How to Buy Real Estate in a Foreign Country

Avoid this major pitfall when purchasing real estate abroad.

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You want to be sober when considering property purchase options in whatever foreign land you’re looking at for your retirement. The trouble is, in these lands of mananas and fiestas, the rum flows, and so do the promises. But rum and real estate don’t mix, especially in a foreign country. The key to success navigating the purchase of a piece of real estate overseas, especially in developing-world markets, is to avoid the liquor and to turn a deaf ear to the assurances.

[See 10 Tips for Retirement Overseas.]

Here’s how real estate pitches abroad often begin. You arrive in the country where you’re dreaming of launching your new life. In the terminal of the airport, the lobby of your hotel, and the restaurant down the street where you go for lunch, you’ll be approached by friendly fellows with houses and beachfront lots to sell. Every taxi driver, every bar owner, every shopkeeper will have a piece of property for sale or a brother or a cousin in the real estate business. You won’t have to seek out agents or developers to help you find your new home. They’ll find you.

The challenge is to identify someone you feel comfortable doing business with. The key is to speak with as many real estate agents as possible and to take nothing any of them tells you at face value. Likewise, property developers in these emerging wild west markets should be treated with skepticism, as should the promises they make about the land they’re developing.

When shopping with a developing market developer, it’s important to buy only what you see, not what you’re told is coming. The developer in question will drive you out to his beach. There, at the shore, he’ll have erected a small clubhouse. Come in, have lunch, enjoy a drink, he will probably say. This fish is fresh. My guys caught it just offshore from our beach this morning. And the rum is local.

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After you’ve eaten your fill, the developer will take you out in his vehicle or maybe on horseback to explore the beach and the surrounding countryside. When the sun is beginning to slip behind the horizon, the ocean’s surface is glittering and dazzling, and the sky behind it is turning red and orange, the developer will begin pointing. Over there, he’ll say, is where the new clubhouse will be constructed. What you see today is only temporary. Down there will be the dock and, over there, the marina. On the hills all around us will be the houses. Just look out there. Look at that sunset. This could be the view from your front porch. You could have a front-row seat for this show every evening. Come on, he’ll continue. Let’s head back to the clubhouse. It’s time for some sundown rum punch.

You’re smitten. Who wouldn’t be? There’s nothing wrong with appreciating what’s being put on the table in front of you. The coasts of Nicaragua, Panama, Belize, Uruguay, and the Dominican Republic, for example, are beautiful. Seeing them for the first time can make you weak in the knees. The feeling can be something like falling in love. Don’t resist it. Allow yourself to savor it. But don’t lose your balance to the point that you marry the first beach that charms its way into your heart. Ask yourself, is this the beach you want to grow old with?

Enjoy the developer’s hospitality, his fresh fish, even his rum cocktails. Let him make his pitch. Then take your leave. Go find out what the guy at the next beach has to offer and the beach after that. Keep in mind the fundamental rule of purchasing real estate in a foreign country: Buy only what you see.

You may believe that the developer who takes you out to see his beach fully intends to deliver on every promise he suggests—including the clubhouse, the dock, and the marina. But remember that in the land of mananas and fiestas, things don’t always go as you expect them to go. Will there be a marina? The only thing you know for certain is that there is no marina right now. That’s the reality on which you should base your decision to buy or pass. Think about it this way: If the marina were never built, would you still be happy living here?

Over the years, I’ve been taken to see planned retirement communities on stretches of the coasts of Nicaragua, Mexico, and Belize, for example, where buying only what you see would have amounted to an investment in sand, surf, and sun and nothing more. Depending on your circumstances, your level of risk tolerance, and your timeline to retirement, maybe a deeply discounted, early-in purchase of a beautiful stretch of white sand, azure sea, and tropical sunshine is just what you’re looking for. My point is to be clear in your purchasing objectives and to pay only for what you see when you buy. Don’t pay all services included prices for not a single service anywhere in sight real estate.

[See How to Choose an Overseas Retirement Haven.]

Finally, don’t buy anything on a first visit. If you were moving from Chicago to Santa Fe, would you take one trip to Santa Fe, tour around for two days, then contract to buy the first house you saw available for sale? Would you purchase a house offered to you by a guy you met over drinks in a bar the night before? The answer is probably no. You want to be careful shopping for real estate in another country, where the language, the customs, the culture, the way of doing business, and the property purchase process are all foreign. Be more cautious than you would be back home, not more cavalier.

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.