Figure Your Budget

Start any overseas property experience with a budget, remembering that the sales price you agree to for whatever you eventually decide to buy is only the start of it. To this amount, remember to add transaction costs (see Appendix A). The biggest cost of acquisition of a piece of property overseas is what's typically called a transfer fee (or tax) or stamp duty. This is a straightforward tax on real estate transactions, and most countries charge one. In Europe, transfer fees can be as much as 12.5 percent (Belgium) or as little as 0 percent (several countries), depending on the purchase price of the property. In places like Ireland and Croatia, where no property taxes are imposed (this is in the process of changing in Ireland, where a property tax is expected to come into effect in 2014), you can view the transfer tax as prepaying the property tax if that makes it easier to bear. No matter how you look at it, it's something to take seriously. In parts of the world that charge double-digit transfer taxes, flipping real estate can be expensive, too expensive to make sense as an investment strategy and so expensive that a would-be retiree- or lifestyle-buyer doesn't want to buy wrong. Reselling and buying again will eat into your nest egg.

A true transfer tax isn't recoverable. However, some countries, including Nicaragua, for example, charge the seller a tax at the time of closing that is sometimes referred to as a transfer tax but that is really a capital ...

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