SANDRA'S BLOG

What to consider before buying in another country

Many of my clients and fans have asked me about buying real estate abroad as they were motivated by the currency exchange rate that favoured the Canadian dollar. There are many reasons why people consider buying abroad.

 

As a Vacation Home  

 

They may want to plant roots in sunny Florida or Palm Springs, to be able to travel without luggage, make a secondary home there and avoid hotel rooms. Here are some questions they need to ask themselves.  

Is this home going to be used often enough to warrant the carrying costs? Calculate just how much it will cost you to own it every year and see if that is significantly less than you would spend renting a place for the same amount of time. Will you be able to use it enough to justify the cost?

Will you be satisfied travelling to one destination and nowhere else, or will you want to travel elsewhere? Will you feel obligated to go there since you pay for it all year long?

 

As a Rental Property

 

Find out if you are allowed to rent it out and how often i.e. weekly, monthly or annually and what restrictions there are at the HOA or condo.  Sometimes you are allowed to rent only after you have owned for 2 years --or not at all. You may discover that your sister and her family aren't welcome unless you are there at the same time!

How will you manage finding a tenant, handing over keys, chasing bad debt, cleaning between tenants, property maintenance if the air conditioner goes on the fritz. What income can you expect and how often? Distance is an issue. You have to hire someone to do these things for you, and that costs money.

 

As a Place for the Kids to Live While Away at School

 

Rather than pay 3 or 4 yrs rent you want to invest and hopefully come out ahead. Sounds like a good plan, but do you have a longterm plan? What will you do after your child is done with school? Will there be roommates? What if your child does not get along with the other roommates? How will you evict them? Is the property zoned for this type of use?

 

As an Investment

 

What is the expected performance? How long will you have to wait in order to turn a good profit? What if things change, how quickly can you unload the property? Canada is considered to be a safe place to park your money on a world scale, so would you make more money investing here? Do you know the economic forecast in the country/state/city? Thing about political issues, what if there is a new government, will you be protected?  If buying with a partner, what's your buyout plan?

The challenges of owning property in another country include Property Management, understanding the buying process in that country, and performing your own due diligence with regards to property ownership laws, rules and restrictions to name only a few things. Then of course, there are taxes to consider.

Worldwide income is taxed in Canada. You may also have to pay a point of purchase tax. You may be required to pay a withholding tax and should obtain a withholding certificate to reduce taxes. There are estate taxes in some places, and you may have to file income tax returns in the country of ownership if you make a profit or have rental income.

 

How to Do It

 

First of all, you need to consult with the appropriate experts including accountants to make sure you understand what lies ahead.

Consider the various ways to own/hold property:

  • - Personally
  • - Through a Canadian Corporation
  • - Partership
  • - Trust
  •  

Spend time in the destination to determine what's right for you. You may find that you don't enjoy the area and need to move, but how easily can you accomplish that and at what cost? You can get cheap real estate in one place, but it proves difficult to get to-perhaps an hour drive from the international airport. You think you can manage it until the kids come to visit and you are making that trek every other day! Saying you want to buy in Florida is like saying you want to buy in Ontario. There are a lot of places to choose from, so try renting in a few of them to find out exactly where you will be happiest.

 

Here are my tips:

 

  • - Talk to your advisors including accountants
  • - Think carefully about who else will be buying and  living there i.e. people your age, people who have the same lifestyle
  • - If you are excited about currency exchange, consider playing the currency market instead
  • - Understand if it will pay or if it will be more expensive and restrictive than renting
  • - Know where you want to buy
  •  

Remember: If you're going to play the currency game be sure to get advice from a trusted professional.

Read more: http://canadaam.ctvnews.ca/open-house/what-to-consider-before-buying-real-estate-in-another-country-1.1852225#ixzz33gXpbGYi

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SANDRA RINOMATO PROPERTIES

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Toronto, ON   M6P 3K9


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Toronto Real Estate Board - IDX Last Updated: 5/22/2018 7:21:38 PM