No matter where in the world you decide to relaunch your life, I recommend that you rent first, rather than buying a new home of your own. Renting for at least six to twelve months keeps you mobile and flexible. It allows you to try a place on for size before committing to home ownership. And it saves you the carrying costs of being a homeowner.
Renting a home or apartment overseas comes with important advantages. However, renting a place to live is not as straightforward a process everywhere in the world as it is in the United States. Here are 14 important things to consider before you become a tenant in a foreign country:
1. What's included in your monthly rent? Make sure the lease establishes clearly what is included in your rent and what is not, such as building or homeowners' association fees, water, utilities, phone, and Internet services.
2. If you're liable for utilities, find out the previous renter's average costs. Sometimes these can be a shock. We've just moved into new office space in Panama City that is the same number of square meters as our house, yet the monthly electric bill for our office has been three times as much as that for the house thanks to the cathedral ceiling in the great room.
3. Understand what furnished and unfurnished apartments actually include. In some places, unfurnished means no refrigerator, no stove, and maybe even no lighting fixtures. Does a furnished apartment include air-conditioning units? When we were shopping for a house to rent in Waterford, Ireland, I was confused by ads that indicated that the space included “all modern conveniences." Finally, I came to understand that this meant the house had central heating, which many people in Ireland didn't have at the time.
4. Figure out how, where, and who you pay which bills to each month. Maybe you deposit the rent directly into the owner's bank account. Maybe you pay a rental manager. Maybe you have to hand-deliver the check to your landlord. In Europe, rent is often paid by direct debit from your local bank account. Building and homeowners' association fees are often paid to a different person or organization and by a separate check, not as part of the rent.
5. Check for a sales clause in your lease. What protection do you have against the owner selling the apartment and giving you limited notice that you have to move out? The lease should include a compensation allowance in case the place is sold while you're renting.
6. Understand who is responsible for setting up the utilities. Will they remain in the landlord's name or will they be switched to your name? There are pluses and minuses either way. For example, what is your liability if the electric bill is transferred into your name?
7. Ask what documentation you'll have to produce to be able to rent. In some markets such as France, you're going to have to prepare a complete dossier of paperwork including recent bank statements, pay stubs, reference letters, and even sometimes letters of guaranty to submit for approval before you'll be able to sign a lease. In Panama, you generally don't need any documentation to rent. You find a place, sign a lease, pay your deposit, and move in.
8. What repairs and maintenance are you responsible for as a tenant? In some countries, renters can be responsible for structural repairs including cracks in the façade or a leaky roof.
9. Document any existing damage and the current condition of used fixtures or appliances. Take photos.
10. Determine when the rental period begins. The date you begin to pay rent doesn't always coincide with the date you take up occupancy. In Panama City the market was so competitive at the time that we paid rent for two weeks in advance of our moving in.
11. Understand what deposit you will be required to make. The general rule is that you'll have to pay the first month's rent plus a deposit equal to one to two month's rent.
12. Whatever the deposit, don't expect to see it again. People in Paris joke that the best way to think about any security deposit you make is to amortize it over the lifetime of your rental. In other words, consider it part of the rent. In Panama, your deposit should be posted with MIVI, Panama's department of housing. MIVI holds the funds and then releases them at the end of the rental term. If something is to be deducted for damages, the landlord informs MIVI and the renter is given a chance to sign off on the amount to be withheld for repairs. Unfortunately, not all landlords do this, which means your deposit could be at risk. One of our landlords returned our deposit in full within a couple of weeks of our moving out, while another property manager refused to return our deposit citing unspecified damages and kept the full amount.
13. Don't sign anything until your lawyer reads it first. You should use an attorney when signing a rental agreement in another country. Unless you are very familiar with tenants' rights and the particulars of rental contracts in the country where you're renting, it pays to have an expert review the documents before you sign. A good attorney will also inform you of any negotiable clauses, so that you have an opportunity to adjust the terms of the agreement to your benefit.
14. Don't be surprised if you're not asked to sign anything at all. Outside the main cities in countries like Panama and Nicaragua, the protocol for renting a house might be a handshake, rather than a written agreement. This shouldn't necessarily make you nervous.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter. Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.