Thinking of buying Real Estate in a foreign country? Think again…

I see this happen over and over again. A newbie traveler takes a vacation for the first time to a foreign country, falls in love with the place and buys a house.  Something that is common practice for Americans retiring abroad.

He/she realizes that the investment has turned into a big headache and ends up losing a good chunk of his/her hard earned life-long savings. GE

Sadly I have seen this happen too many times.  And it all takes place in a period of a few short months.

I am frequently asked if I will ever “settle down” in one of these great places I have had the opportunity to visit by purchasing real estate and making it my home, something many people do and in a short time, too often regret. As a Real Estate professional for over 20 years, I believe in investing in Real Estate and have done OK for myself doing so. So I like real estate, it’s been good to me.

The question is: What is your goal in making that investment? And more importantly, would this actually be an “investment” or a “liability”? Will this purchase make you richer or poorer? In other words, do you expect to get a fair return within a reasonable time or would this purchase be more like obtaining a “new toy” such as a sports car or a matching pair of jet skis?

Let’s start by defining what an investment is and equity important, what it is not…Rich Vs Poor Two Way Street Road Signs Poverty Wealth

John Doe put capital whether his own or borrowed towards a vested interest in a venture, account, property or business in order to gain a profit in the form of interest, income or appreciation of such asset, making such capital more valuable than just having the money sitting in the bank.

So, buying a house you are going to occupy while it might be a necessity and/or maybe even a wise choice does NOT qualify as an “Investment”.

Examples of a Liability (expense)

– The house you live in or a vacation home (this includes purchasing real estate around the world)
– A new car
– A boat (not business related)
– A vacation
– New clothes/shoes
– Toys (motorcycles, jet skis, golf clubs, etc.) sorry sports enthusiasts…

Examples of an Investment

– Rental property
– Real estate at below market
– The cost of education
– Retirement accounts, Certificates of Deposit, Mutual funds, etc.
– Proven business opportunities

ID-100144148Although most liabilities are necessities for basic comfort, leisure, and enjoyment they are not by any means considered investments. Buying a house to live in makes you no interest or income and if you buy in the hopes of it appreciating in value in the future that isn’t investing either, that would be precisely what is considered in the business world as “gambling”. So, keep this in mind when considering the purchase of a house in that newly discovered paradise or even in your own hometown.

Now that we got these terms straight let’s see if buying overseas is a good idea in your situation. I would suggest you consider these factors before you decide to buy a house overseas or anywhere for that matter:

Would losing money from the purchase put you in a financial bind?

Unlike in the U.S.A., it may not make financial sense to insure your property against a natural disaster or fire. Property insurance can be extremely expensive and many time not even available in some countries.

Become familiar with the customs, culture, and laws of the country where you are planning to buy.

You might have fallen in love with a place and later discover a few months later lack of services such as medical careDSCF7547 or availability of certain products are close to impossible to find. “Holly Crap… What do you mean we don’t have a Wal-Mart in this town?! Where the heck am I suppose to buy beef jerky or ammo for my 12 gauge hunting rifle?!” This may take you further away from the comfort zone you had planned to endure. Thus, have you fall out of that “love at first sight” feeling you had of the place at the start of your voyage.content

Have an exit strategy in case you want to ship out.

Understand that a house is another anchor that restrains mobility no different from having a house back home. Find a local real estate professional who can advise you about the possibilities of renting or selling your house before you purchase.  Ask yourself simple questions, “Why should I invest in real estate in this country in the first place?  Do I have an exit strategy in case I want to move somewhere else?”

Get an  objective view from your local real estate consultant or attorney regarding these concerns. Be prepared in the event you choose to revisit the idea of continuing your search for another great place to settle in and decide to continue your journey.little sketchy man in a rowboat with a big blue piggy bank

 

 

 

Any comments of suggestions are greatly appreciated!

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