If you dream of buying a home abroad, you are not alone. Spending the summer in sunny Provence or lively Lisbon sounds wonderful, but you’ll want to know what you are getting into before you dive in with a property purchase as an American. Buying property abroad is a very different process than buying here in the U.S. Here are some key points to help you navigate the process successfully.
Clarify Your Intentions
As with any financial goal, it is important to outline your intentions. For example, if buying a home in France is your dream, make sure to be clear on whether this purchase would be an investment or a vacation property. If you plan to rent out the property, you’ll need to understand tax implications on foreign-generated income. And you’ll want to run the numbers to see if your net income justifies the investment.
Some countries like France only allow Americans to stay for 90 days at a time and then require you to leave the country for a minimum of 90 days. In addition, certain countries and towns regulate how often you can rent your property to visitors, so rental income becomes capped.
And before diving in, be sure the town or village where you are looking to buy is where you really want to be. Consider renting first if the location is new to you. Get a feel for the country and the town so you are confident the purchase is right for you. Buying a home abroad takes months and selling one takes at least as long.
Being clear on what role this purchase is expected to play will allow you to determine if it’s the right decision. A CFP® professional can help you assess whether this purchase aligns with your broader financial plan and long-term goals.
Know Your Budget
Consider how much you can afford for the purchase. In France, there is an additional “notaire” cost that will be added to the negotiated price of the home. The home price does include broker commission, but it does not include the notaire fee, which can be an additional 8% on top of the purchase price.
Not all homes convey with appliances, so you may need to add the cost of major appliances to your budget. Then you’ll want to know the ongoing costs of owning the home such as property tax, insurance and utilities. For a property that you plan to use part time, you’ll likely want to hire a property management company to check in periodically.
Decide How to Title the Home Purchase
Estate planning is very different in countries outside the U.S., and how assets flow through a family can vary widely in other countries. In the U.S., it is quite common that a surviving spouse would inherit a home co-owned with a spouse who dies. But this is not the case in many countries, France being one of them. France utilizes the legal system called Napoleonic Code whereas the U.S. uses the Common Law. The legal differences are significant, and having an estate attorney in the country where you are buying a home is an important part of the home-buying process. You will want to make sure the home is titled in a way where the asset flows according to your wishes.
Put Together a Great Team
Buying a home in another country can’t be compared to buying in the U.S. since there are so many differences. Start by finding someone in that country who has experience in the real estate market, is fluent in the language and ideally has worked with Americans. Engage with estate and tax attorneys who specialize in cross-border transactions and with an international banker who is experienced in working with Americans. Introduce your team to one another so they can communicate during the home-buying process and once the home has been purchased. Your estate attorney, tax attorney and banker will be ongoing relationships for you so that you don’t miss any steps in the future that could cost you money.
A home abroad can open the door to new experiences, connections and cultures — but it should also fit seamlessly within your broader financial plan. With careful preparation and the right advisors by your side, you can make your international dream home a rewarding and sustainable part of your future.
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