As more people in the U.S. become discouraged with falling real
estate values, a faltering economy and higher taxes it is reasonable to
surmise that the increasing trend of U.S. citizens purchasing property
in foreign countries will continue. Certainly, there are many great
opportunities available for the buyer of foreign real estate, however,
it is extremely important that the investor performs the necessary due
diligence and research before deciding on a country and a property. A
short article of this scope could never cover all of the intricacies of
purchasing foreign real estate but I will try to cover some main issues
to consider along with a few of the advantages and potential pitfalls.
Advantages of Buying Foreign Real Estate
- Tax Havens. Many real estate owners in the U.S. have been slammed with higher property tax bills because of the real estate bubble that pushed property values. Unfortunately, when prices fell, real estate taxes didn’t fall as quickly. Many real estate owners are now paying taxes on assessed real estate values that don’t accurately reflect the market value of the property. Thankfully, there are actually many places in the world to invest where there are no property taxes at all. One of these places is the country of Ecuador. Many people will find it hard to believe but a U.S. citizen can actually travel to Ecuador and legally purchase an investment home and not pay any annual real estate tax at all.
- Lower Cost of Ownership. Many property owners in the U.S. have found that it can be extremely expensive to properly maintain their investment or residential real estate. This is primarily due to the high prices of labor in the U.S. Many countries around the world have a surplus of highly qualified construction workers who are paid wages lower than here in the U.S.
- More for the Money. Even though the U.S. Dollar has a lot of value during the last five years there are still many countries in the world where the investor can buy more with their U.S. dollars than at home. Researching exchange rates and local real estate prices is key to finding a suitable place to invest.
Potential Pitfalls of Buying Foreign Real Estate
- Political Instability. It is important to carefully research the current level of political stability in the country where you are looking to purchase real estate. Many countries around the world have unstable political environments that can adversely affect a real estate investment. In extreme cases, governments have been known to seize the property owned by foreigners without offering fair or any recompense.
- Economic Instability. In many parts of the world economic instability can lead to demonstrations and crime. The added cost of having a full time security guard to patrol your property can seriously affect your bottom line. In addition, you may not feel safe in a country with a high level of crime.
- Local Real Estate Laws. It is extremely important that anyone who is considering the purchase of foreign real estate understand the local real estate laws. The best course of action is to hire a local real estate lawyer who can help you navigate the local legal system. Real estate laws can be very complex in foreign countries and you need to be sure that your rights are protected.
- Ted Karsch
