Should you rent a home or buy one when making a move overseas for retirement? Renting leaves you mobile and flexible, and has none of the carrying costs associated with owning property. But buying real estate overseas is fundamentally about diversification and can argue in favor of buying for retirement rather than renting.
Buying your new retirement residence overseas means moving money out of the United States and putting it into another market and potentially another currency. Moving all your money out of the U.S. and into a new retirement residence overseas doesn’t alone bring you the diversification you should be seeking right now. However, using some of your capital to purchase a retirement residence in the place where you want to live and putting other capital to work in another market (that perhaps uses a different currency) gets you not only diversification, but also what can amount to a rent-free retirement.
Another advantage of buying your retirement residence overseas rather than renting it is that it helps you to "take the plunge." It allows you to move your life unequivocally forward and embrace the new adventure. Many people who rent before they buy do so to be able to maintain a property back home, just in case. While this can be sensible, it's also an anchor, a drag. It can divide your attention and keep you looking backward instead of ahead to your new life. Keeping one foot on the pier and the other on the departing boat can land you in the drink. You may remain only partially committed, which will be a handicap.
The bottom line for the would-be retiree buyer is to follow your instincts, not only with regards to what to buy overseas, but also when answering the question, should you buy at all? You know yourself, your motivations and preferences and how well you've researched your chosen destination. You know your level of commitment, your level of readiness and your tolerance for risk.
How to buy for retirement. If you decide that you do, in fact, want to invest in a piece of real estate for personal use in retirement, here are 10 questions to answer first:
1. How much space will you need? Consider whether you want an apartment or a house, two levels or one and one bedroom or two? You probably won’t need more than two. You may want to have a guest room or even a guest house. Decide whether you will want guests to be able to stay with you or would prefer they come and go from a hotel nearby.
2. Do you want a front yard, a back garden or a swimming pool? All of these things require care and maintenance.
3. Do you want to be in the heart of downtown or out in the country?
4. Do you want a turn-key, a renovation project or something in-between?
5. Do you like the idea of living in a gated community, or would you prefer a more integrated setting, such as a neighborhood where you could become part of the local community? This is a key consideration. Going local means you have to learn the local language if you don’t speak it already. Or perhaps you’d prefer to be off on your own with undeveloped acres between you and your nearest neighbor. In this type of rural setting you will need to build your own in-case-of-emergency infrastructure.
6. Do you want to own a car? Consider traffic patterns and transportation. Where you base yourself determines whether you'll need to invest in a car, which is an important budget consideration.
7. Do you want to live in a town? Consider the convenience factor. How far is it to shopping, restaurants, nightlife, parking and the nearest medical facility?
8. Do you want a furnished home? You may have no choice but to buy unfurnished unless you buy from another expat who is interested in selling his place including all the contents. Buying unfurnished means you’ll need to purchase furniture locally or ship your household goods from home.
9. What's your budget? This is the most practical guideline of all. Be clear on your finances before you start shopping, and, if your budget is strict, don’t be tempted to consider properties outside your price point. You’ll only be disappointing yourself unnecessarily.
10. What kind of view would you like from your bedroom window each morning? This can be an effective way to focus on something important that might otherwise be overlooked until it’s too late.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 28 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring and investing overseas in her free e-letter. Her newest book, How To Buy Real Estate Overseas, published by Wiley & Sons, is the culmination of decades of personal experience living and investing around the world.