. How is its political stability? What are the locals’ feelings about foreigners and foreign investment? What are the national feelings, including those of fringe-mainstream political parties who could become mainstream? What do reliable sources like the CIA World Factbook and the State Department’s list of Travel Alerts and Warnings have to say? Does the country have a website or section of a site devoted to foreign investment or the purchase of real estate be foreigners? Are there any known issues with extremists or violence, especially against so-called “wealthy” foreigners? Remember, while you may not be wealthy in the United States, you may be fabulously wealthy by foreign standards.
- Meet a great real estate agent. Your agent will be your guide to that country, local customs, and their world of real estate. Pick an excellent one who not only knows the area, but who doesn’t mind numerous “odd” questions* and who can speak your preferred language fluently.
*Where is a good place to eat? Is the water safe to drink? Where can laundry be done? Who is a good doctor or dentist? Where is a safe pharmacy? What are the laws about…? Where is a good grocery store? What do I need to do to drive legally? What is the best beach? Who is a good barber or beautician? Is tipping the norm? Are the cabs and busses recommended? Is negotiating when making purchases the norm? Where and how are taxes paid? Where are banks who will work with my US bank? Can you recommend competent attorneys and CPAs? Are bribes necessary or customary to get action from local officials and civil servants? Are there areas I should avoid? Are there places that are unsafe for me to go as a foreigner?
- Learn about payment options. You have US dollars and the foreign country probably doesn’t use US dollars. Is there a better time to convert currency? What are the fees? What do foreign banks require? What US laws are involved with removing large amounts of currency from the United States? Will your US bank even give a mortgage on a foreign property? If so, what additional fees will be involved for (to the bank’s view) the additional risk? Will the terms change (ARM, 10/15/20/25/30 year loans)? Will you need to provide additional years of taxes or meet other special standards for foreign purchases?
Some countries also forbid foreign purchases within a certain areas. You may be able to lawfully work around those rules with a foreign holding company. Consult your foreign real estate agent and a foreign attorney to avoid running afoul of these rules and forfeiting your property. (I believe Mexico has some rules like this, but there are known ways to own oceanfront property while staying compliant.)
Beyond that, prospective purchasers should consult with their CPAs and tax advisors relating to tax reporting. This is especially important if the property will be used as an income property or as an asset for a business entity.