A Guide To Buying Property Abroad

9 Min Read
Published Feb. 28, 2024
A colorful row of houses along in a row in a nice neighborhood.
Written By Sarah Sharkey

An enjoyable international vacation might spark the idea of buying property abroad. If you want to make a real estate purchase outside of the United States, the process is a bit different than here in the U.S. Let’s explore what you need to know about buying property in a different country.

Reasons To Buy A House Overseas

The prospect of buying a house abroad is enticing. Below is a look at some of the many reasons to buy a house overseas.

You Can Make Higher Returns On Your Investment

When it comes to purchasing a house as an investment, investors can potentially earn higher returns by buying abroad. That’s especially true if you are interested in purchasing a property in an emerging market.

Of course, all investments come with risk. But depending on your situation, the risk might be worth the potential returns.

You Can Benefit From A Lower Cost Of Living

The United States ranks among the top 12 most expensive places to live in the world, according to Numbeo. That means buying a property almost anywhere else in the world could help you tap into a lower cost of living.

Whether you decide to move abroad immediately or hold the property until you’ve built a solid nest egg, the appeal of more affordable living is easy to see.

You Can Experience Tax Advantages

When you purchase a property abroad, you don’t have to report the purchase of the property. However, if you choose to open a foreign bank account to make the purchase process smoother, you face additional tax filing obligations.

You Can Diversify Your Portfolio

Owning a property abroad can help to diversify your investment portfolio. As a real estate investor, you might appreciate how this new property offers more diversity in your portfolio of properties. That’s especially true if the property provides a new stream of income.

You Can Vacation Cheaper

If you own a property abroad, you can spend your vacations at your new house. Since you won’t have to spend more money on a place to stay, your vacation costs might be lower.

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How To Buy Property Overseas: 6 Steps To Take

If you are ready to buy a property overseas, use the following steps to guide your journey.

Step 1: Ensure You Are Eligible

First things first, you’ll need to do some research to ensure you are eligible to buy a property in the country. Some locations place restrictions that prevent foreigners from purchasing property.

For example, Thailand doesn’t allow foreigners to purchase land in the country. Other countries, like Mexico and Greece, have specific financial rules that you must abide by to purchase a property.

While the rules might put a damper on your plans, it’s best to do this research upfront so that you aren’t caught off guard later in your search.

Step 2: Ensure The Location Is Right For You

After you’ve confirmed that you are eligible to buy a property in the country, it’s time to make sure that the location makes sense for your goals.

A few things to consider include the local climate, available activities, and the possibility of making a vacation rental. Since buying a property anywhere requires a significant investment of time, money, and energy, it’s important to confirm that the location provides everything you had in mind.

Step 3: Hire A Local Attorney And Real Estate Agent

As a foreigner, it’s difficult to know all of the laws and rules involved with purchasing a property in a new country. Instead of going it alone, it’s a good idea to work with both a local attorney and real estate agent to help you navigate the process.

When you have questions, you can turn to these trusted individuals to avoid any pitfalls. Not only can your local attorney help you abide by local laws, but they can also help you avoid any scams that are common in the area.

Step 4: Figure Out Financing

As with any home purchase, figuring out your financing is an important part of buying a house abroad. Below is a look at some of the common financing options to consider:

  • Cash: If you have enough cash on hand to cover the entire purchase, that can streamline the process.
  • Home equity: If you have a significant amount of home equity in your stateside home, then a home equity loan or HELOC might be the right move. With either option, you can tap into your home equity value as a loan, which you could use to cover the purchase of a home abroad.
  • An overseas mortgage from your local bank: Some U.S. banks offer mortgages for overseas properties. It’s worth asking the banks in your area to find out if they offer this option.
  • An international mortgage lender: International mortgage lenders offer home loans in a range of countries. If you meet the financial requirements, then this might be the right route. But in general, these loans come with higher interest rates and may require you to purchase a mandatory life insurance policy to protect their investment.
  • Developer loans: A developer loan is a good option if you want to purchase a property before construction. In general, these loans have fewer restrictions.
  • Retirement savings: If you have retirement savings, then you might tap into them to cover this purchase. In general, this is only a good idea if you plan to use the property as a part of your retirement plans.
  • Country-sponsored programs: Some countries offer Golden Visa programs, which encourage foreigners to purchase properties within the country. The programs often offer support for foreigners looking to buy a home in the country. Beyond a new home, the reward could involve automatic citizenship. Spain is one country that offers this opportunity.

Step 5: Find And Put An Offer On Your Overseas Home

Once all of your financing details are in place, it’s time to find a property. At this point, your local real estate agent will become invaluable. Many countries don’t offer a multiple listing service (MLS), which can make it difficult to find properties for sale and accurately assess the property’s value.

If possible, lean heavily on a local real estate agent during the process of finding a home. Once you find a place that suits your needs, putting an offer on your overseas home is a big step.

Step 6: Close On The Property

If the seller accepts your offer, it’s time to close on the property. Like buying a property in the United States, you can expect to sign lots of paperwork. Also, you’ll need to have the funds available to send to the seller or a designated third party at closing.

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Other Things To Consider Before Buying A Home Abroad

As you navigate the process of buying a home abroad, take your time. It’s not a decision to rush into. Instead, try to consider all of the ins and outs, including the following details.

Down Payment And Closing Costs

When it comes to purchasing a home abroad, you might face different down payment and closing costs requirements. If you choose to make the purchase without a mortgage, you’ll likely need to come up with a large chunk of change upfront. But even if you opt for a mortgage, some lenders might require higher down payments for foreign home purchases.

As you research your options, keep these potentially higher costs in mind.

Whether You’ll Be Renting Your Property To Vacationers

If you plan to rent out the property to vacationers, consider how you will manage that from afar. While turning the property into a vacation rental could be lucrative, the constant turnover might increase the need for maintenance. In many cases, you might choose to hire a property manager who lives in the area to help you keep everything running smoothly.

Try to think through all of the steps of turning the property into a vacation rental before moving forward with the purchase.

The Country’s Laws

The meaning of property ownership varies in different countries. It’s important to understand how the country’s laws on property ownership will impact your own purchase.

For example, you might be purchasing property in a country that recognizes the concept of a title. With that, it’s helpful to understand the legal details to ensure you know what you are buying.

Potential Scams

Throughout the process of buying a foreign home, it’s essential to be on guard for potential scams. Since you’ll be in unfamiliar territory, the murky legal waters could leave you open to scammers.

Be especially careful if working with a foreign mortgage brokerage. Unfortunately, the industry is known to be riddled with scams. Another thing to watch for is malicious overpricing.  Unfortunately, some will target foreigners to try and sell the property for more than it’s truly worth.

If possible, work with a trusted real estate agent and local attorney to help you avoid any potential scams.

Currency Risks

When buying a property in another country, it is usually valued in the currency of that country. The downside is that you’ll have to deal with currency fluctuations across both your home country and the country where you purchased a property.

Political Risks

If you purchase a property in another country, political instability in that country could have an impact on your new property. Purchasing a property in a country with an unstable economy or government comes with the risk of property damage or loss.

While losing the property entirely is an extreme example, the property’s value could decline if the politics of the country put the economy in a tailspin. Try to honestly assess the political risks associated with a particular country before committing to a purchase.

The Bottom Line

Buying a property abroad could be an exciting adventure. While the laws of the other country can make the process a bit more complicated than purchasing a property at home, the reward of your exotic overseas home could be worth the effort.

If you want to pursue an investment property purchase, either at home or abroad, consider learning more about how to buy an investment property with Quicken Loans®.

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