Purchasing property in a foreign country is a popular option for those looking to invest, those wanting a permanent vacation home, as well as people wanting to move abroad. However, because of the complexity involved, there are several things that you will need to consider before moving forward with such an investment. Foreign ownership laws, financing, and tax liability are just a few things you will need to be clear on if you are wanting to purchase property in a foreign country.
When searching for a property to purchase, it is also helpful to keep the cost of living in mind. Some countries have a much lower cost of living than the country you currently live in, while others are much higher. The cost of living should be included in your budget, as you will need to cover that as well as property costs.
Before purchasing any property, it is imperative that you become familiar with the laws of that specific locality. As is expected, the rules and regulations that govern the purchase of property in a foreign country vary, depending on the country. Additionally, each individual country possess the right to place any desired restrictions on non-citizens who are attempting to purchase and own property in that country.
Some countries allow foreigners to purchase homes, but will require the buyers to obtain special residence permits, or register with a specific government agency before they are able to complete the homebuying process. Real estate attorneys from the country in which you are attempting to purchase property will be knowledgeable on any laws and restrictions, and may be a good resource when you are just beginning your search.
As previously mentioned, each country has their own set of rules and regulations. Some specific examples include:
- Spain: To purchase property in Spain, you will first be required to make out a will, in Spanish. Any outstanding debts attached to the property would become your responsibility upon accepting ownership of the property;
- Mexico: In Mexico, in order to protect their native soil from foreign invasion, some lands are not eligible for purchase by foreign nationals. Foreigners are able to purchase property outright for residential use, outside of the 100km restricted land border zone, as well as outside of the 50km coastal zone. However, foreigners will need to set up a land trust through a Mexican bank in order to purchase any property within the restricted zones;
- Turkey: Foreigners are not allowed to purchase any property in rural Turkish areas, or near military land;
- Costa Rica: Costa Rica’s property laws are relatively foreigner friendly. Foreigners maintain the same rights as citizens when purchasing land. No local partner is necessary with the exception of beachfront concession property. Also, Costa Rica maintains a central land registry, through which the buyer’s attorney may confirm that the property maintains a clear title, as well as detail any restrictions on the property before the deal goes through; and
- Italy: Although there are some restrictions as to who may and may not purchase property in Italy, it is largely viewed as a “no restrictions” country in which to purchase property. Citizens of countries with reciprocity are allowed to purchase property-meaning, because Italian citizens are allowed to purchase property in the United States, United States citizens are allowed to purchase property in Italy.
These are just a few examples of foreign purchasing laws. As you can see, in order to protect your interests, ease your mind, and remove some of the stress associated with such a big investment, you should speak with an experienced attorney that is familiar with the foreign purchasing laws of the country you are interested in.
As previously discussed, the cost of living is one of the major costs associated with purchasing property in a foreign country. While property may be inexpensive, the cost of living (food, utilities, medical services, etc) may be much higher and cancel out any cost related benefit to purchasing property in that country. Some other associated costs could include:
- Acquisition taxes;
- Surveying fees;
- Foreign office permits;
- Double tax treaties;
- Large down payment and high interest rate on a mortgage through a foreign-owned bank;
- A separate life insurance policy, so your mortgage may be paid off should something happen to you;
- Attorney’s fees; or
- Realtor’s fees.
The cost of purchasing a property in a foreign country does not end at the property’s negotiated sale price. In some countries, the net value of all of these costs may be less expensive than in the United States; however, it is unwise to simply estimate how much these associated costs will amount to. It is imperative to be fully aware of all associated costs prior to signing any paperwork, specifically the purchase and sale agreement.
The process for purchasing property in a foreign country is clearly complex, and requires a thorough understanding of foreign property laws. It requires an extensive amount of time, research, planning, and preparation.
A skilled and knowledgeable property attorney will ensure that you are aware of all purchasing laws and restrictions, as well as help you identify your needs and financing options.