6 Rules for Tropical Investing
Saying "I own Real Estate In [pick your favorite tropical paradise]" sounds way cool! But watch out for the "grass is greener" syndrome. Without local and independent legal advise, you can get into BIG trouble.
Rule #1 - Go down at least TWICE. Never buy sight unseen. If they don't want you to come down, they are hiding something. Visit in high and low season. Visit without notice. Witness the "non-holiday truth". Do research on weather. Are you paying local pricing or foreigner pricing? Prices may look cheap compared to the North American market, but may in fact, be inflated for the area.
Rule #2 - Know the property laws of the country. Do your own homework. What restrictions are placed on foreigners regarding ownership, travel and length of stay? Is it a stable government or will the rules be changing constantly. Is it friendly toward foreigners? What are the laws regarding squatters' rights? What appropriation rights do the many levels of government have? What is the currency like? Is it strong, weak, or pegged to the US dollar?
Rule #3 - Have your own legal representation that understand local laws and rules. What type of financing/leverage can you get? Dig into the tax implications of buying the property both in the country you are buying and your own country. Is there a tax treaty between your country and the target country? How will profits be taxed? How long can you be out of your country?Regarding property taxes, are you paying at the local rates, or at a rate higher for foreigners?
Rule #4 - Make sure there is adequate property management available. How will the money be transferred to you in the event of a sale or if the property is rented? By wire transfer? How often? What amounts will be held back? Do you have to open a local bank account? What types of communications are forth-coming from the property manager? What happens if the money doesn't come?
Rule #5 - Make sure you can actually own property there! Can foreigners hold the title? What is the Title Dispute Resolution process? How accurate are the titles? Are indiginous rights issues possible? Is it actually real estate you are buying or a "piece" of a project?
Rule #6 - Have an exit strategy. How resellable will the property be? How accessible is it to local existing amenities? to water? to the Airport? This is what another buyer will want. What is the competition in the area?
In the end, consider: Is it real, or is it a dream? With proper attention to these details, you can make sound investment decisions or plan for your retirement with confidence.