International real estate is the easiest and fastest way to get on the path towards diversification. It can also bring lifestyle upside and unique opportunities to profit.
There’s no shortage of practical reasons to buy abroad, but there are also some surprising personal and strategic benefits that rarely get discussed.
Let’s look at what owning international real estate can do for you…
1. Spend More Time In Places You Enjoy
Buying a home in another country reinvents your life in a way that allows you to spend time in places you love but might otherwise struggle to justify visiting often.
If you love the Caribbean, a rental property can give you a legitimate reason to visit your favorite island a couple times per year. Your getaways may even be tax-deductible depending on how you structure your investment.
2. An Adventure-Filled Lifestyle
When you buy a property abroad, you create an alternative, adventure-filled lifestyle for yourself, because everything works differently abroad.
Instead of filtering through listings on real estate websites, the search for your dream home might involve walking through a village and knocking on doors when you see a “se vende” (for sale) sign taped to a window.
When negotiating the purchase price, you can’t assume you’ll get a formal appraisal or Zillow estimate. In some countries, haggling is expected. You might need to bring cash, learn the local way of doing business, and expect a great deal of red tape.
Even paying bills will be different. Paying online isn’t an option in many places. In Panama, the utility company might toss a paper bill over your front gate. It’s on you to find it before it rains that day. To hire a plumber, you might flag down someone on a motorbike.
Expect frustration as you adapt to life and business in another country. The upside is that you’ll become a more capable, flexible person.
You’ll gain a broader worldview, and you’ll have better stories to tell at dinner parties than the guy who bought a standard rental down the road in Phoenix…
3. Privacy Like No Other Asset Class
Privacy is a strategic benefit to international real estate that often gets overlooked. It’s one of the last private investments available to Americans. The IRS does not require foreign real estate to be reported on Form 8938.
This means your villa in Portugal or studio in Medellín doesn’t need to be listed on your annual tax returns (as long as it’s held in your name and not through a foreign entity or trust). Your overseas property is therefore out of reach to anyone who might want to go after your assets.
4. Real Tax Advantages
If you rent your property, trips to check on it may be considered business expenses. You may be able to deduct your airfare, lodging, meals, and transportation from your U.S. tax return.
Mortgage interest on foreign property can also be tax-deductible. These deductions can offset your rental income, lowering your U.S. tax bill just like a domestic investment.
Most People Still Won’t Do It…
Even with all of these advantages, most people still won’t buy property abroad. They’re told by friends and family, the media, or their own fears that it’s too risky or complicated.
Let’s bust the biggest myths that hold people back from one of the smartest moves they could make…
Myth #1: “It’s Illegal To Own Property Abroad”
Not only is it legal for foreigners to own property in another country, many countries welcome and even encourage it with special incentives for foreign investors.
Most countries where the average person would want to buy property—Portugal, Panama, France, and Mexico, for example—have well-established processes for foreign buyers as well as clear laws to protect their rights.
Some countries have restrictions, particularly when it comes to land ownership. Many Southeast Asian countries like the Philippines and Indonesia restrict foreign ownership of land. Instead, foreigners can lease land for set periods of time (usually 25 to 30 years with potential extensions) in these countries.
Some countries may limit the percentage of foreign ownership for certain types of property. Thailand, for example, limits the percentage of foreign ownership in a condo building to 49% of the total floor area.
Other countries have standard restrictions on foreign ownership of land near international borders, military zones, and tidelands near coastal areas. Ownership is still legal and straightforward in most areas with the right guidance.
This raises an important point: when buying property anywhere in the world, it’s best practice to hire a competent, independent lawyer to provide guidance and represent you and your interests. It’s not always mandatory, but it’s usually a good idea.
Your lawyer should be independent, fluent in English, and registered with the local bar association. Your lawyer can navigate the purchase process on your behalf and carry out services like verifying title and registration, reviewing tax liabilities, and so on, in accordance with local law.
Myth #2: “A Foreign Government Will Take My Property”
Government seizures of property can happen in unstable regimes, but the risk is extremely low in countries with functioning legal systems and well-established property rights.
In fact, many countries have better property protections than the U.S., especially when it comes to squatters’ rights, inheritance, and ownership disputes. Governments that rely on foreign investment don’t want to scare away buyers. Losing investor trust would be economically disastrous for them.
Stick to countries with clear title systems, rule of law, and functioning court systems, and this fear becomes a non-issue.
Myth #3: “Overseas Property Is Too Expensive”
Most people assume international real estate is only for the ultra-rich. But the opposite is true: overseas property can be shockingly affordable. In many countries, you can buy attractive homes for the price of the standard RV.
For example, you can buy a one-bedroom apartment in coastal Bulgaria for $60,000, a countryside home in rural Italy for $80,000, or a beachfront condo in Northern Cyprus for about $100,000.
You may not be able to afford a second home in California. But that doesn’t mean you can’t afford a charming apartment in Spain or a rental in Belize.
Myth #4: “Mortgages Aren’t Available Overseas”
It’s true that many foreign banks are cautious about lending to non-residents, but it’s not impossible to get a mortgage overseas. In fact, there are several countries—Portugal, Spain, Italy, Greece, and Panama, for example—where foreigners can and do secure mortgages, even without residency.
If you are able to secure a mortgage overseas, the terms will likely be different to what you’re used to. Don’t expect a fixed-rate, 30-year mortgage, for example. These are unique to the U.S. Shorter loan terms (typically 15 to 25 years) are more common overseas, as are variable interest rates.
In some cases, you may be required to take out a life insurance policy naming the bank as the beneficiary to qualify for a mortgage. This can further reduce the term of the loan since many lenders have age caps between 70 and 75 years. If you’re 65, you may only be able to qualify for a 10-year loan.
Alternatives To Traditional Bank Financing
If you can’t or don’t want to use a local bank, there are plenty of alternatives, such as:
- Developer financing – Many developers, especially those who sell to the foreign market, offer payment programs—preconstruction purchase terms, payment plans, and straight-up financing.
This can be a win-win: you get the financing you want or need to buy the property, and the developer gets the cash flow he needs to cover construction costs. Both parties are protected—you by the purchase contract and the developer by the fact that he owns the property until full payment is received.
If you buy preconstruction, you’re usually buying a unit in a planned building and making payments according to a plan that’s tied to construction milestones. Payments can be so low in some cases that you can make them on your credit card. Payment plans usually span 12 to 36 months. When the property is complete, you owe the final amount, which can be 10% to 50%
- Seller financing – In some markets, you can arrange financing directly with the seller of the home.
- Private lenders – Firms that specialize in financing for expats are available in some places.
- Home equity loans – You may be able to use equity in your current home to buy abroad.
If you’re creative and you understand your budget, there are ways to finance an international property without depending on a traditional bank. In many cases, the purchase price is so affordable that buyers pay cash. You might not need any financing at all.
So, Are You Crazy?
If wanting more freedom, privacy, profit, and adventure makes you crazy, then maybe you are.
But you also need to be smart. You can’t go buy anything abroad and expect to achieve these things. You need to identify the right property, and it needs to be in the right location.
To smooth travels and successful property buys,
Sophia Titley
Editor, Overseas Property Alert