Buy Real Estate Overseas? Who Does That, Really?
We are living at a time that presents the opportunity to take an investor’s profit agenda, combine it with the live-better-for-less agenda of the retiree, and transfer it overseas. An opportunity to use overseas real estate as both an investment vehicle and a strategy for a new and better life, both immediately and longer term in retirement.
Overseas real estate amounts to the surest strategy for creating and preserving legacy wealth while simultaneously reinventing your life and rescuing your retirement. Thanks to global market events of the past half-dozen years, many options exist right now for where to buy to make money while also making a new life, and, thanks to our Age of the Internet, it is possible today to seize these opportunities easily and cost-effectively to build a new life while staying in real-time touch with family, friends, business concerns, and investment portfolios from the old one.
The best case is when you are able to find a piece of real estate in a place where you want to spend time, short term on vacation and long term in retirement, that also holds out the potential for an investment return, in the form of capital appreciation, rental return, or both. This perfect storm of objectives should be your ultimate goal. A holiday home on the beach of Nicaragua can become little more than a headache and a carrying cost if you ultimately decide you can’t abide life in the tropics.
The reasons to diversify your investment portfolio and your lifestyle to include real estate overseas have never been more compelling than they are right now. But, you may be thinking, who does this, really? Isn’t this a strategy of the jet-set? No, it’s not.
I come from middle-class Baltimore, my husband Lief from middle-class Phoenix. We started our overseas real estate adventures with next-to-nothing. (Lief made his first property investment using a US$5,000 gift from a family member.) I’ve been covering the live and invest overseas beat for nearly three decades. In that time, I’ve met thousands of others, at conferences and in my travels, who, likewise, have built adventure-filled lives that include real estate holdings overseas, and I can’t think of one of them who I’d describe as jet-set. These are all regular folks.
They represent all demographics. Our Editor Lee Harrison took early retirement at the age of 49 from a successful engineering career based in Manhattan and moved first to Ecuador, then to Uruguay, next to Brazil, and, most recently, last year, to Colombia. In each case, Lee bought a home, and, in each case, he was rewarded. A significant part of Lee’s income over the past 12 years of his retirement has come from his serial home ownership in each of the countries where he’s been retired.
Friend Coley made his first overseas real estate purchase at the age of 35. Coley and his wife Allison weren’t worried about money, making ends meet, or how they’d pay for retirement. Coley was making a great living, the young couple and their two small children were enjoying a fully appointed life in Washington, D.C., and retirement was decades away. Looking ahead, their lives seemed to promise lots more of the same–more earnings and an even more comfortable lifestyle as they continued to work hard and make their way up the D.C. ladder. They had achieved, at early ages, the life that many Americans dream about.
Only it wasn’t working for them. From their position in the U.S. capital, they had an insider’s view of what was going on and, from their perspective, what was going wrong. This was seven years ago, and, after a lot of research and months of soul-searching, Coley and his wife, in their mid-30s, scooped up their two little ones and opted out. “We wanted to get out while we were still young enough to remake our lives and our children’s futures in a way that made more sense to us.”
Coley and his young family hopped a flight from the American capital to the Panamanian one, where, months before, they’d purchased a house on the beach. They had to pull the trigger on their plan, because their house back in the States had sold. Yet, they discovered, their new home on the coast outside Panama City wasn’t finished yet. Arriving in Panama, the little family checked into the Intercontinental Hotel.
“We were at the Intercontinental for weeks,” Coley explains. “I would wake up in the middle of the night in a cold sweat. What was I doing? We were living in a hotel in a Third World city with two toddlers, for crying out loud. Burning through our savings. No one could promise when our house would be ready for us to move in. I thought I’d made the biggest mistake of my life.”
Today, seven years later, Coley is confident that moving his family to Panama was the smartest thing he could have done at the time and that, if he hadn’t done it then, he’d do it today for sure. “I look at what’s going on back in the States,” he says, “and I know we made the right choice. I see very bad times ahead for my country. I think my family and I can do better for ourselves in this life we’re creating for ourselves.”
The two most common reasons for resistance to the idea of investing in real estate overseas can be a general uncertainty about how to go about it and a more specific concern about the cost. Can the average investor or retiree really afford to pursue this strategy? Yes. You could get started with as little as US$50,000 to US$100,000 of working capital, sometimes less.
The most sensible first purchase is a small place (house or apartment) in a country where you want to spend time and where you have a reasonable expectation of generating some cash flow from rental. Given a budget of US$50,000 to US$100,000, you could purchase a piece of property that you could use part-time and rent out otherwise in Abruzzo, Italy; Bearn, France; Cuenca, Ecuador; Medellin, Colombia; Granada, Nicaragua; or Cayo, Belize, to name a handful of examples. You wouldn’t be buying big or fancy, but small and modest is the way to start anyway.
Big and fancy means heavy carrying costs. Property taxes usually depend on the size of the property. A big house on a big lot needs lots of cleaning, landscaping, and caretaking. And a fancy house is one you’re more likely to worry about being damaged by renters. Starting out, especially if your budget is limited, you want one or two bedrooms and standard finishes, fixtures, and furnishings. This is not to say you don’t want charming. In Abruzzo and Bearn, to stick with my two examples in the Old World, even US$50,000 to US$100,000 can buy you a lot of charm.
Most property markets outside the United States are cash-only. You probably aren’t going to be able to organize local bank financing, though in most developing markets you can pursue developer or seller financing.
Ecuador, Colombia, Nicaragua, Belize, and Panama qualify as good starter markets, places where you can buy with less than US$100,000 and where seller/developer financing is possible. With US$100,000 to US$200,000 to spend, your options expand to include Uruguay, France, Italy, Spain, and Croatia. You might even find something in that range in Ireland. With US$200,000 to US$300,000, you could buy almost anywhere.