(NC)-Have you always wanted to own a vineyard in France? How about a villa in Italy? Look before you leap, say the pros.
Buying a home abroad is a complex process, says Chartered Accountant Dwayne Oberle, owner/broker, First Choice Financing in Waterloo.
"While it's similar to buying locally, it's also different - geography adds a new dimension. In addition to the usual considerations (the property's location, size and condition) you have other issues to consider because you are purchasing in a different country with different laws. And remember to investigate your health care coverage to ensure it is adequate."
Toronto-based Chartered Accountant David Trahair advises that you consult a tax and real estate professional before making any decisions.
"While owning a property in a foreign country may sound appealing, it usually involves more risk. Take the U.S., where house values have plunged recently. It's also expensive to have one home let alone two, so research the market thoroughly and avoid taking on more than you can afford to carry."
Budget and Costs
"Look at the big picture," Oberle advises, "in determining your budget and costs. Make sure you understand the country itself - does it have a stable economic and political environment? What are the true living costs? What additional fees are associated with owning a home? Does being a non-resident hinder you? Will your property taxes be higher? Are there extra costs to consider, such as government-imposed taxes? What about your moving and travel costs?"
Insurance and Maintenance
Trahair recommends that you consider the logistics of your investment, especially if your home will be a rental property. "Is it adequately insured? As a non-resident owner, insurance companies may decline to cover your home unless it is inspected regularly. What about the physical distance - how will you maintain your property from afar? Are there qualified trades people in the area to repair any damage? Finding quality renters who will respect your house is another issue you'll need to consider."
Tax
There is a pretty good chance that the foreign country will tax a non-resident on real estate capital gains located in that country. Foreign exchange is an issue too. If you are planning to live in Canada and rent your foreign property out, that rent could very likely be taxable in both countries. A similar situation could arise if you decide to sell that property while still a Canadian resident.
Financing
Oberle advises dealing with a local financial institution. "Property values will depend on the development stage of the country and local real estate markets, so know whom you're dealing with and determine whether you qualify for financing. As a non-resident, are there additional conditions to meet? Does the house meet environmental standards? Finally, always inspect the property yourself."
More information is available from a Chartered Accountant.
Credit: www.newscanada.com