The hot real estate market can make this a trying time for investors looking to grow their portfolio in the U.S., but opportunities abound for those interested in owning property in another country. This week, Bankrate spoke to Christian Ross, managing broker at Engel and Völkers in Atlanta, about how international real estate transactions work.
This conversation has been edited for length and clarity.
What are the benefits of investing in property abroad? Why not invest in the U.S.?
Investing abroad, I love it because it gives you the opportunity to have a vacation home. Sometimes, you can have a very large tax benefit that you would not have locally. There are some places and developers where they’ve already negotiated deals with the government where you you can get a very low tax rate for 10 or 15 years, or no taxes at all.
What should people know before deciding to invest abroad? How do you know if it’s a good strategy for you?
It’s really a matter of tolerance in a lot of different areas. Do you want it to feel like the U.S. but just be somewhere else? Do you mind if something is more of an “authentic” experience, if you will? In some places, if you’re doing repairs, you can’t go to Thumbtack, you need to wait for someone to come, like a plumber, so it may require some patience.
What are you looking for in the culture, the reliability of services, the healthcare system?
It may take 2-3 years to sell a property in certain places if you decide to sell. A lot of markets aren’t like the U.S. where you put something on the market and in 30 days it’s gone. There’s an aspect of risk tolerance, knowing you can’t easily offload a property like you can in the U.S.
It’s definitely tolerance all across the board. What environment do you want? Are you comfortable legally where some countries only write contracts in their language? Are you comfortable getting a team around you who can help you understand how that all works?
Is it more difficult to get financing abroad if you’re not a citizen?
One thing that we’ve seen is a lot of people are taking out equity loans or doing private loans. There are a lot of banks that are based in Canada that handle financing based in the Caribbean. A lot of times it’s 30 percent down, which is nice so you don’t have to go in with cash.
A lot of times there’s also developer financing. They’re breaking your payments into chunks so it might only be $5,000 or $10,000 upfront. The developers are always flexible, but part of making sure that flexibility is in your contract is working with the right local experts.
Where are the best places to invest right now?
My clients are really focused in Mexico. The Dominican Republic is becoming popular, too. Canadians had already been going there, but now a lot of Americans are going there. It’s a quick flight from the East Coast, especially in New York and Orlando where you already have a big Dominican population.
Developers see such demand that they are creating lower-priced options.
People are also looking at Panama. COVID has created all these new programs, citizenship by investment programs. Even the Cayman Islands created this program to live there for two years.
The developer I talked to yesterday [editor’s note: this conversation was held on May 5] in the Dominican Republic never had anything for less than $200,000, but now they’re going to build condos in downtown Punta Cana for $145,000.
It’s a lot more accessible now than it has ever been. I actually was talking with a brokerage group in Mexico and they’re in five different cities spread out. This was probably October. All of them had increased sales and they were saying a lot of people were not financing. They were getting personal loans in the US to bring the cash down. It was from beach towns to mountain towns, it was every landscape you could imagine.
Another place is Portugal. A lot of people want to be accessible by a flight that’s not as long. Portugal had a huge influx of expats. I think people are going to stay. Anyplace that was open and welcoming during COVID, people went to. I think we’re going to see people stay. In the States people may downsize and have their second home abroad. People are putting their money where their hearts and their dreams are right now.
Your company runs a ‘Fly and Buy’ program. How does that work?
People are going to be able to see properties. We’ll go over the legalities, they’ll learn all the ins-and-outs. We have a lot of friends and clients who now call other places home. This program is really to take all the questions and get them answered in one trip. If you decide to buy and you choose a particular developer, and they will take the price of your trip off the sale price up to $2,000.
It gives you the platform to see what other questions you may have, and if this is even a possibility for your life, if it’s something you want to do.
When it comes to wherever you decide to move to, you also want to get an understanding of transfer of wealth regulations. Understanding how beneficiaries work and how it affects how you pass on your wealth.
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