After living abroad for an extended duration many expatriates consider purchasing property in their host country. There’s no doubt that buying a property in your host country as opposed to renting can offer increased returns as well as providing a roof over your head. However, investing in property abroad can bring its own unique challenges and regardless of how well you know a country you should still perform due diligence and research. Here’s a checklist of 20 questions you should ask before purchasing overseas property.
Is the property price below, on par or above the market price? If you one day wish to gain on your investment you need to make sure that you are getting the best possible value for your purchase.
What are you plans on a long-term basis for the property? Do you intend to live in it when you one day retire, rent it out or sell it in a few year’s time. The answer to this question should determine where the property is located, the size and the long-term prospects for a property of that nature. For example, if you intend to remain in the property for a couple of years before renting it out, then you need to select a location that has a strong rental market. Conversely, if you intend on living out your retirement years in the home then your priority should be an area that you like and can see yourself living in for a long duration.
What are the tax implications of owning the property? You should thoroughly research how owing the property will impact your tax status. Before purchasing the property ensure that you are fully aware of any additional taxes you may face both in your home country and your host country.
If you choose to rent the property, what return on investment can you expect after you factor in interest, taxes, insurance, and upkeep expenses? If you plan on purchasing the property with the ultimate aim of renting it out, you should thoroughly research how this will impact your tax and financial status both in your host and home country. Be prepared for the fact that you may face periods of time where you may not have a tenant in situ and that you plan for this eventuality accordingly.
What are your tax responsibilities in the foreign country if you rent or sell the property? Will the beneficiaries of your will face inheritance tax on the property in the event that you pass away? It’s not just the financial impact of the ownership of the property that you need to consider, you also need to be aware of the costs and taxes you, are others, will face if and when you sell the property.
What will happen in the area in the future? One of your critical considerations when purchasing property should be the value of the property in the future. Are other buildings planned nearby, is the value of property in the area expected to increase?
What is my exit strategy if I need to get out of this property and return home in a hurry? If you are not very financially stable, one of the issues that you will need to consider is how you will continue to pay the mortgage on the property in the event that you suddenly need to leave the country. You may wish to complete some research into how liquid the property in the area in which you are intending purchasing is and the length of the current sales cycle.
If you are seriously contemplating buying a property overseas research and due diligence is key. It is usually much easier to get INTO a foreign property purchase than it is to get OUT of it. Our expat relocation guides contain comprehensive destination specific information about buying property in a number of cities throughout the world. It provides a detailed overview of the property purchasing process together with a list of local professionals who can help you to locate a property that is right for your needs.