5 tips for buying a condo or second home abroad
Posted on Monday January 06, 2020
5 tips for buying a condo or second home abroad
One foot in the snow, the other in the sand: the thought of owning a second home abroad is beyond exciting! But before making neighbours with the palm trees, take the time to compare markets, get expert advice and look carefully at your budget.
Compare the various markets
Real estate is a complex industry—and even more so in a foreign country! The many real estate markets around the world are constantly evolving and, in some locations, very different from our own. They are affected greatly by the status of the local economy, supply and demand, and demographics. For example, your buying power will be much greater in Ecuador than in the Bahamas.
Demand for a number of destinations was particularly high in 2019, with Florida remaining a perennial favourite. Seek out professionals (realtors, lawyers, notaries) in Canada who have experience with these types of real estate transactions in order to create the most up-to-date picture of the real estate market in the regions you’re interested in. Don’t rush the decision-making process, and stay open to destinations that may surprise you!
Panama: Off-the-track paradise
One of its region’s best-kept secrets, this tiny country linking Central America to South America has started attracting more and more investors seeking a pied-à-terre under the sun. A wealth of information is available online about life in Panama, .
Rent before you buy: A wise decision
Have you been toying with this idea for so long that you’ve started feeling the urge to follow through? Start the process by first renting a condo or home in the region you’ve become passionate about. Some international tourism companies, like Transat, offer a range of options and can assist you in finding a rental property abroad.
This provides you an opportunity to enjoy your prospective dream destination while also confirming that it truly meets your needs before you take the next step. Within the space of two to four weeks, you can immerse yourself in the local environment and make sure that any cultural or linguistic barriers are not too high. Who knows? You may discover that the physical environment doesn’t suit you or that the infrastructures in place are inadequate. It’s important for you to feel at home.
Avoid making rush decisions
Hold off on contacting a realtor to start viewing properties during the first week. These professionals can often be very persuasive, and you could find yourself making an impulse purchase... especially after lounging in the sun and enjoying several sangrias! Unfortunately, there are endless stories out there about real estate deals that turned sour. You don’t want to become just another anecdote doing the rounds at an office party!
Get advice: Ask a friend or local contact for their opinion
The best approach to getting a feel for a new place is to talk with people who have been living there for a while. Long-time or even new friends, family members and even third parties may have valuable information to share.
Here are some topics you may want to raise with them:
– the local real estate market and geography (desirable neighbourhoods, developments)
– proximity to services
– cost of living (daily expenses, exchange rate, taxes, etc.)
– access to health care
– cultural and sports activities/events
– location of embassy
In addition to clarifying certain important details, these conversations give you a chance to look into the future as you interact with others who have gone through the same process as you.
Work with skilled professionals
Seek out professionals with experience in international real estate transactions who are familiar with local laws, market realities and resale potential and may even speak the language.
A broker specializing in international transactions can give you confidence that you are making a sound investment. You could start by contacting a realtor in Canada who is affiliated with an international network and can put you in contact with a broker on the ground at your destination. This person can advise you concerning the procedures to follow in the country you’ve chosen when it comes to making a purchase offer, competing with other offers and conducting property inspections.
If you’ve chosen Florida as your future second home, the website of the popular French-language monthly publication Courrier de Floride lists (link in French only).
Are you eyeing properties in the United States? You should know that in that country, notaries do not conduct real estate transactions. Instead, you should retain the services of a real estate attorney to assist in closing your purchase.
Fees, responsibilities and other considerations
Congratulations—you’ve bought a second home! Before you break out the champagne and run out to buy a new bathing suit, consider first some new responsibilities that accompany your status as a property owner.
To rent or not to rent: A personal choice
To keep costs down, many owners opt to rent out their secondary residence while they are not living there. Besides Airbnb, there are a number of websites out there for posting rental opportunities, including VRBO, Rent by Owner, Vacation Renter, Vacation Rentals and Novasol (if you’re in Europe) to name just a few. Before you start posting ads, check the rental guidelines and rules established by your condo association where applicable. Some developments are very strict in this regard.
Would you rather avoid renting so you can be sure that your property is free at all times for last-minute getaways? Then consider using the services of a caretaker to drop by periodically and ensure that all is in order. In fact, many insurers require that you make provision for this. Check with your insurer to find out what the rules are in your situation.
Costs and budgeting
The snowbirds may be taking flight, but to ensure that your money doesn’t do the same, you’ll want to establish a budget that takes the following into account:
– Overhead costs (electricity, heat, air conditioning, etc.)
– Taxes (income taxes, municipal taxes, etc.)
– Loan interest rates
– Contingency fund and monthly fees (for condo purchases)
– Anticipated number of trips per year
Avoid foreign mortgages (and associated rules)
Based on a survey conducted by the association Florida Realtors, around 90% of Canadian homeowners in Florida pay cash for their properties. It’s probably safe to assume that a very large proportion of these buyers use the option to refinance their homes in Canada rather than taking out a mortgage in another country, where the rules are often very different. By going this route, you also avoid the impact of exchange rate fluctuations.
Health insurance coverage
Before you trade in your winter boots for sandals, remember that in order to maintain your Medicare coverage, you should also inform the government that you are planning to leave the country. To remain eligible, you may not be absent from the province for more than 212 days per year. In other words, you must spend at least 153 days, consecutive or not, in New Brunswick.
There: you’ve joined the ranks of the snowbirds, those happy people boasting golden tans even during the whitest of winters. Now that you have a second home patiently waiting for you under the sun, start planning your next trip... and don’t forget the sunscreen!