Vacation Property Walkthrough: International Vacation Properties

International destinations offer a variety of benefits to vacation home buyers, but these purchases require extra planning and attention to details. Depending on the country, there may be rules and regulations regarding who can own property – and how the property can be used. It’s important to consult with a qualified local real estate professional and a local attorney to determine if a purchase is both feasible and practical, and to ensure you understand your rights. (See also: How to Finance Foreign Real Estate.)

Benefits

If you enjoy travel, an international vacation home can provide an exciting and educational opportunity to immerse yourself in a different culture and learn a different language and customs – not to mention, it can be just plain fun. A vacation home provides travelers with a place to base shorter day trips from while exploring the region – with the added comfort of returning to your 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 doesn’t hold true for all markets (you’re not going to find a bargain in Monaco, for example), there are many corners of the world where home prices and the cost of living remain comparatively low. (Check out: Most Expensive Housing Costs Around the World and 10 Countries Where You Can Live LIke a Millionaire.)

Today's travelers have the added convenience of laptops, tablets and smartphones to stay connected with friends, family and the office (not too much, we hope!) from nearly any vacation spot in the world – making it easier than ever to travel abroad. (For more, see: Retirement Travel: Good and Good For You.)

Foreign Ownership

Certain countries have rules regarding foreign ownership, and others restrict it altogether. You can search for local real estate agents online and through the International Consortium of Real Estate Associations website, which also provides details about each partner country’s economic/political profile, market conditions, financing and restrictions for foreign buyers.

Even if a country doesn’t 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 must be kept in a Malaysian bank account.

When buying overseas, it’s of the upmost importance to ensure the transaction is conducted in a manner that protects your property rights. In the U.S., home buyers receive title to the property; this distinction isn’t as clear in all countries. Consult an experienced real estate attorney to make the process go as smoothly as possible and check that the necessary paperwork is in order.

Safety and Stability

It’s important to know about any safety issues, as well as any restrictions for U.S. citizens traveling abroad. The U.S. State Department provides up-to-date information regarding the safety and stability of various countries, including any travel warnings and alerts (subscribe to get up-to-date safety and security information and help the State Department reach you in an emergency abroad). Under extreme circumstances, the U.S. may restrict citizens from traveling to or within certain countries. The State Department regularly updates this information as economic and political situations change.

Foreign countries may also impose travel restrictions on visitors. Remember: When you’re in a foreign country, you are subject to that country's laws. (For more, see: Bringing Over $10,000 to the Philippines? Not So Fast.)

Drivers' Licenses

Many countries don’t 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 generally must be accompanied by a your own driver's license, should be considered a short-term solution since they typically expire within a year. If you’ll be abroad for longer periods of time, it’s a good idea to pursue a local driver's license as soon as practical.

Exchange Rates

Exchange rates can and do vary, and the cash price for a vacation home abroad can shift significantly over the course of negotiations. When planning a purchase, consider the historical relationship between the two currencies and current analyst forecasts. It’s helpful to remember that various exchange rates are offered at any one time, so it can be financially advantageous to shop around at various banks. (See also: 6 Factors That Influence Exchange Rates.)

Financing

Most buyers will have a difficult time finding a U.S-based lender to finance a home overseas. Some lenders in foreign countries will offer loans to foreigners, but the required down payment may be prohibitively large. Given this, many international real estate purchases are conducted as all-cash transactions. If you pay cash, it will give you more negotiating power and reduce the financial complexity of the transaction. (For more, see: How to Finance Foreign Real Estate.)

Paying the Bills

Even if you buy your vacation home in an all-cash transaction, you’ll still be responsible for a variety of monthly bills, such as electric and water. Depending on the country and area, you may have the option to set up regular payments through a bank or money transfer service. These services can help reduce transaction fees while providing competitive exchange rates. (See also: Top 10 Checking Accounts for U.S. Expats Living Abroad.)

Property Management Services

Whether you’ll use your vacation property abroad for personal or rental purposes, a property management company can oversee all aspects of the property, including maintenance and lawn care, plus marketing and bookings, if required. In general, you’ll 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 you for reimbursement.