9 Due Diligence Tips for Buying Offshore Real Estate

offshore real estate due diligence tipsOwning offshore real estate is a great investment. It can create a revenue stream that helps to increase your personal wealth while providing a place that you can use for retirement in the future. The key is to do your research and identify a property in the right location and fulfill the purposes you have in mind.

Here are nine tips that will help you conduct the due diligence needed to secure the right offshore property.

1. Up Your Networking Game

One of the best ways to learn more about real estate opportunities within a given offshore market is by building contacts with those already living in the area. This isn’t as hard as many think. Given how people connect via social media, more traditional message boards, and other online methods, getting in touch and cultivating connections with those living in the area are relatively simple.

What’s your goal? Be upfront and admit that you’re considering real estate options in the area, and you would love to know more about it. Discuss factors like the climate, services provided by the local municipality, access to shopping, how easy it is to travel around the area, and even what to do during different seasons.

Along with learning a lot about the area, you also get to make friends to socialize with when you visit the country.

2. Find Out If Property Ownership is Limited to Citizens and Residents

There’s no universal rule that applies when it comes to owning offshore properties. There are few, if any, barriers for non-residents to own residential or commercial real estate in some nations. In other countries, it’s necessary to establish residency before you can buy any land. That includes purchasing condos that are part of a larger complex.

Establishing a relationship with a real estate lawyer is one of the easiest ways to determine what requirements are in place and under what conditions you can legally purchase a property. You may find that it’s okay for you to own commercial property in some areas but not residential properties. In other countries, the opposite may be true. There are still other nations where non-residents may purchase either type of property as long as they meet specific legal qualifications.

A qualified real estate lawyer in the country of interest can explain what applies in your case.

3. Determine If Local Bank Accounts are Required

One of the qualifications you’re likely to find when purchasing offshore real estate is that there must be at least one bank account established in the same country. Generally, all transactions related to the purchase will be handled by that particular institution.

It could be that the bank also provides condo financing or home mortgage loans. From that point forward, loan payments are remitted through those offshore bank accounts. Even if you plan on using domestic funds for the payments, you will transfer the funds into your offshore checking account, then make the mortgage payment once the transfer posts and the funds are available.

4. Secure Representation Within the Country

As you look for the right real estate, it pays to have representatives on the ground representing your interests. That means hiring a local real estate agent who can locate potential properties and learn more about any properties you hear about through your social networking connections. The agent is in a better position to assess the property’s condition and tell you if it lives up to the images and video you’ve seen.

Along with your real estate agent, the ongoing services of a lawyer are important. The lawyer can provide legal advice and conduct title assessments and property background checks. This determines if there are any liens or other claims on the property that must be settled before you submit an offer. Once you make the offer, that lawyer can evaluate the terms of the sale and make sure you are adequately protected.

5. Consider Offshore Financing Versus Borrowing the Money at Home

You may have the idea of borrowing the money to purchase the property from your domestic bank, transfer the funds to your offshore checking account, and then complete the sale. Before you do that, compare the merits of this approach with securing a loan from an offshore bank that’s either located in or does business in the country where the property is found.

There are several reasons to consider this. The right offshore bank is likely set up to conduct loan transactions involving multiple currencies, including the one used in your home country. They may match or even be better in terms of interest rates than what you can get at home. Last, some offshore banks offer bundled services that would allow you to enjoy some additional perks if the mortgage, savings account, and checking account were all with the same institution.

6. Understand How Square Footage is Calculated

If you’re a resident of the United States, this is something that you may not even consider. That’s because you’re accustomed to the square footage of a home focusing on the interior only. That may or may not be the case with real estate in offshore settings.

For example, you may look at a property and inquire about the square footage. The figure provided accounts for the home’s interior while including the front and back porch footage. If you’re not aware of this, you may be disappointed when you visit the property and walk through the interior.

7. Evaluate the Cost of Comparable Properties

Your experience with domestic real estate deals has taught you to find out what houses nearby are selling for in the current market. That same idea applies when you’re attempting to find the right offshore property. Take the time to find out what houses or condos of similar size and with much the same features are being sold for currently.

While there will never be a perfect match, this approach at least tells you that the asking price is within reason. When it’s within 10% or slightly more of what other properties are going for, it’s worth looking at what the property has to offer versus what those nearby properties include. That may account for the slight difference and confirm that the price is a good one.

8. Know Your Tax Obligation in Advance

Property and other taxes must also be considered. This includes any tax or fee that makes it possible for you to own property and enter the country to use that property. Your lawyer can help you understand every type of obligation or expense that will apply.

Project what you will pay in one-time fees and costs. Add in the annual taxes and other obligations that you will incur in the future. That will help you determine if the location is right for you or if seeking property in another offshore area would be better financially.

9. Determine Maintenance and Upkeep Costs

While it may be a while until you make the property your permanent residence, it can be used as an investment in the meantime. As the owner, you will be responsible for the upkeep and maintenance. Along with making sure the property attracts tenants, you also ensure that it’s in good condition when deciding to move there.

Consider what it will cost to hire someone to take care of the grounds, make minor repairs, and keep the property in compliance with any local ordinances. The social network you established is an excellent place to turn to for recommendations of someone reputable to keep the property in top shape. Depending on the local standards for this type of work, the total you spend each year may be more affordable than you expected.

Get on the Path to Offshore Real Estate Ownership

There is no better time than now to get started on your quest to own property in an offshore location. Belize is a popular choice among those who purchase offshore real estate. It welcomes foreign investment and places no restrictions on non-citizens owning property.

Our team at Caye International Bank can help you perform with due diligence and financing your purchase of offshore real estate. Contact us today and learn more about financing and mortgage options and our many other investment solutions.

Contact Caye International Bank

 

 

 

 

 

About this author


Luigi Wewege is the Senior Vice President, and Head of Private Banking of Caye International Bank, published author of The Digital Banking Revolution - now in its third edition, has co-authored economic research which was presented before the U.S. Congress and currently serves as an Instructor at the FinTech School. He holds an Italian MBA with a major in International Business, as well as a BSBA with a triple major in Finance, International Business, and Management - cum laude from the University of Missouri-St. Louis.