International House Hacking?

Question

I've been listening to the 4-hr work week and it's got me thinking about travel and wondering if anyone here does international house hacking? Live in a foreign country for a year - buy a place to live in/fix up for 6 months to a year then hold as a rental or sell? I was curious about what problems you'd run into and locations that are ideally suited to this.

It's kind of a dream future planning - for empty nester years ;)

Richelle T. · Answer

Account Closed I'm looking at a multi-unit beach vacation rental. My parents are retiring back to our home country and are looking for a property that produces rental income in addition to serving as a primary home. This would be international house hacking at its best I think. Having citizenship in both countries helps but the US has better interest rate and terms over the developing world. American financing for international investment would be awesome.

Account Closed · Answer

@Ceril S.

I would make sure of the tax side of things. Its almost never a problem to invest in a country, but there are nearly always annoying taxes.

For example: I invested in a property in the US. I had a job in New York for a few years. Figured I'd buy the property, fix it up, live in it and when I was thinking of transferring out of the US, I'd sell it. As I said above, buying was not a problem. Fast forward three years and I was ready to sell and put the place on the market. The US has something called FIRPTA which is the "Foreign Investment in Real Property Tax Act" and I was required to pay a tax of 10% of the sale price of the home. I got a waiver based on the fact that I lived in the property as my primary residence. I had a CPA help me on this one. Another factor was that I had to wait 6 months for this waiver. For six months after closing my money was sitting in escrow with my attorney until I could produce the waiver letter. The law actually requires the buyers attorney to hold the money in escrow but we signed an agreement between buyer, seller and our respective lawyers that my lawyer could manage the escrow.

Just to give you an idea of what you may need to be aware of up front. If I had just bought the place as a rental property and hadn't lived in it, there would have been no way out of paying 10%, not just of my profits but of the total sale price of the home. Pretty much every country I've lived in has some sort of tax on foreigners owning property or land - its easy pickings and very profitable for government tax revenues.

Ceril S. · Answer

Account Closed Thanks for the input - I am still wrapping my mind around local laws and regs - I hope it still ended up being worth it for you in the long run.  I was wondering if something like that could be circumvented with partners who were citizens.

Account Closed · Answer

In the end, I didn't have to pay the tax and got my money. So I did make money on the deal. If your partner is a citizen of the country, I would imagine you'd get around a lot of the hoopla. Your partner, as a "local" would probably know something about "how things are done" in that country. That can be a tax, legal and practical help. The question is whether you trust your partner enough to put everything in his/her name and that you do not appear in any way to have a stake in the deal.

Account Closed · Answer

Another issue to thing about is financing. Another problem I encountered when purchasing a property in the US is that I didn't have employment record, W-2, social security number, credit score, etc. No American bank would even think of lending me money to buy a house. I had to get a social security number, I had to build up my credit over at least a year and in the end, I was able to get a mortgage through my employer's credit union that had dealt with foreigners like me before. I had to give them proof from my employer as to my employment status and the length of my contract, etc. But other than that, none of the regular banks would loan me money.

Something I've seen posted here somewhere - also be aware that a US bank will probably not loan you money to purchase property in another country. For example, how can they appraise the property? How can they trust that you won't just disappear and stop paying your mortgage? If you did stop paying your mortgage how could they foreclose on the property? The exceptions are banks that have partner institutions in other countries perhaps.

Of course, if you have oodles of cash lying around and can pay cash....

Richelle T. · Answer

Hi @Ceril S.Thanks for following up! I'm actually still negotiating on a property there. I ended up getting a small multifamily here in the states that has taken up the majority of my attention.

The seller had about a one year time horizon in January, so she's just now getting ready to talk turkey.

Ceril S. · Answer

@Richelle T. was curious if this went anywhere. Thinking about doing a winter/spring rehab on a vacation property then just using Airbnb for the season to help fund the family vacation home.

Richelle T. · Answer

Will do, best of luck to you as well!

Ceril S. · Answer

@Richelle T. I would love to hear how this goes! That does sound pretty ideal.  My ultimate dream is to travel/house hack along the way (eventually when the kids are done with college) Keep us posted.

International House Hacking?

Most Popular Reply