Vacation Property Walkthrough: International Vacation Properties
International destinations offer a variety of benefits to vacation home buyers, but these purchases may require extra planning and attention to details. Depending on the country, there may be rules and regulations regarding who can own a property, and how the property can be used. It is important to consult with a qualified real estate professional and an attorney to determine if a purchase is both feasible and practical, and to ensure the buyer understands his or her rights.
For people who enjoy travel, an international vacation home can provide an exciting and educational opportunity. Immersing oneself in a different culture and studying the local language and customs can be extremely fulfilling. A vacation home provides travelers with a place from which to base shorter day trips while exploring the region- with the added comfort of returning to one's own home each evening.
Another benefit is that international vacation properties may be much more affordable than comparable properties in the United States. While this does not hold true for all markets, there are certainly many regions throughout the world where home prices and the cost of living remain comparatively low.
Today's travelers also have the added convenience of laptop computers, tablets, smartphones and cell phones to stay connected with friends and family from nearly any vacation spot in the world.
Certain countries have rules regarding foreign ownership and others restrict it altogether. Local real estate agents can be found through the International Consortium of Real Estate Associations (ICREA; www.worldproperties.com) who can provide details regarding various countries' restrictions.
Even when a country does not impose restrictions on the purchase of real estate, it may have rules regarding what happens if the foreigner wants to eventually sell the property. Foreigners are welcome to purchase property in Malaysia, for example, but if the property is ever sold, the money will have to be kept in a Malaysian bank account.
When purchasing a home overseas, it is of the upmost importance to ensure the transaction is conducted in a manner that will protect the buyer's property rights. In the United States, home buyers receive title to the property; however, this distinction is not as clear in all countries. Consulting a qualified real estate professional and an attorney will help ensure the process goes as smoothly as possible and that all of the necessary paperwork is completed.
Safety and Stability
The U.S. State Department (www.travel.state.gov) provides up-to-date information regarding the safety and stability of various countries, including any travel warnings and alerts. Under extreme circumstances, the United States may restrict citizens from traveling to or within certain countries. The State Department regularly updates this information as economic and political situations change. It is important to know about any safety issues as well as any restrictions for U.S. citizens traveling abroad.
Foreign countries may also impose travel restrictions on visitors. Travelers must remember that while in a foreign country, they are subject to that country's laws.
Many foreign countries do not recognize a U.S. driver's license, though many will accept an International Driver's Permit (IDP) issued by the American Automobile Association or the National Automobile Club. These permits, which often must be accompanied by a regular driver's license, should be considered a short-term solution since they typically expire within a year. A local driver's license should be sought as soon as is practicable.
Exchange rates can and do vary, and the cash price for a vacation home abroad can vary significantly over the course of negotiations. When planning a purchase, buyers can consider the historical relationship between the two currencies and current analyst forecasts. It is helpful to remember that various exchange rates are offered at any one time; it may be financially advantageous to shop around at various banks.
Most buyers will have a difficult time finding a U.S-based lender to finance a home overseas. Some lenders in foreign countries, however, will offer loans to foreigners, but the required down payment may be prohibitively large. Many international real estate purchases are conducted as all-cash transactions. Paying with cash gives the buyer more negotiation power and reduces the financial complexity of the transaction.
Paying the Bills
Even if the vacation property was conducted as an all-cash transaction, the owner will likely be responsible for a variety of bills such as electric and water. Depending on the country and area, owners may have the option to set up regular payments through a bank or money transfer service. These services can help reduce transfer fees while providing competitive exchange rates.
Property Management Services
Whether the vacation property abroad will be used for personal or rental purposes, a property management company can oversee all aspects of the property such as maintenance, lawn care, marketing and bookings, if required. Owners generally pay a set fee for specific services and a fee plus commission for rental management. In some cases, the property management service will be able to pay all necessary bills on the property and then invoice the owner for reimbursement.
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