7 Keys to Buying Overseas Retirement Property

May 29, 2008 RSS Feed Print

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San Miguel de Allende, Guanajuato State, Mexico.

While some retirees head straight for America's sun districts—Florida, South Carolina, California, to name a few—others travel clear across the border to launch their postcareer lives. And since many overseas retirement hubs combine a reduced cost of living with a delightful tropical climate, it's no wonder they're so appealing.

Overseas retirement is "more popular all the time," says Ruth Halcomb, who runs the international living website, LiveAbroad.com. "The baby boomers are retiring, and they are the people who went to the Peace Corps and studied abroad." Although buying retirement property overseas can be enchanting, it can also be challenging. Anyone thinking about spending a chunk of change on foreign real estate should be aware of some practical considerations.

Here are seven tips for retirees considering buying property overseas:

1. Beware the market trends: While American real estate is experiencing a protracted swoon, some world property markets are moving in the opposite direction. Likewise, the dollar is in the midst of a multiyear slide against foreign currencies. Combined, these trends suggest that selling your U.S. home to buy property overseas today would be unwise, says Michael Englund, the chief economist for Action Economics. "Making that switch now would appear to be classic herd-mentality behavior—jumping out of and getting into markets that have already moved sharply in one direction—theirs being up, ours being down," Englund says. Financially, it would make more sense to wait—perhaps a couple of years—for real estate and currency cycles to reverse course. However, Englund cautions, "it's no easier predicting currency markets than it is predicting real estate markets."

2. Think proximity, safety, and health: When selecting a destination, retirees should look for a politically stable country in relative proximity to the United States. This will help minimize hassles when they return home for visits, says Deb Andrews, the editor of the Caribbean Property & Lifestyles magazine, an online publication that specializes in issues involving relocating to the Caribbean. But another consideration, healthcare, is just as important. "You have to make the decision: Either you are going to go home [for medical treatment]—in which case you don't want to be [a great distance away from the United States]," Andrews says. "Or you you're perfectly willing to migrate your primary healthcare to wherever you are moving—so you'll want to know that the hospitals are pretty solid around you." (In the event of an emergency, of course, you won't have the option of returning to the United States for treatment. That makes good, in-country healthcare essential.) Countries such as Costa Rica, Panama, and Mexico generally score well on these standards.

3. Give it a tryout: Even if you're convinced you've found the land of your dreams, it's a good idea to spend at least a couple of months as a renter before buying property in that country. There are a number of challenges to overseas life that might not be immediately apparent. By renting, you have much more latitude to return to the United States if you sour on your new location. "I have seen quite a few people really entranced with the idea of retiring in Mexico or Spain—somewhere exotic—and they change their minds after a while," Halcomb says. "Either something goes wrong or they miss the community they had in the United States."

4. Make in-country connections... : While exploring your potential new home, seek out others who have left their homelands to live in that country. "You'll certainly meet expatriates," says Roger Gallo, the founder of Escapeartist.com, a website on life overseas that is affiliated with Caribbean Property & Lifestyles Magazine. "Find out what they went through—most people will offer advice." Expatriates can help you learn if the country is right for you, as well as provide information about properties, financing, and legal issues.

Tags:: housing,; retirement,; real estate

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stephenwilliams2345 of NY 1:44AM May 30, 2012

Buying property overseas can carry a huge risk and what is the reason really to buy when you can rent? If I have $300,000 in cash to spend on a house, how many years could I rent for that money without taking on the risk that a purchase involves? I could rent a nice place for, say, $1250 a month for the next 20 years, while the principal sat in an interest-bearing account. If I got a modest 2% rate, I would be making $6000 a year, which after tax would cover about 3-4 months rent. Why tie up that money in real estate? After five years I might want to sell my house only to find out that I cannot even get what I paid for it. There have been many people who have lured themselves into buying a place in "paradise" only to be very disappointed. Take a look at the real estate market in Spain, for example. It was a hot market in the 1980s. Then the economy collapsed. There are plenty of horror stories out there of people who have put their life savings into a place in the sun and are stuck with a home of little value because the developer of the area went bankrupt and the surrounding area has half-built homes that no one will ever buy. They can't leave because if they do, they will go away penniless. If you think I am just another doom and gloom naysayer, I'll tell you now that I do own a home in Europe and have for 24 years. It is my home which my husband and I bought and raised our family in. The economy here is stable but this is not a retirement paradise. I am considering moving to another country but will not buy. Once I sell my house, the money is going into the bank.

EXE60 1:43PM March 31, 2012