15 Tips for Americans Buying Property Abroad (Especially If It’s Your First Time)

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There are any number of reasons why you might be considering buying property abroad. Maybe you fell in love with the local area while on vacation, or you’ve always envisioned yourself living the sunny island life with your feet in the sand after retirement. While owning a home is an essential part of the American dream, buying property abroad seems more like an unattainable fantasy. However, it’s not as far-fetched as you may think.

It’s not just the super-rich who can escape to their tropical getaway or Italian villa. In fact, an estimated 9 million U.S. citizens live overseas, according to The U.S. Department of State’s Bureau of Consular Affairs.

While it is possible, there are things that you should consider before buying property abroad such as foreign ownership laws, tax liability, and costs. You should also assess how buying property abroad fits into your long-term financial plans, and whether you’re using the property for investment or personal use.

We’ve received some tips from the experts, and we’ll walk you through the basics from start to finish about what you can expect as an American buying property abroad.

1. Think about what you want today

First things first: Why are you buying property abroad and what are you hoping to get out of it?

Are you looking to invest in a place that you can use as a vacation rental? Do you want a second home somewhere more affordable that you won’t be renting out at all?

The answers to these questions will affect where you purchase the property and the type of real estate you should be scouting out.

2. And what you want tomorrow

Do you see yourself retiring overseas? Are you planning to sell for a profit (hopefully) in a few years and then use the money for something else?

Real estate is a long-term investment, and no matter your intentions, you need to have an exit strategy.

Property can take a while to sell, which is why you need to have a clear plan should you change your mind or if something were to happen.

3. Research potential places to buy

You might be considering more than one country or more than one area within a country; now is a good time to narrow down your search.

“First and foremost, do your homework,” says Elizabeth Kinsella, Global Member Services Manager at Leading Real Estate Companies of the World, an international, invitation-only network of top-performing real estate brokerages. “I think a lot of shows on television can glamorize the romantic notion of buying a home in another part of the world. Not doing your homework before going into a purchase like that is misguided. There are a lot of variables.”

4. Pinpoint your budget

What do homes cost, and how much can you afford? Will you need to put down any money?

Figure out what you’ll need to save to get your foot in the door. When you know your budget, it’s easier to narrow your search.

As part of your initial research, Kinsella suggests becoming familiar with the prices in that particular market before contacting an agent. Some countries may also have different fees and costs when purchasing real estate.

“Real estate is different in every part of the world. Don’t assume it’s going to operate just as things do here in the U.S,” she advises.

Additionally, make sure you’re comparing locations and properties apples-to-apples. For example, a one-bedroom condo in Paris might cost the same as a three-bedroom house with a pool in Mexico.

You should factor in the cost of moving, too. Moving from one state to another can be costly, but moving overseas could be ultra-expensive. The average cost of a moving container is $3,000 for a three-bedroom home; however, that number can increase dramatically if you plan to ship cars or pets.

If you’re moving everything but the kitchen sink over a great distance, plan to budget at least $10,000 for the move itself.

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5. Find an agent who understands the local market

A good place to start is to find real estate brokerages in the U.S. with overseas affiliates.

Otherwise, you can try to find an agent who works in the area where you want to buy and has successfully helped other non-citizens or non-residents purchase a home.

6. Gather insights about where it makes sense to buy, neighborhood-wise

The three most important factors when buying a home: location, location, location. A well-known phrase that is true even if you’re buying property abroad.

Your decision shouldn’t only be about the home itself, but also where it’s located. A great location can change an entire neighborhood.

Do you want a condo with a sweeping view, or a single-family home by the waterfront? Do you have young children and need to find a home with a school nearby? What about local healthcare, public transportation, crime rates?

Just like the U.S., different neighborhoods will appeal to different buyers, depending on what you’re searching for. Talk to your agent about your best options.

7. Visit the area and learn what it’s like

If you’ve never visited the area before, it’s best to get acquainted with where you want to buy.

You’ll want to know how walkable the neighborhood is (will you need a car?) and where you’ll ideally want to buy. Spending as much time in the area as possible will give you a better understanding of what you might need before you start packing up (or saving up).

8. Talk to your agent about what the market forecast looks like

When purchasing real estate, it’s important to learn more about the local housing market and what the future may hold. Talk to your agent about the market forecast and do a little research on your own.

Browse listings in the area where you want to buy to get a general idea of the current market. Then, look at home price trends over time to see if home prices have been going up or down. You can also ask your agent about a comparative market analysis (CMA), which is an estimate of a home’s value based on recently sold homes in the same neighborhood.

This will give you an idea of how the asking prices on those listings compare to what properties are selling for in the area.

9. Ask about rules and regulations around buying as a foreigner

Real estate practices vary by country. When buying property abroad, standard practice is to hire an attorney, notary, and a translator (if necessary), in addition to an agent.

Every country has different regulations when it comes to purchasing real estate, so finding an expert to help you navigate and follow the local rules is vital.

The National Association of Realtors provides general guidelines on real estate practices in countries around the world.

10. Look into taxes

As Benjamin Franklin once said, “In this world, nothing can be said to be certain, except death and taxes.” You may not want to think about tax liability when buying property abroad, but it’s a factor you must consider.

If you are living and working abroad, you must report that income to the Internal Revenue Service (IRS).

“The U.S. operates on a citizenship-based taxation system, meaning that all U.S. citizens have to report their worldwide income on a tax return,” says Olivier Wagner, U.S. tax expert and the CEO of 1040 Abroad, a company that specializes in preparing tax returns for U.S. citizens living abroad.

“If income tax was paid to the host country, the taxpayer would be able to claim the foreign tax credit to offset their US tax liability; it would be reduced dollar-for-dollar for taxes paid to the other country,” he says.

Generally, the purchase of foreign real estate doesn’t have to be reported on your U.S. taxes, unless you earn rental income, but you may be able to enjoy some tax benefits. This is why it’s so important to talk to a tax expert who’s familiar with both foreign and domestic taxation.

If or when you choose to sell your home, that’s a different story.

Home sales must be reported, and you may be liable for capital gains tax, which is a type of tax applied to the profit made from the sale of an asset.

11. Understand zoning rules

Do your due diligence. What if you want to rent out the house? If you plan to do anything with the property, such as convert it into a rental property, it’s imperative that you understand the local zoning rules. Zoning refers to the laws that govern how property can be used in certain areas and the type of operations allowed on the site.

The penalties for violating zoning laws can be brutal. Depending on the location, this could include criminal charges which could lead to conviction, fines, or even jail time.

12. Factor in utilities and other carrying costs

How much will it cost to maintain the house — while you’re there, and while you aren’t?

At the most basic level, you’ll need to make sure your home has electricity, gas, sewer, water, trash, and recycling provided.

Not only do costs vary depending on your location, but how utilities operate could be different depending on the country or region. Make sure you’re able to keep the water and electricity on while you’re away!

13. Figure out how to pay for the house

In the U.S., the majority of home purchases are performed with a mortgage loan. Unless you already have the cash, you’ll need to figure out how to pay for the house.

“It’s not that easy to get financing in all parts of the world,” notes Kinsella. “You’re better off having your finances in order before going to the country because you can’t guarantee a mortgage.”

Wagner also recommends looking for a lender that does business in both countries. “Ideally, if you have contact with a bank operating in both countries, it would be advantageous to be able to use your U.S. credit history in the process of securing the mortgage,” he explains.

14. Know how the title review and transfer process will work

When buying property abroad, keep in mind that transaction costs when you close on your property can significantly add up to the overall costs of the property. The transfer fee, a tax that can add more than 10% to the sales price in some countries, is one of the largest fees you may encounter.

The title review process could also potentially throw a monkey wrench into your plans. It might take significantly longer (we’re talking years) to review a title in some places.

15. Find someone to help manage the place when you aren’t there

When you’re not home, it may be a good idea to find someone to manage the property when you’re not there.

While you’re at it, it may be wise to invest in a security system for your property. This is for your peace of mind as well as the safety and security of your new home.

Real estate is different in every corner of the world. Do your homework before buying property abroad and talk to a broker to get some advice. They will be the best source of information when you’re ready to purchase your dream home overseas.

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