There’s a ton of upside when you buy real estate overseas.
You can make money, and it’s also a great way to mix up your investment portfolio and diversify outside the U.S. and outside the dollar.
You often get more bang for your buck, too. I’ve met lots of folks that bought a beach condo in Panama, Costa Rica, and Ecuador—something they could never afford back home.
But I tell you, some people do the craziest things when they’re buying property overseas.
They fall for the sleazy sales pitch. They hire some guy they met in a bar as their attorney. They hand large sums of money over to strangers they don’t know and haven’t checked out.
In short, they leave their common sense at home. They get lured astray by the exotic landscape, the tropical sun and the local rum…
If you’re looking to buy real estate in another country, here are three of my top tips for things you should always do—and one thing you shouldn’t.
First, buy ahead of the Path of Progress. I know this is something my colleague Ronan McMahon explained in your e-letter earlier this week. It’s worth repeating.
The Path of Progress is anything that makes a locale more desirable—driving real estate prices up. It could be a new highway or international airport that cuts travel time to a destination, increasing visitor numbers and demand for accommodation. Perhaps it’s a slew of new businesses starting up, attracting workers who all need a place to live. Or, something like a 5-star hotel opening in a spot that previously only had hostel-style accommodation, bringing in well-heeled visitors.
Get in at the right stage of a Path of Progress, buy the right property at the right price, and you can look forward to capital appreciation and strong rental returns as prices surge ahead.
Secondly, only buy “fee simple” property. What’s that? It’s also known as freehold or titled property. It’s the most complete form of ownership and gives you the right to use the property, sell it, lease it, improve it, pass it to heirs. Fee Simple is probably the form of ownership you’re most familiar with in the U.S. and Canada. So it’s understandable that many buyers when overseas make the mistake of not asking what type of ownership they’re getting when they buy. They assume it is fee simple. But there are many other ways of holding real estate overseas. And, the seller (and even your attorney) may not explain in detail what you’re getting. You need to ask your attorney and have them go through anything you’re not quite clear on.
A reader once showed me photos of a house he planned to buy. It looked luxurious, with ocean views and high-end finishes. But there was one big glitch: It was not titled. Even worse, it was in a zone where foreigners are not allowed to own property. My advice was to run a mile and spend his $700,000 budget on a home that he could legally own.
The third thing you should do? Always check the permits. Nobody likes paperwork. But same as back home, when you’re building overseas, you’re going to need paperwork. Getting permits and approvals takes time and money. Sometimes, to make their lives easier, folks skip one or more stages in the permit process.
The most brazen one I’ve come across is a developer who built a whole project of single-family homes and did not get a single permit or approval for it. His plan was to approach the municipality when he was done and ask for forgiveness. Unfortunately, the municipality wasn’t in a forgiving mood when he approached them. Instead, they threw the book at him…
If one or more permits are missing on the lot, home or condo you’re buying, you may not be able to get title on the property. Or, you might have to tear down the home or parts of it—or pay big fines (and legal bills) to regularize matters.
If there are one or more permits missing on a property, make it the seller’s headache to sort it out. Don’t try to figure it out yourself. Get your attorney to check that every single one of the permits and approvals needed are in place on the property you’re buying. And, remember, you can always walk away if it isn’t all in order.
But my number one piece of advice, and the one thing you should never ever do…
Never sign a contract without consulting an attorney.
More than 90% of the folks that tell me things went wrong when they bought overseas have one thing in common: they did not hire an attorney.
It’s always perplexed me…why wouldn’t you get legal advice? Well, the top reason cited for not hiring an attorney was the cost. But, the few thousand bucks you’ll pay an attorney is a tiny percentage of the price you’re paying for the property. And, a good attorney can help safeguard your investment.
You should hire the attorney before you sign any paperwork or hand any money to the seller.
One last tip: ask if your attorney has any kind of connection to the seller. In some countries, an attorney can legally represent both sides of a transaction—it’s not seen as a conflict of interest. My advice is always ensure you get a lawyer that only represents you.
Follow these simple safeguards and your experience buying overseas should be a rewarding and potentially very profitable one.
Get Your Free Your Overseas Dream Home Report Now
Sign up for the FREE Your Overseas Dream Home e-letter and get a valuable report (free for a limited time) on the The Global Real Estate Boom of 2021: 15 Places Where You Can Profit.