You've just returned from a romantic week in Paris and already you are thinking of when you might be able to return to your newfound paradise. The idea of purchasing a condo in a nook of this European city only grows more tempting as you spend more time back in the states-"the real world." Buying property abroad can be an exiting venture, however, before you let your emotions control your purse, consider a few things.
- Why Buy? People make real estate purchases for primarily two reasons, but most often, a combination of the two. People buy for investment/resale value (financial consideration), and people make purchases for enjoyment/value of living (emotional consideration). Will you be renting your place out full-time? Part-time? Will you want to keep it empty for spur of the moment visits? Decide what your motivation for a purchase is-strictly to make money on an investment or to give added value to the quality/enjoyment you will derive out of living or visiting the property? Likely the answer will be both, but examine which motivation is stronger. This will help you in your search for the perfect piece of property.
- Investment: Location. If you are looking to buy property abroad from strictly an investment standpoint, you must consider the location of the property. If it is in an area of a city, town, or rural setting that is not good for resale (poor economic factors, high crime rate, etc.), it might not be a good investment-even if you personally would not mind living there. If, on the other hand, you find a property that might be missing some of the elements you want but is in a great location, it is a good idea to keep it in the running. You must always consider what potential buyers will want when deciding on a property. Remember, you can change a property's aesthetics, but you will never change the location of a property.
- Vacation Home: Location. Location is a no-brainer for people seeking a vacation home. If you are going to be spending your hard-earned money on a property oceans away, you should make sure that when you have the time to enjoy your purchase, you do not spend it wishing your condo was in the next "villa" over. Buyer's remorse can be even worse on a second home purchase, so make sure you are in love with not only the property but where it is located.
- Investment: Size and set-up. If you are looking to market your purchase for rent (while you are living in your country of residence), you will want to make sure that the unit will appeal to potential renters. Condos and houses with "funky" set-ups might be appealing to you because they have "character," however, they may be just "odd" or "quirky" to potential renters. As a result, the unit may be difficult to rent.
- Vacation Home: Size and set-up. If you are buying a property abroad, you will probably want to have enough room for friends and family to stay with you. Make sure your purchase suits your needs at the present time but do not ignore the possibilities that the future brings. If you are planning on having a grandchild soon, or if you normally travel with a particular group of friends, it may be a good idea to buy a bigger place than you might normally consider. If it is in the budget, getting an extra guest room or an entertaining-friendly set-up are good assets-this will encourage your friends and family to spend the money on traveling to come and visit your slice of paradise. On the other side of the coin, don't overbuy-your second home should be enjoyable and not a thorn in your side.
- Property Manager. If you are spending less than thirty percent of the time at your second home, you should seriously consider hiring a property manager. It is almost a must considering the potential problems you may have as an absentee landlord/owner in a foreign nation. A manager will be useful for a variety of reasons as defined by his contract-from collecting rent from tenants to performing odd jobs to informing you, the owner, of problems that should be of more concern.
- Legality. Contact a real estate attorney in the part of the world where you are looking to purchase. Laws vary by country and region. Know the law before even thinking about putting an offer on a place.
- Language. If you are not fluent in the language where the property is located, get a translator. You need to know exactly what is going on with the purchase and any issues surrounding the deal.
- Insurance. Speak to your current provider and ask about insurance issues that may arise from owning a property abroad. You may need specialized insurance or you may need to contact an agent in the country in which you are purchasing.
- Lender. The last (and most important) component of the process is getting the money for the purchase. Unless you are financing 100% of the price, you will need a mortgage or some sort of financing. In order to get a conventional mortgage for a second home in a foreign country, you will need to approach the international lending division of a leading financial institution for rates. You may have to look into several companies before you find a program that works for you. Obtaining a loan for a second home can be challenge enough in the United States, let alone in a foreign country.
Buying a second home is exciting-buying a second home in a foreign country can be exhilarating...and intimidating. The purchase process should not be intimidating if you consider the above factors. Remember to factor in the amount of money you will be spending in order to visit your second home-airline, moving costs, and all the other additional expenses need to be considered. The goal of a second home purchase should be to enrich your life, not to cause financial stress.