Offshore Real Estate Investment Considerations for 2022

Not all plans for wealth building are confined to your home country’s borders. There are plenty of international options that you can consider. One of them happens to be offshore real estate.

If this is an idea you want to investigate further, it’s important to know how to make the most of this approach to add to your wealth. Here are several points that need attention before attempting to make any purchases.

Real Estate Laws and Offshore Property Owners

One factor that must weigh heavily in your decisions is how the real estate laws in a given country apply to you. Don't make any assumptions even if you’re familiar with the requirements that must be met in a different nation. Laws related to property ownership by non-citizens can vary quite a bit.

Your goal is to confirm that you can own real estate even though you are a citizen of another country. Once that’s done, investigate any particulars that would apply to how you could manage the purchase of a property.

In some cases, it may be necessary to go through an agent who will represent you. At other times, it might be advantageous to set up a trust and purchase the property through that entity. You may also find that there are no impediments to property purchases as long as you have the resources to pay the asking price.

What’s the Tax Structure?

Along with purchasing real estate, what sort of tax obligation goes along with the ownership? Knowing how the tax structure applies to citizens doesn’t necessarily tell you much. You want to determine what sort of obligation you have for the property and other taxes because of your status as a non-resident and a non-citizen.

Here’s something that you may not realize there are offshore locations that offer tax incentives for those who are willing to purchase, maintain, and in some way make use of the real estate that they buy. Those incentives may apply for the first year of ownership or be in force for a more extended period. Consult with a tax expert and find out what sort of breaks you would be able to receive.

Commercial or Residential Properties

What kind of real estate do you have in mind? Perhaps you want a residential property that will serve as your vacation home and eventually your home for the retirement years. It could be that you would like to invest in commercial property on your own or as part of a group. In many offshore locations, both of those options are possible.

Location will be important to the decision of where to buy real estate. If it’s for a residence that will serve you in multiple ways as the years pass, make sure it’s an area that’s safe, has a climate that you like, amenities and features nearby that you can put to good use, and is likely to retain or appreciate in value.

Choosing Between Developed and Undeveloped Real Estate

How do you feel about purchasing a property that has yet to be developed? That can be a plus if you want to spend more resources on new construction rather than adding to or renovating an existing structure. It’s the way to go if you like the location but would prefer not to have to tear down the current building to make way for ones that are better suited to your purposes.

At the same time, developed real estate may be a better choice for you. That’s true if the home or commercial building found on the property can easily be adapted to fit in with your plans. When those structures require little more than some cosmetic changes, you can purchase and use them immediately. Best of all, there are no worries about zoning laws that would impact your ability to add on or build new structures on the property.

Leaseholds Versus Freeholds

As you begin to check around for different real estate options, it won’t be long until you come across properties described as freeholds and leaseholds. With a freehold, you own the land, and anything found on it. That includes structures, landscape elements, and everything associated with the property. You are also entirely responsible for everything that’s found on that property.

A leasehold works a little differently. With this arrangement, you enter into a contract that provides you with ownership of whatever is on the land for an agreed-upon period. You do not own the land proper. The contract terms will define what elements of the property you are responsible for maintaining. While this approach may be acceptable if you’re looking for a commercial space, it’s not likely to be the best choice if you are looking for real estate that you can use during your lifetime and then pass on to your loved ones.

Options for Financing

There’s more than one way to structure the financing needed to purchase your offshore property. While you could opt to utilize domestic funding for the purpose, that may not be the best decision financially. Take a close look at financing options that originate in the country where the property is located.

It’s possible to set up offshore bank accounts that can serve as conduits for purchasing and making mortgage payments. For example, you could set up an offshore checking account to receive the money from a mortgage loan that the same offshore bank provides. Issue the payment to the seller using that account. Going forward, use the funds that you deposit into the account to make the mortgage payments. A plus of this strategy is that the interest paid on the loan is likely to be competitive with anything you could get at home. It might be a little lower than your options for domestic financing.

Rent Potential

As you consider different properties for residential or commercial purposes, think about the rent potential of the property if you aren’t planning on living there until later on in life. It can be a great way to offset the mortgage payment until you’re ready to move in.

Location, availability of utilities and other services, and even proximity to healthcare and shopping all play into whether someone would want to rent the property. Remember that since you will eventually be moving to the area yourself, it’s essential to know about those amenities.

Add Real Estate to Your Offshore Assets

Opting to purchase property in an offshore location is a significant decision. It can also be one of the best strategies for strengthening your financial positions while preparing assets for your personal use later in life.

Look closely at any properties that capture your attention and consider what you would do with them now and in the years to come. Doing so increases the odds of ending up with real estate that benefits you in more than one way.

Author bio:

Luigi Wewege is the President of Caye International Bank, headquartered in Belize, Central America. Outside of the bank, he serves as an Instructor at the FinTech School in California, which provides online training courses on the latest technological and innovation developments within the Financial Services industry. Luigi is also the published author of The Digital Banking Revolution, now in its third edition.