8 Simple Mistakes to Avoid When Investing in Real Estate Abroad!
Kinjal Mistry was awarded a degree in Civil engineering in 2016 from Dharmsinh Desai University, Gujarat. She is a Manager (Civil B. Tech) at SDCPL – Gharpedia. She has a passion for Creative Writing. As a content writer she loves to write blogs on Civil Engineering, building materials etc. Besides, being a blogger, she also handles Construction estimating and Costing at SDCPL. She possesses excellent critical thinking skills to identify and offer solutions to engineering problems. She loves sports and reading novels. She is easily reachable on LinkedIn, Twitter and Quora.
When you planning for investing in real estate abroad, you must take several precautions. You cannot buy the first piece of land you find, and you cannot buy a vacation home from a broker you do not know. The tips listed below will help you save money, protect your interests, and find the best property in a foreign country.
Real Estate Investment Mistakes to Avoid
Mistake 1: Buying a Real Estate Property for No Reason/Not Using it Very Much
You need to think about why you are investing in real estate abroad. Are you buying an office for your business? Does your family want to go for a vacation at the same spot several times a year? You should weigh the value of the property against how much you will pay. If you are not using the property consistently throughout the year, you should rent when you travel to that country.
If you plan to use the property throughout the year for business, rentals, or pleasure, you can start working with an agent.
Mistake 2: Buying From the First Person You Meet
You should buy a property with help from a licensed agent. You can do your research online when you have met an agent, and you can read that agent’s reviews. If you are buying directly from the owner, you need an agent to handle the deal. You do not know the people you are buying from, and you are not a resident of the country. You may not have much legal recourse, and you cannot easily travel to meet the seller.
Mistake 3: Sending Money For No Discernable Reason
You can send money within the U.S. using a transfer company, and you will get a receipt for the transaction. You can contact the local authorities where that person is located if they are not responding to your inquiries, and you can contact the government for assistance if you feel you have been swindled.
When you are sending money to a foreign country, you need to have a reason for doing so. You can work with an agent who will tell you what the proper procedure is for a property sale. You can follow the steps that are used to buy and sell property, and you will not rely on an independent buyer that you do not know very well.
Mistake 4: Not Estimating Property Taxes before Investing in Real Estate
Property taxes are charged in every country around the world, but your local bank may not have the capacity to collect property taxes, hold them in an escrow account, and send them to a foreign country. You can ask your agent if they know how much property taxes will cost, and you should request a form that shows how much your taxes are every year.
Do not make payments to anyone but the government when taxes are due.
Mistake 5: Underestimating the Exchange Rates
You need to know the exchange rate when you are sending money to a foreign country. The exchange rate determines how much your US dollars are worth, and you need to know you have enough money for the purchase. If the dollar is not as valuable in a foreign country, you have less buying power. If the exchange rate is fluctuating, you need to check it constantly.
You may have planned to spend $50,000 for a vacation house on the coast of Vietnam, but the currency in Vietnam could get more valuable in the few weeks between when you decided to buy the home and when everything came together. The price of the house did not change, but the currency values might have changed. A house that was once $50,000 could be $51,000.
Mistake 6: Not Checking On Liens and Titles
People in America are required to have a lien and title search done on a house before getting a mortgage. Most real estate agents will not write a contract on a house without doing a title search. However, you do not know the local laws in a foreign country. The agent you are working with might not do a title search, and your lender in America may not have the resources to check the title for you.
You need to contact the local government, work with their records department, and make certain there are no liens on the house. You can check the title history of the house, and you need to fill in the gaps if the title is not up-to-date. If you do not follow these steps, someone could take the land, claiming it belongs to them.
Mistake 7: No Clue, How to Maintain the Property
You need to find a property manager who will look after your property, or you need to hire a housekeeper who looks after the property when vacationers or tenants leave. If you run a business, you need to hire a manager who will be tasked with maintaining the building. Leaving the building empty for an extended period is unsafe.
Mistake 8: Not Understanding the Local Weather Patterns
People who live in tropical climates understand that major storms will happen every year. These people know when to evacuate, when to board up the windows, and how to keep water out of their homes. If you do not understand how much inclement weather can impact your new property, you will not know what to do.
If a hurricane is reported in the Atlantic, it might move in on the Bahamian island where you own a bungalow. As mentioned above, you need a property manager who can board up the windows, block the doors to prevent floods, and help your tenants leave if they need to evacuate.
When you are ready for real estate investment in abroad, you need to avoid mistakes listed above. Buying property across the world is difficult when you are buying without the help of an agent or an understanding of local laws. You need to study the weather conditions in that area, and you must check the title on the property yourself to avoid any legal hang ups.