Buying property abroad as an American: What you need to know

There are many great reasons to buy property abroad as an American. Some people do it to retire in a beautiful place where the US dollar stretches further. Others want a profitable investment property. And some people are thinking about relocating to another country.

Buying overseas property is exciting, but there are a few things to consider if you want to make a successful real estate investment. In this guide, you'll learn everything you need to know about buying property abroad as an American.

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Table of contents

Why should you buy property abroad? What to consider when buying property overseas? What are the financing options for buying property abroad as an American? Do you need to declare a foreign property purchase to the IRS? Tax implications of buying property abroad How to avoid scams when buying property abroad Buying property abroad as an American FAQs Can a US citizen buy property in another country? Do I pay US taxes on foreign property? Will US banks give mortgages on foreign property?

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Why should you buy property abroad?

Foreign real estate is attractive for a few different reasons.

• Retirement: Many Americans consider buying property overseas during retirement to enjoy a lower cost of living and better weather
• Investment: Buying property abroad diversifies your investment portfolio and generates passive rental income
• Vacation: Save money on accommodation costs by owning a vacation home in your favorite holiday destination
• Relocation: With more people working online, many are considering moving to a different country for the cultural experience and a lower cost of living

Whether you're new to the idea or have been considering buying a house in another country for years, successful foreign property purchases require careful research.

What to consider when buying property overseas?

Buying real estate abroad as an American is not as straightforward as doing it in the US, but the benefits are well worth it. Here are some things to consider.

Country laws

Make sure to study the property laws of the country where you're thinking of buying real estate.

Most countries welcome Americans to purchase property, but some have local laws and regulations that make it more difficult.

For example, foreigners can't own land in the Philippines.¹ When buying property in Cyprus, there are limitations on how many properties US citizens can own.² In New Zealand, US buyers typically can't purchase existing homes or residential land but can invest in new developments or commercial properties.³

Visas and residency

Check if property ownership gives you residency benefits or if you need a special visa to visit or live on your property overseas. You don't automatically get the right to live in a foreign country when you have property there.

Some countries offer residency permits and paths to citizenship to foreign property owners.

For example, when you invest at least 500,000 EUR in a real estate property in Spain, you get a 2-year residence permit that can be renewed.⁴

At the same time, in countries like New Zealand and Austria, property ownership doesn't give you any residency rights. You would need to apply for a separate visa if you want to live there.⁵ In fact, you may need residency to buy property there in the first place.⁶

Currency exchange rate

Foreign currency exchange rates can affect how much you pay for your property. For example, if the U.S. dollar weakens against the euro, a house in Spain could become more expensive.

Local currency fluctuations can also make your overseas real estate appreciate or depreciate in value. Make sure that you’re buying property in a country with stable currency.

Property type

Different property types come with their own pros and cons.

Buying an apartment in a busy city gives you potential for a strong rental income, but it requires a lot of management and often comes with HOA fees.

A house or a villa can be perfect for retirement or as a vacation home, but you'll be responsible for maintaining the garden, the pool, and other amenities depending on the property.

Many people dream of owning a beachfront property, but they’re vulnerable to weather damage and, in some locations, natural disasters.

Make sure that the property you choose aligns with your goals and personal preferences for a successful real estate investment.

Property market and political stability

The country's economy, inflation rates, and political environment all affect property values. Do your research to make a sound investment that will appreciate in value.

What are the financing options for buying property abroad as an American?

Financing a property purchase abroad is more complicated than in the US, but there are a few options available.

Local mortgage

Some foreign banks offer mortgages to non-residents, but be sure to check the terms and conditions. Interest rates may also be higher than what you're used to in the US.

US banks

US banks sometimes have special mortgages for buying property abroad. Your US bank may also partner with other financial institutions to provide an international mortgage.

Developer financing

In some countries, property developers have attractive financing options for buyers. For example, in the Dominican Republic, developers may be willing to negotiate terms and work out flexible payment schedules.⁷

Read further
Funding your overseas property purchase guide Overseas property mortgage: explained Is it possible to get an international mortgage from Bank of America?

Buying property abroad? Send money the hassle-free way with Wise

Now that we covered all the basic costs of purchasing your dream home, the only question left is: how to send money to pay for your property overseas?

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Do you need to declare a foreign property purchase to the IRS?

You typically don't have to report a foreign property purchase to the IRS unless it meets certain conditions. That said, if you rent out your foreign property and receive income from it, you will most likely have to report it on your US taxes.⁸

Tax implications of buying property abroad

The tax implications of buying property overseas can be confusing, but you can figure them out with some research and, if necessary, help from a real estate attorney.

Tax	Requirement
Property tax	In most cases, you’ll need to pay a foreign real estate tax in the country where your property is located. These taxes are typically paid every year.
Rental income	If you rent out your foreign property, the rental income is typically subject to U.S. taxes.⁸
Capital gains	If you sell your property, capital gains are typically subject to U.S. taxes.⁸
Foreign bank account	If you have a foreign bank account with more than 10,000 USD in it, you need to report it to the IRS.⁹

Make sure to consult with a tax advisor to better understand your tax obligations when buying property abroad.

How to avoid scams when buying property abroad

Unfortunately, some scammers want to take advantage of foreign buyers. Here are some common scams and tips on how to avoid them.

Fake listings

Scammers often create fake property listings to get money or your personal information. They may use photos of properties that don't exist or are not for sale and promise attractive prices and incredible deals.

If something looks too good to be true, it probably is.

Title fraud

Scammers can try selling property they don’t own or without a clear title. This means the property might have legal issues, unpaid taxes, or other claims against it and end up being a bad investment.

Overpriced properties

Scammers often target foreign buyers who are unfamiliar with the local market and sell properties at much higher prices than their actual value. Always do your research when buying property abroad.

How to avoid scams

• Visit the property in person before making any commitments to check its condition and location
• Do a title search to check for any debts, legal disputes, or claims against the property or hire a local lawyer to do this for you
• Hire a reputable real estate agent with good reviews, credentials, and a proven track record

Buying property abroad as an American FAQs

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Can a US citizen buy property in another country?

Yes, US citizens can own real estate in another country.

Many countries make it easy for US citizens to buy property, but some have restrictions and additional requirements for foreigners. Make sure to check the specific country’s regulations and figure out if you need special permits or residency visas to buy property or visit.

Do I pay US taxes on foreign property?

If you rent out your foreign property or generate any income from it, you typically need to report it to the IRS. This includes rental income and capital gains if you sell the property.⁸

Will US banks give mortgages on foreign property?

Some US banks have international mortgages for buying property abroad, but you should expect different terms and interest rates from domestic mortgages. Other financing options for buying a property abroad include getting a local mortgage from a foreign bank or negotiating developer financing.

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Buying property abroad as an American opens opportunities for a better lifestyle with a lower cost of living and passive rental income. Whether you're looking for the perfect place to retire or your next investment, more and more Americans buy foreign property every year.

However, transferring funds overseas can be complicated. You may lose money on currency exchange rates and fees. This can make it harder to buy property overseas.

Take on the world with Wise. Easily send funds to 80+ countries and save on your down payment, local living, and more.

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Sources:

1. Oxford Business Group - Real estate regulations in the Philippines
2. Investropa - How to buy and own real estate in Cyprus as a US citizen
3. Bambooroutes - How to buy and own real estate in New Zealand as a US citizen
4. ImmigrationSpain - Get residency in Spain after buying a property
5. ImmigrantInvest - Real estate investment in Austria
6. Land Information New Zealand - Buying residential property to live in
7. The Agency - Property financing options in the Dominican Republic
8. USTaxHelp - What are the tax implications of owning foreign property or investments
9. Investopedia - The tax implications of opening a foreign bank account

Sources checked 07.23.2024