There are many reasons why you may be considering purchasing a property abroad. Most people that do so often have the thought of owning a vacation home in mind. Others buy property overseas as an investment vehicle which they can rent out and later sell at a higher market rate (after it has appreciated). Whatever your reason is, buying a property abroad is going to be a different experience than the norm in Canada
Here are the top five considerations to take into account when making that purchase:
1. What Is The Purpose Of Your Overseas Property?
This is arguably the most important factor to consider when buying property abroad. It will have a direct influence on everything including the country to invest in, your budget and the viability of that investment. For example, if you are buying a property to relocate, you will need to do a thorough examination of the locality you want to buy into. How is the surrounding area? How are the available amenities? It would actually be best if you lived in the area for a while to get a feel of its vibe and decide whether it’s worth settling in.
If your purpose is property investment, you need to consider all essential factors affecting the country’s economy such as political stability to see whether the property will give you a good ROI (return on investment).
2. What Are The Foreign Country’s Property Ownership Laws?
Each country has laws and regulations regarding how foreigners should go about the purchase of property within its borders. It’s of utmost importance to understand how these laws will affect you before you make your purchase. You don’t want a scenario where you find out that you have violated several restrictions after you’ve already acquired the property - and now the foreign government wants to penalize you or take over your asset.
If you don’t understand a country’s property ownership laws in detail, consult a real estate attorney specializing in foreign transactions.
3. How Will You Finance Your Purchase?
Securing financing for the purchase of a property overseas is one of the most challenging aspects of this venture. If you are not planning on using cash, you could consider using a foreign bank to acquire a mortgage. The foreign bank will require you to put up a huge down payment and most likely offer you a high-interest rate. If that’s not an option, you could consider using a home equity line of credit although that will mean risking your primary residence in case you default on the loan’s repayment. There are many other financing options to consider. A financial expert with experience in international property purchase matters can advise you accordingly.
4. What Are Your Tax Obligations?
It is important that you adhere to tax rules in any foreign country. Before making a home purchase, learn what taxes you are required to pay and when to pay, as well as whether you are eligible for any tax reliefs. Tax laws and legislation in each country vary widely and you don’t want to find yourself on the wrong side of the law when all you want is some peaceful time in your vacation haven.
5. What Are Your Property’s Resale Prospects?
This may not cross your mind when making a purchase, but it is crucial! Consider finding out how much your property will be worth in five or 10 years time. How fast is it to sell property in that region? How are the local market conditions likely to be in a few years time? Factoring in your property’s resale prospects will help you avoid acquiring a depreciating asset or get stuck in the market for months trying to sell.
All in all, when buying property overseas, it’s crucial that you engage a professional real estate agent, an attorney and a financial advisor who is knowledgeable about foreign property purchases.
This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.