Older readers of mine will know that I lived overseas for almost three years in the Caribbean. I wrote tons about my time there, namely about all of the weird and yet awesome experiences that come with living abroad.
I always found it interesting when I met people who actually bought houses there and moved their whole lives there permanently. I knew my time in Grenada had an end date so I never to had envision myself there for eternity, and honestly, I never wanted to. It was great to live there for some time, but I don’t want to do it again.
Still, every year people purchase homes overseas, imagining walks along the seafront, dinners on sunlit terraces, and marble floors beneath their feet. Others see overseas property as an investment to provide them with rental income when they retire.
Whether you’re looking for a special place in the sun for a luxurious life abroad, a rental property to generate capital, or an awesome addition to your investment portfolio, buying a property overseas can be great, but it’s also a complex process.
There are a number of important things to consider, such as local market knowledge and the different laws, taxes and policies that apply to foreign land owners in your country of interest. I can’t even imagine how crazy it would be to navigate taxes. It was hard for me to figure them out and all I did was work abroad, let alone actually own property. I think, though, that the most important consideration would be cost.
So, in Grenada, it was interesting because 2.71 Caribbean dollars = $1 US. So, some things were super cheap and others were just outrageously expensive for no reason. You have to watch that when buying a property in a foreign currency. It makes it necessary to consider currency exchange and how the cost of your property will be affected by exchange rates. The two most important questions to consider are how you will manage foreign exchange risks and who will facilitate your foreign currency payments.
Managing Foreign Exchange Risk
Just like the strength of the dollar is always changing here, fluctuations in the exchange rate between the dollar and your foreign country will affect and alter the cost and return on an overseas property. So, it’s very important to consider both when you will buy and how you will make payments overseas.
It seems simple, like you would would just send the mortgage check and be done with it, but there’s so much more than that to consider. For example, I remember how hard it was to find money transfer options when I lived in Grenada. We eventually just started taking pictures of my work checks and depositing them in my US account. But, if I were buying a house I would really shop around. Don’t leave it to chance or simply accept the exchange rate you are offered. There is usually some wiggle room!
Managing Your Foreign Payments
I’ve written before about how complex it was to bank in Grenada. At the time I didn’t know there were places like Currencies Direct that could have helped us get the best exchange rates. Ah, you live and you learn though right? But, if I were to do it over, I would definitely look at more financial services than just banks. I didn’t realize how many companies were out there that could have helped us move money around without as much of a headache as it was to open a bank account and wire money and just accept the exchange rate we were given.
So, I guess the whole point of the post is to say that if you’ve spent years dreaming of your Spanish villa or fantasizing about foreign real estate investment, you should go for it. However, just realize that a lot of research needs to be done and that it’s not all rainbows and butterflies. I mean, there will be rainbows. And probably butterflies. But, it’s also a lot more complex than you might initially think to find a spot, figure out the taxes, and then find a way to pay your mortgage without excessive fees. If you do your research right, though, it can definitely be worth it in the end.
Have you ever wanted to own property overseas? Where would you live if you could?