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5 Ways To Fund Real Estate Purchase Overseas

a hot tub on a balcony in spring

As much as overseas vacations are a way to sightsee the world and relax, they are also an opportunity to explore real estate investment opportunities abroad.

In case you have been thinking of this for a while but don’t know how to raise funds for such a project, read along as we highlight various ways to finance property overseas such as a reverse mortgage.

Meanwhile, before you decide to invest in a property overseas, consider the following:

1. Why the decision?

To efficiently plan for a property purchase abroad, decide why you are making the decision. Buying a place for investment purposes will require considering the expected return. On the other hand, if you are buying to relocate, then it will be necessary to observe the surrounding areas of the property such as the availability of social amenities and safety. 

2. Real estate law

Every country has its law. The rule guiding property ownership in your country will most likely be different in another country. Make sure to research and consult a real estate lawyer to avoid any future issues.

Some countries mandate that all foreign real estate owners must obtain special residence permits.

3. Budget

One of the major factors that will influence the budget is your currency value compared to the overseas country’s currency value. Figure out how much you will need in total and how much you have in the bank. This will help to calculate the amount of additional funds you may need. Different ways to funds will be discussed later in this article.

4. Get an independent valuation

Although this might be tedious, try as much as possible to get an independent valuation of any property you want to invest in abroad. This may also help your loan request if you are looking at getting funds from a bank to fund the project.

5. Tax liability

Study tax law surrounding foreign real estate investment in your country and the overseas company. In the US for example, it is not mandatory to report foreign real estate on your taxes, But it will be required if you are earning rental income from it.

Ways to finance property overseas

There are different ways to fund overseas property. Below are five you can explore:

  • Self-funding

This is the best option for purchasing a real estate property abroad. Unfortunately, it is not an option everybody can explore. Some of the sources of this kind of fund are IRA and 401k. People may also use their inheritance or funds from family and friends.

  • Bank loan

Bank loans are not usually available for foreign buyers. For countries where the option is available, the loan term is typically shorter than you will normally get in your home. It will also be affected by whether you have residency status or not. To apply using a residency status, banks will require you to submit proof of income just like you would in your home country. The amount of income accepted varies from country to country and bank to bank.

  • Mortgage

A mortgage is one of the easiest ways to borrow money to finance a property abroad. A second mortgage is the best when it comes to avoiding exorbitant interest rates. Another method in this category is the Home equity line of credit (HELOC) which is approved by a bank based on the borrower’s equity in a property. This means you stand a higher chance of getting a higher amount of loan if you own 100% equity in your home. It also comes with a low-interest rate and you don’t have to use it all at once.

Reverse mortgage is another option to explore only that it is available to buyers at least 62 years old. Some seniors usually take advantage of this mortgage to purchase vacation homes, according to All Reverse Mortgage, a company that specializes in reverse mortgage loans.

  • Sellers’ flexible payment plan

It is possible to find property sellers with flexible payment plans. This means they allow payment over a certain duration of time. However, they usually request a fixed minimum down payment between 20% to 50%.

They also set terms and conditions, which you should make sure to read or get a lawyer to interpret for you. Typically, they give a maximum of five years payment plan.

  • Developer flexible payment plan

Real estate developers offer financing for interested buyers when they need money to proceed with their projects. A pre-construction financing works in a way that you own a property not yet completed. This funding method may sometimes be interest-free while eligibility differs with countries and requires little paperwork. The payment is usually scheduled.

A developer financing may request a 15% down payment, another 15% after 6 months, and 10% after 12 months, then the balance on completion of the project.

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