[quote=svelte]My wife and I wind down weeknights by watching House Hunters International.
Fairly often, it shows people buying a vacation home in a seaside community somewhere…we always shake our head – they’ve just locked themselves into taking all their vacations at that one location.
Also don’t quite understand how it can be cost effective, unless they plan on living several months out of the year there.[/quote]
Svelte,
I agree it’s not always wise to buy a place overseas. Take anything you see on those HGTV shows with a grain of salt. Most people don’t realize but they are all fairly “fake”. All of the properties are already purchased before the show airs. The production company can’t take a chance the deal won’t go through so in many of these cases the shows are faked and the properties are long purchased/owned. Plus all the properties they are going around to for comparison are also typically fake and many times the realtor’s house, friend of the realtor, friend of the property owner, etc.
I’m not saying all those HGTV shows are fake but those HGTV House Hunter’s International shows are just about all fake pretending to be buying a place. They are already long since owned in many cases with them moving out furniture out of each room to film it.
Keep in mind that many of these owners that are buying 2nd homes are renting them when they aren’t using them. And that can help maintain it during the year. Even in expensive locations, renting the properties can pay for the entire year’s worth of expenses.
For example, in one of my 2nd homes, I rented it out for up to $8,000 a week during high season. And I got it too. But it came to a point where I couldn’t even enjoy my own property because I couldn’t justify to myself turning vacation rentals down for $5,000 to $8,000 a week. So it’s a catch 22.
Owning a property overseas for many people is NOT about it being cost effective. Many times it simply is NOT. Without renting it out while you aren’t using it, you are stuck maintaining it.
I own several properties overseas but I rent out each and every one of them and it more than pays for themselves plus generates income even after accounting for management fees, utility bills, insurance, local income taxes on the rental income, annual property taxes, plus accounting for paying income tax here in the USA.
It just depends on the locations but many people aren’t buying overseas and thinking about it being cost effective.
Also, many of these people buying are wealthy and it doesn’t matter to them if they are losing money on it. In fact, I sold my beach house after one of the European guests that I had really loved it. He made an offer I couldn’t refuse and last I heard he only uses it a week or so per year and not sure if he is renting it out.
Also, you can also do home exchanges via sites like http://www.homeexchange.com We’ve done some amazing exchanges around the world where we will swap a small apartment for luxurious properties in places like Manhattan, Paris, London, Maui, Monte Carlo, Nice, Zurich and many others.
I realize that is NOT the norm but you can find creative ways to make the most of the property and maximize your ROI.
But I DEFINITELY agree with you that you really have to think twice before you buy a property overseas and also know ALL the laws and also what the taxes are like in each country. Many times abroad, no one tells you what the tax consequences are, or they flat out lie to you about it.
I’ve seen Americans buy a property because it was “cheap”. But then they never pay their property tax or municipal taxes for years and years and have problems when they sell.
In many countries, you do NOT get any bill in the mail. It’s your responsibility to hire an accountant to file the taxes. No one ever mentioned this to you but you find out when you sell.
Also, in some countries you have to get a permit to sell the property which isn’t always so easy. So it really makes sense to think all of these things through before buying abroad.
