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It’s easy to romanticize the idea of buying a home abroad. You find yourself looking through listings of beautiful homes with ocean views and pools and think “I could definitely call that place home!”
But, while it may be tempting, buying a home abroad isn’t necessarily the best decision. There are pros and cons to both buying and renting, as well as situations where one approach may be preferable over the other.
Join me below as I walk you through some important points to consider to help you decide whether you should jump in and buy that dream beach house, or rent instead.
What is your expat avatar?
Depending on your situation, there may be a clear winner in the buying vs. renting debate. Here are some of the more common scenarios for expats – which one do you identify with the most?
#1: Full-time expats
These are people who have left their home country, or intend to leave their home country, for a new home abroad. Wherever they are moving will be their new home base.
#2: Part-time expats/Vacation-home buyers
These are expats who vacation in the same destination year after year. While they don’t spend the whole year there, they like the idea of having a home away from home they can consistently go back to. They’ve chosen the place they want to be and feel comfortable enough to consider purchasing a home there.
#3: Future expats/Plan B planners/Investors
The motivation for these people to purchase a property abroad is as part of their Plan B setup or for investment diversification. They don’t plan to spend much time in the property at the moment, but they like the idea of it being there if they need it as a landing pad. They are happy to rent it out in the meantime as an investment property.
Are you #1, #2, or #3? Your particular situation definitely makes a difference in determining whether renting or buying makes more sense.
Important considerations before buying abroad
Most offshore real estate markets are not nearly as straight-forward or well-developed as those in Canada and the United States. If you make the wrong decision, it is not going to be easy to turn it around.
Think of it like getting a tattoo – you better be darned sure of what you want and where you want it before you get it!
Here are some important considerations you need to keep in mind before purchasing a property abroad.
Be specific about your location
If you are looking to buy a place you need to be specific not just about the country or city you want to be in, but the neighborhood itself. Some people may like the idea of being in the city, until they are kept awake all night by barking stray dogs or loud parties at the nearby church (both true stories). If you have a neighborhood in mind that you think you’d like, make sure you try before you buy so you can sus out any potential deal breakers.
Understand the rules
Make sure you have a good understanding of the applicable laws, regulations, and procedures in your jurisdiction, including:
- What are your rights/obligations as a property owner?
- Can non-citizens/residents own property?
- What taxes are you obligated to pay?
- Do you need to set up a corporation to purchase property?
- Is it legal to rent out your home? Are any special permits required?
- How long does it take for title to transfer?
Spend a good amount of time doing your research beforehand and employ on the ground experts to ensure you understand the process and can make an informed decision. No take-backsies!
Be prepared to pay in cash
When buying a property in emerging real estate markets across the world, you are pretty much going to have to pay cash, as the financing we are used to here in North America is just not available in many other places. There is the odd exception to this rule, such as with our friends at ECI Development who DO offer financing options for their properties. Make sure you check them out!
But, generally speaking, you will need to pay in cash, so make sure you factor that into your budget and be realistic about what you can afford.
Beware gringo pricing
Ah yes, the dreaded gringo pricing. If the real estate website’s in English, there’s a good chance you are getting gringo pricing, which means the prices are probably inflated. The best way to get a good feel for what things actually cost is to physically be there and check it out for yourself. That’s also how you’ll find the best off-market deals.
Factor in all the costs
Anyone who owns a home knows that the costs definitely add up! Whether it’s insurance, property taxes, repairs, HOA fees, or utilities, there are many costs that need to be factored in when considering whether it’s worth it to rent or buy. Make sure you have a good understanding of what your costs are going to be before make any purchase decision.
Buying: Pros & Cons
Even with all those caveats, buying is absolutely a great option for many people. Here are some of the main pros and cons for buying a property abroad:
Pros
- Real estate investments can qualify you for residency in many countries
- You will have a place to call home and can keep some of your personal belongings there
- You are invested in a hard asset that should appreciate over time
- A landing pad in a foreign country is a great addition to any Plan B and gives you somewhere to go if SHTF
- You can rent it out for extra income when you aren’t staying there
Cons
- Large upfront cost with little to no financing options available
- Complexity and uncertainty in foreign laws and real estate processes
- You are on the hook for all maintenance expenses and other costs
- Can be difficult to liquidate
- Opportunity cost: Is this the best use of your dollars, or are they better spent elsewhere?
Renting: Pros & Cons
Now let’s take a look at some of the common renting pros and cons:
Pros
- No maintenance or extra costs to worry about
- Flexibility – you can move around more easily with no strings attached
- Easier – no muss and fuss, you just sign a lease or book online and you’re good to go
- Cheaper up front
Cons
- Nowhere to call “home” – this may not seem like a big deal at first but most people eventually want to have a permanent homebase somewhere
- Your rent is going towards paying for someone else’s investment
- Uncertainty – your rent can be increased or you can be required to move out at the whim of your landlord
Renting vs. Buying: My recommendation
You may think from reading this that I’m against buying a property overseas, but that is not the case. I am just very much of the mind that you need to be very certain you are making a good long-term purchase decision before you pull the trigger on a real estate purchase abroad.
The flexibility of renting is very attractive, in my opinion, and I love the idea of not having to worry about the maintenance and all the additional complexities involved in purchasing a home. Not to mention not having to put up all the cash up front!
My recommendation is to get at least a solid 6-months of on the ground experience before you make any buying decisions. Renting is a fantastic option for both the short and long term and, at the very least, can be a great bridge strategy to employ as you look for your perfect place.
At the end of the day, each of our expat avatars above have different reasons why they may find value in purchasing a home abroad, all of which are valid. It’s up to you to weigh the costs and benefits and make the decision that’s right for you.
I hope you enjoyed this week’s article. Make sure you subscribe to Escape Artist Insiders Magazine for all the latest in offshore news, along with expert advice for setting up your Plan B. You won’t want to miss our April edition with a focus on residencies and citizenships – subscribe today!
Thanks for reading, and have a great week!
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Lisa is an aspiring expat from Canada who is working to put together her Plan B with a young family in tow. She is excited to pair her lifelong love of writing with her passion for offshore strategies and outside-the box investments in her weekly articles for Escape Artist readers. Follow this “rebel with a cause” as she walks the path less traveled and shares her experiences along the way.
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