A few years ago, a colleague took his family on a holiday cruise to Vanuatu where they left their ship to explore some of the beautiful Pacific Islands. On his return to work, he shared stories about his wonderful experience, mentioned that property there was relatively affordable, and said that he and his wife were considering making a purchase.
Buying real estate overseas can be complicated. Affordability is important, but no matter how wealthy you are, you will have to take into account several factors that may not spring to mind in the flush of excitement. You don’t want to make an uninformed or impulsive decision that you will later regret. On the other hand, if you have been inclined to write off foreign property ownership as a luxury reserved for the super-rich, you may be surprised to discover that it isn’t. Buying real estate overseas may not only be viable for you; it could be a good option, provided that all the right stars are aligned. Here are a few questions to get you started, so you understand exactly what you would be getting into, what is involved, and what to expect when buying property overseas.
WHAT IS THE REAL REASON YOU WANT TO BUY REAL ESTATE OVERSEAS?
Do you want to make your friends jealous? That might be your real motive, but seriously, what purpose would real estate serve? As an offshore investment? A holiday home for every winter season? A place to spend your golden years? Your answer will determine your next steps. From a financial standpoint, the ideal case is one where a holiday home yields capital appreciation from the time of purchase to the time of owners retiring to that home. That is according to the Live and Invest Overseas publishing group, founded by expatriation expert Kathleen Peddicord. In the meantime, the property generates cash flow from tenants when the owner is not in residence. The purchase also diversifies the owner’s portfolio, buffering against changes in other assets, including domestic property. Does this model scenario apply to you?
WHAT TYPE OF REAL ESTATE?
Residential or commercial? House or apartment? Move-in-ready or renovation project? Concrete jungle or secluded paradise? Your answer will be influenced by the lifestyle you envision for yourself if, indeed, your property will be accommodating you. Consider contacting a service such as the Hibiscus International real estate travel agency, which was established to match Canadians and their lifestyles with suitable properties around the world. The company’s online listings range from a US$44,000 parcel of land in the Dominican Republic to a US$2.68 million hotel in Barbados.
WHERE IN THE WORLD?
The Caribbean may appeal to you as fantastic place to buy property: sandy beaches, lots of expats, and financial incentives. Area hotspots include the Dominican Republic, the Azuero Sunset Coast in Panama, Medellin in Colombia, and Ambergris in Caye Belize. On the other side of the Atlantic, southern Portugal’s Algarve district was identified by Live and Invest Overseas as the world’s top retirement haven for 2015. There, you can purchase ocean-view real estate at an unprecedented bang for your buck, due to a dive in property prices following the financial crisis of 2008. The coastal area boasts a healthy rental market and an average cost of living 30 per cent lower than the rest of Europe. Further east in Istanbul, Turkey, you can buy property with a little as US$50,000 and retire with your partner on a budget of just US$1,100/month.
If you want to buy in North America, Peddicord, author of the Wall Street Journal endorsed book, How to Retire Overseas, makes a surprising case for buying in the United States, where the market uniquely expedites the growth of small capital. Alternatively, you may prefer to buy an entirely different region, based on geography, climate, infrastructure, services, or familiarity with the language and culture – all the while keeping a keen eye on good economic opportunities.
WHAT IS IT REALLY GOING TO COST YOU?
Here is where things can get complicated. Take time, ideally with professional guidance, to research all facets of making an overseas purchase so that there will be no hidden surprises. Andrea Carnish, a journalist who writes for several publications, including the Canadian Real Estate Wealth Magazine, offers some thoughts in her excerpt featured in The Globe and Mail, Nov., 2012):
Have a financial plan. Some nations (in the Caribbean, for instance) may have a Canadian-affiliated bank that you can work with, but most purchases will likely be made in cash unless you have a credit profile in the country.
Consider the services of a Canadian international tax specialist to help you understand all of the tax implications, both in Canada and abroad. Is it better to purchase in your name or as an entity? Do you need to write a separate will? How can you minimize probate fees?
Select a reputable real estate agency or property developer to guide you through the buying process with all of its cultural idiosyncrasies.
Seek independent legal advice from a solicitor who is bilingual in English and the local language.
Identify all relevant local laws and regulations, including any required licenses or residency permits and landlord responsibilities if you will have tenants.
Be prepared for outgoing costs such as local taxes, insurance, property management fees, maintenance, and utilities.
THE BOTTOM LINE
Pick well. Understand exactly what you are signing up for. At the right time, make a good decision result that would result in a positive return on investment; however, you personally measure this.
“THE IDEAL CASE IS ONE WHERE A HOLIDAY HOME YIELD CAPITAL APPRECIATION FROM THE TIME OF PURCHASE TO THE TIME THE OWNER RETIRES.”
by James Paik | Contributing Writer
