International Real Estate
By Phillip Townsend, Thu Dec 8th

1. Do your homework. Familiarize yourself with the laws andcustoms of the country. Research the tax codes, currencyrestrictions, and the qualifications for residency. Having alocal attorney is a must. Ask your real estate agent or a fellowexpatriate to recommend an attorney. The local American embassycan also provide a list of referrals. If you plan of purchasingproperty in a place where English is not the official language,you should insist on a bilingual lawyer who is able to translateall relevant legal documents.

2. Research. Find out the specifics about your new home-to-be:from the local political and economic situation to the dailycost-of-living. The last thing you want is to sink money into aplace that's unstable. Check out the U.S. State Department'ssite, www.state.gov, for up-to-date assessments of virtuallyevery country.

3. Finding a realtor. Once you're ready to look at property,you'll need to find a competent local real estate professional.There are many horror stories of people who have either dealtwith either unscrupulous or misinformed parties, costing themthousands of dollars (and in a few cases, their entireinvestment). Don't be one of those who learn the hard way. SomeU.S., UK and Australian firms have representatives orprescreened affiliates abroad. In some countries (Mexico,Honduras and Bali, for example), real estate agents are notrequired to be licensed and con artists abound, waiting to preyon cash-rich foreigners. A good resource for competent realestate professionals is the International Real Estate Contactslist, which is available at: www.thegloballife.net. 4. Theprocess. While every place has it own set of rules and nuances,the process of buying abroad generally works like this: First,the buyer and the seller to agree on a price, a security deposit(generally, 10 to 25 percent) will probably be required to takethe house off the market. Your attorney should then receive acopy of the title and verify that the property is free from anyliens or claims against the property. They should also adviseyou of any strange archaic laws, like those in parts of Canadathat allow anyone to fish on your land, those in England andFrance that allow sheep to pass through your property, those inrural Italy that give your neighbors first-refusal rights on anyland used for agricultural purposes (which could leave someoneelse with the fruit in the vineyard or olive grove on "your"property), or historic construction bans that prevent you frommaking any external changes to a property (even installing apool). Also, if you are buying anything in need of restoration(or more than a hundred years old), have a structural surveydone.

5. Mortgages? Financing your dream home may not be possibleabroad. Your U.S. bank will only lend

you the money for yourforeign abode if you're willing to use other assets forcollateral, like your existing home or automobile, CDs orbrokerage account. Some foreign banks will extend a mortgageonce you've opened an account, but most likely, you will have topay cash. If you decide to open a foreign bank account, you mustreport its existence to the U.S. Treasury Department. The IRSrecently warned U.S. expatriates that they risk up to a $10,000fine or 50 per cent of the value of the account if they fail toreport overseas bank and financial accounts. For details, getIRS Publication 54, Tax Guide for U.S. Citizens and ResidentAliens Abroad online at www.irs.gov/publications/p54/index.html.

6. A word of caution about renting. You may be consideringoffsetting costs by renting out your foreign home while you'renot there or setting it up as a short-term vacation rental.While the extra income can be a big bonus, countries such asMexico and France have strict eviction laws (in France it cantake up to 3 years to evict tenants who decide to stay withoutpaying, unless you demonstrate to the courts that you've foundyour tenant a suitable similar rental to move into). 7. Abouttaxes. If you make a decision to rent out your property, youwill be required to report rental income on your U.S. tax return(you may also be required to do the same with your "new" countryof residence). Since the United States has reciprocal taxtreaties with dozens of countries, you probably don't have toworry about double-taxation, since any amount paid abroad willbe credited against your U.S. tax bill. If you work abroad, youmay even be able to sidestep Uncle Sam altogether by qualifyingfor the $80,000 foreign income exclusion (and by writing off themaintenance expenses on your new home). If you decide to sellyour foreign property, be aware that capital gains taxes in somecountries can reach as high as 40 percent. I suggest solicitingthe help of an international tax specialist for informationabout your own situation. A top U.S. expert is: Jane Bruno, theauthor of The Expat’s Guide to US Taxes. She can be reached at(561) 222-9273 or via email: janebruno@adelphia.net. Just tellher I sent you.

8. Legal matters. After making your purchase, you should be sureto draft a local will to ensure your property is passed along toyour heirs.

Complicated legal and financial issues, strange covenants, andsquatters could make that villa in the south of France orfarmhouse in Tuscany seem like more trouble than it's worth.

If you do your homework and hire the right people, your foreignpurchase should be smooth sailing.

About the author:Phillip Townsend is a former freelance correspondent for Moneymagazine. His first e-Book, Passport to Canada: the CompleteGuide to Living and Retiring in Nova Scotia, and the specialreport, the Caribbean's Best Kept Secret, are available atwww.nsliving.info.