The Caribbean. Costa Rica. Panama. Ecuador. Greece. Spain. These are just a few locations often considered by Canadians as options for the purchase of a second property. Beyond offering an escape from winter or for a complete life change, with some research and due diligence investors may even find opportunities to earn rental income and build long-term capital growth.
Issues to consider in addition to housing market information include: political and economic stability, transportation, amenities, and vulnerability to natural disasters. If the property is serving as a vacation home/rental, determine if you can see yourself returning year after year for several weeks at a time. Consider potential health care costs and its availability and quality.
What are the costs of utilities? What we take for granted at home is often not as readily available or reliable in other countries. It is imperative to ask about monthly costs above and beyond the property’s purchase price. Tax implications on the sale of a foreign property can also incur serious costs and capital gains.
Research the location
Avoid being one of those people who stay in an all-inclusive resort and, two weeks later, think it would be great to live there. Living in a foreign country for a few months of the year is different than visiting a resort. Consider overall amenities: sports facilities, cultural attractions, and ecotourism activities. Does the location offer sufficient diversions to keep you and your family happy?
Rules, regulations and legal advice
Once you’ve determined the ideal location to invest, familiarize yourself with the local rules, regulations and laws. Investors should obtain legal advice from an independent English-speaking solicitor who is not connected to the developer, vendor, or real estate agent. A solicitor who speaks the local language and knows the local system is preferable. Check up on recent changes to immigration laws as well as rules regarding part time or full time residency.
Finance and tax issues
Depending on the country in which you are buying, you may find that you can work with a Canadian affiliated bank. For example, Scotiabank operates throughout the Caribbean. Most countries have additional costs such as stamp duty, taxes, and local fees. Be prepared for these potential extras and seek specialist tax advice from a Canadian international tax expert.
Ongoing costs and selling
If you plan to rent your property, you may need to pay property management fees, utility fees, maintenance costs, insurance, and local taxes. If everything goes to plan, one day you’ll sell your property for a profit. Have all your legal documents ready and make sure there are no liabilities or other issues affecting the property, so when it comes time to sell you can do so quickly and with no surprises.
For further information on this issue, or if you have any questions, contact Daryl Cooper, Portfolio Manager, Cooper Schneider Financial, at 306.343.3255.
Sources: The Globe and Mail, Canadian Real Estate Wealth Magazine