If you’re considering retiring in a new country, it’s usually wise to plan to rent a place to live at first. This will give you a chance to try the idea on for size before committing. However, owning property in another country can have important advantages. So, when you’re ready, you may be tempted to take the plunge and invest in a home of your own.
Here are 11 things to keep in mind as you consider an overseas property purchase:
1. The real estate agents you encounter may not be licensed, and they may have little relevant experience. Maybe they were travel agents or mechanical engineers in previous careers. I use those two examples in particular because I’ve known real estate agents in overseas property markets who formerly held these positions in the United States.
2. The real estate agent you decide to work with probably won't really be working for you. In emerging and unregulated markets, the property agents don't work for the buyer, and they don't work for the seller. They work for the commission, which they want to be a big as possible.
3. This can lead to something called "net commissions," whereby the seller tells the real estate agent what he wants to net from the sale. The agent sells for whatever he can sell for. Then the agent pockets the difference, which can be substantial, often totaling as much as 20 or 30 percent.
4. In nearly all property markets outside the United States, you'll find no multiple listing service and no tradition of shared listings.
5. You can’t take clean title for granted. In particular, be careful about purchasing ejido land, cooperative land or rights of possession property.
6. Engage your own independent attorney. Don't use the seller's or developer’s attorney.
7. Verify all important points of the sale with the help of your attorney, and don’t take the seller at his word. Without following up you don’t really know if he owns the land he's offering to sell you or if the boundaries are drawn where he says they are.
8. Buy what you see. If electrical lines have been run to the property, then you're buying a piece of property with electricity. If a clubhouse has been built, then you're buying into a community with a clubhouse. If you don't see a marina, don't count on a marina, even if it's promised and pictured in all the developer's materials.
9. If you're buying on the water, understand the restrictions on ownership of beachfront property. In most countries, you cannot own the stretch where the water actually meets the land. This strip is called different things in different markets, and it's measured in different ways, typically working from the high-tide line. The point is, don't believe someone who tells you that you can "own" the beach, because, in most cases, you can't. It's owned by the state.
10. Understand all the costs of acquisition. These can go beyond the agent fees. Remember transfer taxes (sometimes called "stamp duty"), titling fees, registration fees and attorney or notary fees. These fees are not all relevant in all markets, but you want to understand, up front, which ones you'll be responsible for paying and include those costs in your purchase budget and your projections for investment returns.
11. Think through what will be required to accomplish your goals for the property. If you intend to rent it out when you're not in residence, you'll need rental and property management. If you intend to be in residence only part of the year but don't want to rent while you're away, you'll need a full-time caretaker on-site. Again, include these costs in your budget and your return-on-investment projections.