 "IL's Flip Answers Disgust Me!" Saturday, Sept. 15, 2007 One of your fellow International Living readers wrote last week to lambaste Kathleen Peddicord (my wife). As some of the reader's comments relate to buying real estate, I thought I'd respond. Here is the e-mail (I've corrected the typos and misspellings, but not the poor grammar): "Your flip answers disgust me! Unless one is worth a million or has $500,000-$800,000 in the bank, one CANNOT BUY REAL ESTATE JUST ANYWHERE ONE PLEASES! I have tried to find a small house or condo in Costa Rica and even working through Stewart Title with their mortgage banker's connections it is not possible for me to get a mortgage. And I have excellent credit in the States. You paint just a rosy picture of buying a home abroad. It ain't that easy, lady, so you need to level with your readers. The bureaucratic red tape and hassle with resident requirements, etc., and attorney and one is required to leave the country for a period or time every year. BTW, a non-citizen cannot even get a mortgage in Ecuador.
"Again, money talks! But you are doing your readers a disservice by promoting retirement overseas, when, in reality, the best that they can hope for if they are the average family is to rent a house or condo in another country for a month or so. Or until they win the lottery because property IS NOT as cheap and available as you and your organization pushes!" Hmmm…where to start… First, no one at International Living has ever said buying property overseas is easy. In fact, we write about our own difficulties all time. We fear we begin to sound like broken records, making the same points again and again. Buy what you see. Don't buy without title insurance. Never use the seller's attorney; always invest in your own. If you're intending the property for personal use, rent first before you buy. If you're reading faithfully and every day, dear reader (as I know you are!), by now you can recite these mantras along with us. Every country comes with its own issues, hurdles, challenges, and pitfalls that can cause you grief. No question, generally speaking, finding the right buy anyplace you're interested in investing isn't easy. You have to travel to the country. You have to meet with as many real estate agents and developers as you can (for, remember, few countries outside the U.S. offer an MLS, and each broker or agency will have different properties listed…and some will list the same properties at different prices). You've got to visit the properties. The effort can take weeks…even months. If you are shopping on a budget, as the reader who wrote in last week seems to be, then you have to work even harder. Real estate agents, remember, earn their money as a percentage of the total commission from the sale. They aren't going to be as interested in spending time to make a $50,000 sale to you if they've got another buyer shopping for $250,000 properties. It's common sense. That doesn't mean the $50,000 properties don't exist. While I haven't been to Costa Rica for some time, I wrote to a friend (not a real estate agent) who lives there now with his family and asked him to give me an idea of the minimum you'd have to spend to buy something livable in that market. Here's his response: "I logged on to one website and searched for property in Costa Rica for $100K or less. It took me about five minutes from start to finish, including the time to write this message to you. Thirteen properties come up. Either your reader has tastes that are above his wallet or he is not trying very hard. Here is the link." I took a look at the website my friend referenced. It lists a one-bedroom apartment close to the beach for $85,000, as well as a more "local" property with two one-bedroom houses on it for $25,000. What if you're not a millionaire (and probably even if you are)? That is, what if you don't have ready cash to close? Then you'll probably have to sell another asset--your house back home, for example. It's another point we make all the time: Mortgages are not readily available in most of Latin America. When they are available, the local bank you're dealing with couldn't care less about your credit rating in the U.S. In fact, there's an exception to this. Panama banks will look at your credit rating in your home country, for example, but that's not the important factor. If you can't show income to pay back the loan, an excellent credit rating in another country is meaningless. If you want to borrow money locally (assuming you're buying in a country where that's an option), you need to be able to show that you can make the monthly payments from income. Even a multi-millionaire isn't going to get a loan in Panama, Costa Rica, or Europe if he can't show cash in-flows. It doesn't matter if he has 10 times the amount of the loan sitting in a savings account in some other country…unless it is earning enough interest to fit the debt-to-income ratio required by the bank in question. Of course, if you're retiring and don't have enough money to pay cash for your retirement home overseas, you could always rent…which can be much cheaper than owning in many countries. The typical expectation for rent in the U.S. is about 1% of the property value per month (unless things have changed since I last rented property in the States). Outside the U.S., you're generally looking at 0.5% of the property value per month. This is a generalization, of course, and the figure varies country to country and region to region within a country. (That is to say, if the market where you're looking to rent charges more or less than 0.5% of the property value per month, please don't write to me to complain; nothing is absolute.) The reader who wrote to Kathie last week also raised the issue of residency difficulties. I'll save my replies to those (also misguided) complaints for another day… Lief Simon For International Living P.S. Although the point's been made in these dispatches many times in many ways, I'll make it one more time now: Retiring, owning a second home, and living outside your home country isn't easy. It is an adventure…and a lot of fun once you resign yourself to the bureaucracy and other hassles and headaches you'll have to deal with. If you aren't up for the challenges, stay home…please. | 
