12 Items To Confirm Before Buying Real Estate In A Foreign Country

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Check These 12 Important Items Before Buying Property Overseas

I’ve bought a number of overseas properties—both for personal use and as investments—and I find that evaluation of a potential purchase always comes back to a few simple basics. It’s a safe and secure process when you follow the rules and use the same good sense that you’d use in your home country.

Specifically, for any property you’re considering buying overseas, I recommend you ask yourself these four questions:

#1: Is the location good? As anyone in the real estate business will tell you, location is paramount. You can fix almost anything else with enough time and money, but you can’t fix the location. Make sure it’s either good or that you have a strong reason to believe it’s on its way to becoming good.

In addition to the neighborhood, also consider the distance to the airport and to good medical facilities.

#2: Would you need to own a car? This is an important question not only for you if you intend to use the property personally but also in the contexts of resale and rental. The ability to walk to stores, restaurants, and administrative services, meaning you don’t have to invest in owning a car if you don’t want to, makes life more convenient and also more affordable. In the case of a city property, it’s not necessary that it be completely walkable; being near convenient public transit is the next-best alternative. Of course, walkability doesn’t apply in remote properties that are intended to “get away from it all.”

#3: What’s going on next-door? In Santa Marta, Colombia, I looked at a beautiful new high-rise apartment three blocks from the beach with an impressive view of the Caribbean. When I looked out the window, I happened to notice that the adjacent “never-to-be-developed” property was filled with construction equipment. As it turned out, this undisclosed neighboring building was going to block most of the view I’d have been paying for.

Just south of João Pessoa, Brazil, we looked at a planned community of beautiful town homes a couple of blocks in from the beach. While driving to the property, I happened to notice a billboard announcing the construction of a massive low-income housing project on the adjacent property… again, undisclosed. You can’t see into the future, and you can’t know everything that will happen. But do keep your eyes open to what’s going on in the area around you.

#4: In which direction is the Path of Progress moving? Take a big-picture look at any major infrastructure upgrades in the works. If you’re a Path of Progress investor, you’ll benefit from construction of that new highway or airport. If, on the other hand, you’re looking for continued peace and solitude, you’ll want to avoid them. Either way, you should consider them.

If you’re buying into an existing building, you should also consider the following four questions:

#5: What is the condition of the property overall? Look at paint, general appearance, the pool, grounds, elevators, and facilities. A quality, well-managed building is never in rundown condition. I’ve heard plenty of excuses about how the homeowners association (HOA) was going to fix things up during the coming year… but a well-managed property doesn’t become rundown in the first place.

#6: How strong is the HOA? We all know that HOAs are an annoyance. However, there’s no doubt that they preserve the value of your investment. Make sure the rules for appearance and maintenance are being followed and that the HOA is well-funded by reviewing their financial statements (your real estate agent can get these for you). Compare the HOA fees to those for other facilities in the area to make sure they’re not exorbitant but are sufficient.

I looked at several properties in Montevideo, Uruguay, where the agent proudly told me that the HOA had been disbanded to save money and that future assessments would be made to take care of any building needs. I called these “dying buildings” because they were rapidly turning into poorly maintained, shabby properties.

See if the HOA documents allow—or prohibit—short-term rentals. Many municipalities place restrictions on them. If you want to be able to rent your place out for maximum return, this is a problem. If, on the other hand, you intend to use the property as your residence, then no short-term rentals in the building is a good thing.

#7: How many units are for sale? If a mature building has a seemingly large number of units for sale, it could be a sign of trouble—a big tax increase, an HOA fee increase, or something unpleasant going on in the neighborhood, like a shopping center being built next-door. Ask around to find out why so many units are being offered for sale. The best source of reliable information on this can be the building’s doormen.

#8: What kinds of cars are in the parking garage? This may sound strange, but a building with well-off owners who care about the property will likely have a garage full of nice, well-kept cars. The more expensive they are, the better. If you see old junkers in the parking garage, take it as a warning.

If you’re buying in a planned community, consider these four questions:

#9: How many unsold units remain? We were looking into property for sale last week in Mazatlán, Mexico, and found a large, brand-new apartment for sale—with an almost 180-degree ocean view—at a good price. But then we noticed that there was another just like it… and then found two more. After checking the building’s completion date, I found it was completed almost four years ago.

Something’s wrong here, something I can’t see by investigating online. I’m traveling to see the area and property next month, and I’ll figure it out. But if you see a large number of still-unsold units in a finished building, you should smell a rat.

#10: How is infrastructure being funded? Many planned communities depend on property sales to fund the promised infrastructure and community amenities. This can mean that, if sales are insufficient, infrastructure and amenities never get finished, leaving owners holding the bag with unfulfilled sales promises on unimproved land.

I won’t tell you to avoid sales-funded developments full stop. However, if the developer needs sales to fulfill his promises, that’s an item that should be in your “risk” column.

The golden rule here is to “buy what you see.” This is an oversimplified way of verifying that, if the project were to stop today, leaving the remaining sales promises unfulfilled, you’d still own something that you believe to be of value.

#11: What is the competition in the area? I once looked at a project in Uruguay that was 2.5 miles from the beach, practically requiring its residents to have a car—call it Project A. The houses were expensive by local standards, between US$250,000 and US$450,000. Project B, in the same town, was located right on the water, offering brand-new apartments for US$75,000, with plenty of unsold units.

The town became popular with expats—partly due to Project A’s promotional efforts—but almost everyone opted for cheaper and more convenient properties in Project B or elsewhere in town. Local competition wasn’t the only reason Project A failed, but it was an important factor.

#12: Can the developer deliver what he’s promising? I’ve written about this in detail in the past. Take a look here: 10 Questions To Ask Before Investing With A Developer Overseas.

Buying property in another country can be safe, rewarding, and profitable. Just be sure to follow the rules and apply the same common-sense behavior you would back home.

I’ll be at the Global Property Summit starting March 18 in Panama City, co-hosting with Lief Simon. Along with a lot of actionable overseas opportunities, our group of experts will be covering all the tricks of the trade when it comes to buying properties abroad. You can get more information on the Global Property Summit here.

Lee Harrison

Continue Reading: How To Move Money To Colombia

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About Author

Lee Harrison

Lee has been living overseas for nearly 15 years, making his first purchase abroad in the colonial city of Cuenca, Ecuador. After that first investment, he traveled extensively across Latin America and Europe looking for the best property deals possible. Lee’s network of property insiders from those travels, along with his understanding of local cultures and languages, has helped him develop insight into local property markets that only the locals usually possess. He offers overseas real estate advice in his weekly Overseas Property Alert.