As world travel becomes easier and more accessible, people are becoming more aware of the foreign exchange industry and the differences in currencies throughout the world. As a result, more and more people are investing in properties abroad for various purposes such as a second home, a retirement destination or simply an investment to take advantage of the exchange rate. However, before running off and purchasing an Italian villa, a Bulgarian ski chalet, or a Caribbean beach house, research is essential and there are things you need to know to become an informed buyer.
First, gather some general information on your potential destinations for purchase. Learn the rules and regulations regarding foreign ownership in the places of interest, as some countries such as Switzerland restrict foreign ownership entirely. Also, confirm with the U.S. State Department about the stability and safety of the countries you are considering. Regardless of your plans for the property, you do not want to invest in an unstable environment.
Buying property overseas is a complicated procedure and requires additional expertise. Once you have decided on a specific location, hire a real estate agent who is licensed and has experience with foreign investors in that country. They will be acquainted with related laws and customs that are unfamiliar to you, and will help you avoid costly mistakes and/or illegal transactions. In general, these real estate agents tend to overcharge with commissions reaching as high as 8%. However without their guidance, your potential losses could double or triple your initial cost and you could face a fierce legal battle.
When investing in property overseas, investors should expect to pay cash. Financing mechanisms such as mortgages are not as sophisticated as they are in the United States. It is unlikely to find dozens of mortgage lenders offering loans, especially in countries such as Mexico, Greece, Spain and those in Eastern Europe. If paying full in cash is not an option, check out English-speaking countries and former colonies like Singapore, South Africa, or Hong Kong. Yet even in these countries a deposit of at least 40% is required. These laws are designed to alleviate fears of investors skipping the country and defaulting on payments
When buying property in America, you receive a warranty title stating that you are the owner of the property. However, when buying property overseas, you do not always receive such a title and the distinction of ownership of the property isn’t always as clear. It all depends on the location and the country involved. Boundaries all over the world have shifted so it’s quite possible that once you buy property, someone who is several generations removed from the original owner could make a claim on the land. This is especially true in Eastern Europe where World War II redrew many borders. To avoid any complications, enlist the help of a notary. Notaries specialize in verifying legal documents and can assist you in reading the title history to see if there are any gaps in the property’s history or numerous property claims in the past.
Being a knowledgeable and informed investor is crucial when purchasing real estate abroad. It is risky and not recommended for all investors. But in the right situation and after taking the right steps, investing overseas can be extremely profitable and well worth the time and effort.