When investing in property or purchasing a retirement home, it can be a smart move to look to foreign countries. Real estate prices in many parts of France have been on the rise, so French residents have been searching for more affordable options elsewhere.
The idea of buying property abroad can be tantalising if you choose an area where real estate prices are significantly lower than where you’re living right now. On the downside, property purchases in a foreign land often come with hidden real estate transaction costs, which can eat into the savings you were expecting.
Here are some common transaction costs you might face when purchasing foreign real estate, as well as a few tips for keeping them to a minimum.
Currency conversion fees
If you’re buying property outside of the European Union, the transaction is going to take place in a currency other than the Euro. When calculating your costs, you will need to consider the exchange rate at the time you make your down payment, as well as any fluctuations over the duration of your loan.
You will also need to take into account currency conversion fees, which are typically charged as a percentage of the amount being exchanged. Online currency conversion services such as Western Union offer an affordable way to exchange currencies without high conversion fees. If you are particularly determined to keep your costs low, monitor the exchange rate closely and exchange currencies when it is most favourable to you.
Thanks to Western Union, you can also perform reliable immediate money transfers to your foreign bank account or parties involved in the transaction.
There are certain challenges you might face when trying to finance foreign real estate. Banks in France might be reluctant to lend you money to buy property located abroad, or they might impose stringent requirements such as a substantial cash deposit.
Another option is to take out a loan in the country where you are buying property. As a foreign buyer, you might likewise be required to satisfy certain requirements, such as opening a local bank account and placing a substantial cash deposit with the bank.
No matter which option you choose, remember to compare home loan packages across both foreign and local banks. In order to keep your loan costs down, opt for a home loan package charging low interest rates and low administrative fees.
Taxes and levies
Assuming that you are buying your foreign property for investment purposes and intend to rent it out, you will be liable to pay taxes in France as long as you remain a French resident. In the absence of treaties or other agreements between France and the country where your property is located, you might also be liable to pay taxes in the foreign country.
Furthermore, each country has its own way of determining when you are liable to pay taxes, and how the amount of taxes is calculated. Other factors that might affect your tax liabilities include whether you intend to live in the country where the property is located, whether you are a retiree, and whether you intend to make the property your primary residence.
Therefore, when deciding which country you wish to buy property in, you should first familiarise yourself with the taxes and levies imposed on foreign property buyers. These taxes should be considered when you are calculating your return on investment prior to committing to a property purchase.
Legal and administrative fees
The legal and administrative fees for your transaction will vary depending on where your property is located. For instance, in Spain, you will need to engage the services of both a lawyer and a notary public, whereas in the U.K., one single lawyer will be able to complete the transaction.
Legal and administrative fees can vary considerably depending on which firm or practitioner you approach. So, it is worthwhile to shop around and compare fee quotations in order to find a cost-effective solution.
An agent can be indispensable in helping you source properties on your behalf and ensure that your transaction goes smoothly, particularly if you don’t have the time to make frequent visits to the foreign country or don’t speak the local language.
Once you have collected the keys to the property, you might also wish to hire an agent to manage the rental and maintenance of your property.
The various agents’ fees should be taken into account when adding up your total real estate transaction costs. To ensure you pay a fair price, do your research and know how much agents typically charge in the area.
When investing in real estate abroad, the secret to keeping your costs down is to do your due diligence and know exactly how much a potential transaction is going to cost you. Thanks to the Western Union® app, it’s easy to keep your currency conversion and money transfer fees low.