There is an infinite amount of absolutely stunning and breathtaking properties in equally picturesque countries around the globe. For this reason, it is sometimes easy to come to a rush decision when choosing an international destination in which to purchase a home. The key to finding the second home of your dreams is rooted in asking yourself plenty of poignant questions while examining the countries that interest you most.
Some questions that should be considered when exploring buying a home in another country are:
- How does the cost of living compare to my current cost of living? How does that fit in with my current financial plan? My retirement plan?
- Are foreigners allowed to legally own property? Are there any limitations or special requirements that I must meet in order to purchase a home?
- Is my culture reasonably compatible with the culture of this country? Are there any special customs and ways of comporting oneself that is foreign to me? Would any of my everyday behaviors be misconstrued as being rude or offensive?
- What is the long and short term economic outlook?
- Is this a politically stable country? What are the policies of the current administration? Do they support and encourage foreigners investing in their country?
- What is the quality of the education system in this country? Are there schools that teach in English or the other language(s) of your choice?
- What is the country’s first language? If not English, then would I have to learn another language in order to be fully integrated in this society? Can I get along with English only?
- Are there any major businesses in this country?
- This is especially important for retirees; what is the quality of the healthcare system?
- What is the climate like? Is the area prone to natural disasters like earthquakes or hurricanes? If so, can I buy insurance?
- How is the country’s infrastructure? Are there paved highways and quality roads that make traveling from town to town safe and easy? Is there an airport close by?
- What is the telecommunications ability of this country? Is high-speed Internet and cable readily available? Will my cellular phone service work?
- What are the national and local crime statistics and patterns?
- What are some of the historical trends of this country’s real estate market? Is it prone to frequent ups and downs? Is the real estate market currently seeing rapid and exorbitant rates of appreciation?
The Next Step…
Once you have decided on which country to purchase your property in, several new questions undoubtedly come to mind. Normally, these questions are related mainly to the different legal requirements needed in order to obtain residency, purchase real estate, local bank financing and the country’s tax regime, among others. Purchasing luxury properties abroad significantly increases the complexity of the real estate transaction.
Be sure to ask the following questions when meeting with your real estate professional as these are paramount to engineering a successful transaction.
- What are the country’s tax laws?
- Income Tax – Are residents liable for income tax on their worldwide income or are they only taxed on earnings made within national borders? Are non-residents taxed at a higher percentage than residents are? Are retirees’ social security, pension and other retirement monies taxed in this country?
- Transfer Tax – Is the tax levied for the recording of the transfer of property to be paid by the buyer or seller? Are non-residents living outside the country subject to a higher tax? Are there penalties if a home is sold before a certain amount of time?
- Rental Income Tax – Would I be liable to pay taxes on the rental income earned from my property? Is the tax levied at regular income tax rates? Is the tax imposed at a higher percentage for non-residents? Are there any special provisions made if you were to invest in a tourism zone?
- Wealth Tax – Are individuals whose net assets exceed a certain level liable to pay an annual wealth tax? Are owners of real estate subject to a wealth tax regardless of residency status?
- Property Tax – Does the country have a set percentage for all municipalities or is it up to each province to set the property tax rates?
- Are there special benefit programs in place that encourage foreigners to retire and purchase property in that country? For instance, Panama has instituted a comprehensive retiree benefit program which entitles retirees to receive constant discounts on everything from closing costs on homes (50%), to prescription medicines and entertainment.
- Local Bank Financing – Can I obtain local financing or does the deal have to be made in cash?
- If local bank financing is within the realm of possibility, what are the local financing parameters for this country? Be sure to inquire about the following: Financing rates, Interest rates, Mortgage period: What is the maximum life on mortgages? Life insurance: Are mortgages required to obtain life insurance for the amount of the loan in order to secure payment?
The world is a smaller place than it has ever been. A wealth of nations are increasingly more open to foreign investment and as such, it is imperative that you ask questions and stay informed. A great way to keep up to date with the various financial rules and legalities of the country that interests you is to contact the United States Embassy in that country. Visit http://usembassy.state.gov/ for links to each of the United States Embassies across the world.
Other ways to ensure a positive experience are:
- Choose an agent who is fluent in both English and the native language of the country you are interested in.
- Choose an agent with a proven track record of dealing successfully with purchasers who come from other countries.
- Keep your attorney and financial advisor involved throughout the life of the transaction as large real estate dealings made abroad may affect your financial situation back home.
From breathtaking Mediterranean villas in Italy, to palatial properties in Costa Rica and Spain, there has never been a better time to capitalize on the emerging global market and purchase the second-home that dreams are made of.
This article is provided for informational purposes only and is not intended, nor shall it be deemed, to provide or offer legal, financial or tax advice or guidance. The views and opinions set forth in this article are not necessarily the views and opinions of Coldwell Banker Real Estate LLC. You should always consult with your own advisor when dealing with any of the issues visited herein.
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