Real Estate News International Property Buying Guide
Wish you could live on vacation, whether in the heart of Paris or on the beaches of the Caribbean? You can, if you play your real estate cards right.
Buy real estate abroad, and you get more than a charming escape and bragging rights to your villa in the south of France.
"Beyond the obvious status symbol, it is definitely the best way to embrace a culture and enjoy the art-de-vivre of [another] country," says Thierry Journiac, founder of Switzerland-based TerraCognita Estate Solutions.
You can add to the list of potential benefits a diversified portfolio, better value than you might find in the U.S., strong appreciation and perhaps some rental income.
That partly explains why a growing number of people have opened their minds--and their wallets--to foreign home ownership. In the last couple of years, the international real estate market has seen a significant boost from affluent buyers, whether they are after an idyllic getaway, a lucrative investment or both.
The economic climate at home has encouraged the international trend--and even with that climate changing, some experts see the buying abroad trend continuing.
Historically low interest rates, particularly in 2003 and 2004, encouraged real estate purchases, says Delores Conway, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate. Although rates have risen recently, she points out that they are still relatively low. "Another thing is the huge runup in the American housing market, enabling people to pull equity out of their own homes in order to afford a down payment on a second home."
That equity is less available with price growth in the United States slowing dramatically--and in some cases, declining. The investor population is obviously going to look for other places to put money, says Jim Gillespie, president and chief executive of Parsippany, N.J.-based Coldwell Banker Real Estate. And wealthy types looking to buy a second or third home have said that rising interest rates have no bearing on their purchasing decisions, he says.
According to Ian Payne, senior vice president and managing director for Europe, Middle East, Africa and Asia Pacific for Realogy (nyse: H - news - people ) global relocation firm Cartus, buying real estate in emerging markets can be very rewarding. Take Thailand, which offers beautiful scenery and has seen tremendous growth.
"People were going in there and making a complete mint," he says.
What's more, buyers can often get much more for their money--be it for a home or basic living costs--in many international locales.
"In comparison with U.S. prices, most European markets are quite affordable," explains Alexander V.G. Kraft, chief executive of Sotheby's (nyse: BID - news - people ) International Realty France. "Where as $1 million doesn't buy you much in the U.S., in most European countries you can still find a grand home with lots of land. That's definitely a big incentive."
Of course, with the positives come the negatives--or at least the potential for negatives, if buyers aren't prepared. Among the risks is that a currency will slide, taking with it the value of your investment, or even political unrest. Concerns over property rights, local laws and cultural clashes should be factored into the decision making process as well.
"For some people, buying abroad is achieving a lifelong dream," explains Conway. "For these people it makes sense because in spite of the negatives, it is a lifestyle choice. They're quite willing to face those challenges--and probably even welcome them."
But people, who expect things to go as smoothly as they do in the U.S., may be in for an unpleasant surprise. Assuming both the process and the conventions will be the same as they are at home is one of the biggest problems foreign buyers run into, Payne says.
"There is a huge amount of naïveté from people thinking the system would be the same as theirs," he explains. "The assumption should be that it will be very different than your own."
If buyers fail to do this, they will become very frustrated very quickly. In fact, simply shopping for property can present location-specific difficulties, Kraft says. Unlike in the United States, you may have to make many of the viewing arrangements on your own. That could entail running from one agency to another to see a handful of properties, he says.
The buying process (an exchange of letters can solidify a purchase in some locales) as well as the laws (foreigners cannot legally own property in certain areas) and restrictions (local laws deem certain materials or additions off limits) are often very local as well.
That's why our experts advise potential buyers to become very familiar with the area, as well as with the legal, financial and taxation implications of owning there, before entering any kind of binding decision. In order to do so thoroughly and adequately, they suggest enlisting the help of an independent attorney who has knowledge of the local laws and conventions.
The good news, you can do much of your homework without ever setting foot on a plane--and it is not only cost-effective but also wise to do so. Don't buy on impulse, when you're buoyed by tropical cocktails and beautiful sunsets. Look into everything from the stability of the currency to the growth potential of the property market.
"You should go with an open mind. Italy is Italy and France in France," Kraft says. "And none of them are California."
Article from: www.forbes.com