Things to Consider Before Buying Property Overseas

A wise woman once said you should approach buying an overseas property like you would a marriage: take your time, understand its strengths and weaknesses, don’t get carried away by its appearance or potential, take into account how hard it may be to maintain.

If ONLY I’d been that wise woman!

While a property may give you goosebumps, but no matter how good a deal it seems or how credible a developer appears, the decision to invest your money (or borrowed money) in a foreign property should NEVER be made in haste.

Ask yourself, is the home/ village/ region/ country really a place you will want to call home for years to come, or are there aspects that will eventually frustrate you and make you desperate to move on? How difficult will it be to sell, and is capital gain even a possibility?

Same-same, but Different

Negotiating a real estate deal in another country—whether buying or selling—is likely to be very different from any experience you have had in your home country.

For example, in the United States and New Zealand, you typically inform your agent of the price you want to offer and any conditions. They then call the owner or the other agent and you generally expect a counteroffer if the seller doesn’t accept your price outright.

Contrast this with Latin America and Australia, where you might simply hear back that the seller has declined your offer. The seller then expects you to come back with a higher offer, and don’t be surprised if the seller expects with a price higher than the original listing price!

Arm Yourself With Knowledge

Buying a property overseas—whether new, pre-construction, or already owned—always carries an element of risk and requires a great deal of research. However, you can minimize your chances of making costly mistakes by slowing down and thoroughly exploring your options. Before purchasing your potential new home or investment property, ask the following questions, and verify the answers (especially if translated), using a credible source:

1. Is there year-round access to the area in both dry and rainy seasons?

Climate and climate change are especially important considerations. Do seasonal extreme weather events create a need to batten down the hatches or evacuate the area entirely, as they do in some parts of the US, the South Pacific, and the Caribbean?

European villages may be quaint, but think back to recent flood events in Spain, Germany, Italy and France. Is flooding becoming a more frequent occurrence, and if so, what height above sea level or river level is the property?

Do roads become impassable for months of the year, as they can in Asia, Latin America and even parts of Australia? If so, this will impact your ability to access essential services, or generate rental income.

In Greece, Croatia, and many other Mediterranean and Baltic holiday havens, villages and islands effectively shut down in the colder months, limiting access to supplies, social opportunities, and services. Foreigners may dream of living on a Greek Island or Croatian coastal town, only find themselves wandering around deserted streets with few shops open, fewer cafes, and limited scheduled transport.

2. Does the existing infrastructure include sewage treatment, stormwater management, paved streets, and sidewalks?

In many parts of Asia and Latin America, it can rain 20 inches in 24 hours. Where does the water go? Ask to see the stormwater engineering plan, local government flood maps. and verify that there is a sewage treatment system; otherwise, that beautiful beach you planned to swim at may not be so appealing on an outgoing tide.

3. Is there hot water in the kitchen and all bathrooms?

Believe it or not, it’s not uncommon to find only cold water running from both taps in overseas homes. In Asia, in particular, kitchens often lack hot water, and developers claim that in tropical climates, you don’t need it. Some even argue that cold showers are good for you. You may disagree!

4. Don’t Buy Too Early

Although you may pay more by waiting, it’s better to invest in a property once a community has developed in the area/ on the land rather than buying off-plan when no community exists yet. Remember: the future value and appeal of your property depends on the quality of the community and the amenities built around it.

5. Does zoning exist, and is it enforced?

You might think you’re buying in a beautiful location, only to find your neighbor building a cement factory next door. Or the palm grove you love gets in the way of your ocean view. Worse still, a beach bar could open right next to your serene coastal home. This happens more often than you’d think, especially in areas where zoning laws are weak or non-existent. If an issue would arise, how strongly enforced are the laws or regulations, are local authorities corrupt, and will a bribe be required?

6. How Much are HOA or Body Corporate Fees?

Outside of the United States, HOA fees may be unregulated and determined solely by the developer. Some developers keep fees artificially low to attract buyers, only to raise them later to cover maintenance costs. In some cases, maintenance may be neglected entirely. Research the developer’s track record with previous projects before committing.

7. What’s the Final Price?

Developers often exclude the costs of furniture and appliances from promotional brochures. If you expect a fully furnished property, confirm what is included. Ensure all fixtures and fittings are itemized in the sale and purchase agreement. Additionally, get a clear understanding of closing costs, including taxes, broker fees, attorney fees, and notary fees.

8. Check Your Visa Rights

Some countries, such as Thailand, Indonesia, and Australia, have strict foreign ownership laws. In Thailand, for instance, foreigners must have a Thai partner owning at least 51% of a property unless it is part of a condominium complex. In Indonesia, foreigners cannot own land outright. In Australia, foreign buyers must apply for approval, demonstrate a minimum level of earnings, and pass a background check to ensure they are not under foreign government influence.

Do not assume that buying property automatically grants you residency. This is a common misconception among buyers in Italy and Spain. Consult a qualified migration agent and verify their advice with official government sources.

9. Are There Rental Restrictions?

Increasingly, cities and towns are placing restrictions on vacation rentals in residential areas. As locals are priced out of their home-towns, there’s a growing backlash towards both foreign investors who buy to rent, and those who buy to live only part of the year in a community. Both scenario can result in a degradation of community and culture, while hastening teh demise of a residential population, essential services, and overall quality of life. Check if rentals are permitted if you intent to use the property in this manner; even if it’s merely a gite or shed that you wish to rent for a little extra income.

In Conclusion

While some of these considerations may seem overly cautious, educating yourself on the laws, regulations, and specific conditions of the country where you plan to buy can save you money and prevent significant stress in the long run.

Note: The above is not intended to be a complete and exhaustive checklist, but rather a starting point for your own research. Always consult a professional to verify your findings before making a purchase