How to Pay for a Property Abroad

Since I’ve completed my house in Bali and shared how amazing it is to have a home abroad, I’ve been glad to see the interest sparked in other wanderlusters in the potential of not just traveling but also moving abroad.

Without fail though, one question continually comes up.

Can I get a mortgage for a property abroad? If not, then how can you pay for a home abroad?

The answer to the first question is mostly likely “No, you cannot get a mortgage for a home abroad.” Unless you are an established permanent resident with an employment history in the country and current employment in the country, you likely will not be able to get a loan from lenders in that country.

As for your home country, lenders in your home country likely will not grant you a mortgage for real estate in a foreign country. With the collateral for the foreign property being in a different country, the situation ultimately proves to be too (potentially) messy.

So, then on to the second part of the question.

Are there other ways to pay for a home abroad besides a mortgage?

Yes, there are four other very viable options for financing real estate abroad. Those options are

1. Paying cash
2. A home equity line of credit
3. Purchase elements of the property, piece by piece, over time (land, building, furnishing, etc.)
4. Leveraging an existing business to finance the property
5. Bonus option: Shop cheap with Akiyas, €1 houses, and alternative markets…then refurbish over time

We’ll get into these options later, but it’s worth pointing at that these four options highlight three recurring themes in a good plan to “escape” and move abroad.

1. Buying a home in your home country is (potentially) a good investment, store of value, and tool to finance living abroad.
2. If you want to travel for an extended period (9+ months) or move abroad permanently, plan for a preparation period of 2 to 5 years before the move. This is more than enough time to get you to a comfortable, stable place, and set yourself up for a more carefree adventure than not.
3. For solopreneurs and freelancers, there is immense value and several tangential benefits (tax, social, financial) for formalizing your business as a LLC or S-Corp, so discuss the option with an accountant and lawyer.

Now, let’s get into the details of your options for financing the purchasing of a home abroad or building a property abroad.

The four most practical ways to finance the purchase of a home abroad

Though a mortgage is generally out of the question for foreigners hoping to purchase property in another country, with good planning there are several other options for paying for a home abroad. Here are the best four ways to purchase that home in paradise.

1. Pay Cash

A feasible option, given the lower real estate prices abroad and lower cost of living

While “pay cash” may not be the answer you wanted to hear, paying cash for real estate in one of the many “high value” locations I recommend – Bali, Thailand, the Philippines, Argentina, Colombia, and more – is much more of a possibility given the generally low prices for good real estate.

While the median home price in the US right now is $420,321 according to real estate aggregator Redfin, $200,000 will buy a rooftop penthouse in Buenos Aires, and $100,000 will buy a comfy condo in this vibrant metropolis.

In Bali, $100,000 will buy a nice cozy villa with a pool 5 to 15 minutes from the beach

In Phuket, Thailand, $20,000 will buy you a cozy condo.

I share these prices to make the point that a cash purchase is possible due to the affordability compared to North American and European markets.

Additionally, the brand new $200,000 penthouse in Buenos Aires isn’t comparable to the median home in the US. It is a luxury home in a global center more akin to New York, Paris, Madrid, or San Francisco than America, and you’ll be fooled if you can afford anything beyond rent for a year and a half for $200,000 in New York, Paris, Madrid, or San Francisco.

Ultimately, if planned 5 years out this means saving $20,000 per year, or $1666 per month each month, and then never paying rent again. Not a bad deal, right?

However, what if you’re already paying rent and that doesn’t leave much to save?

Then, converting your rent into a mortgage as an alternative to saving, and using that to finance your new home is a perfect option and our next option.

2. Use a home equity line of credit to pay for a home abroad or new build

If you’ve purchased a home in the US but want to go abroad, you don’t need to sell it off. And, as long as your home is rentable, you are far better off keeping it.

Homeowners can use a “Home Equity Loan” to borrow money from the bank, using their home’s equity as the collateral and basis for the loan. The resulting loan is usually yours to do with as you see fit and could potentially be used to finance the purchase of that home abroad (be sure to check the fine print, consult an accountant, and consult a financial planner). Then you have effectively financed the purchase of a home abroad.

After working out the numbers, rent your existing home out long-term to cover the Home Equity Loan, and you’re in!

Keep in mind that generally, you need at least 20% equity in your home to be able to tap into a home equity loan you will only be able to borrow up to 80% of your equity, but the payment period of 5 to 30 years will make it very easy to pay off the loan over time.

Though most people think they have to sell their homes in the US, thanks to the Home Equity Loan and 1031 exchange option, keeping your home now may be more of an advantage than a burden.

However, if you don’t have a home to borrow against, taking it slow and building your dream home on your own piece by piece is a great option as well.

3. Purchase each element of the property (land, building, landscaping, furniture), piece by piece, over time, and manage the process in phases

Many people get caught up with the idea of a whole house and feel like they have to pay the whole cost at once. This just isn’t so.

As long as you’re not buying in a crowded metropolis, like Kuala Lumpur, Tokyo, Buenos Aires, or Bangkok where everything is built already and no unused land is available for sale, then usually the best areas are out of the way villages with plenty of vacant land. These vacant plots in developing countries have amazing pluses, like being near the ocean, mountains, or national parks, and likely being within a 15-minute drive of a developed area.

By buying land with the intention of building your own home, you have the flexibility to move through phases of the process at whatever pace you’d like. Additionally, building on your own allows you to create your dream home and is generally much cheaper than a comparable existing construction.

But let’s take a look at the numbers of my case to convince you that the “piece by piece” approach may be more affordable than you think.

My house in Bali was actually two houses – one for me and my little hobbies, and a separate guest house for visitors, so half the land and one house would have been just fine.

For that one house

Land was $15,000

Construction was $50,000

Furnishing was $10,000

Each of these elements could have been completed in their own time.

I could have purchased the land for $15,000 and waited indefinitely. Though I ultimately built at the 2 year mark, I could have always sold and recouped my money. We are now at the 3 year mark and that same piece of land is valued at ~$40,000, so I could have sold the land with a $25,000 profit to finance purchasing a property elsewhere if I’d decided to leave Bali.

Then, let’s fast forward to the building process, which cost $50,000.

I highly recommend not starting construction if you can’t pay for the full build at the start of the build. I’ve watched hundreds of buildings on Bali get to the 50% point and run out of money and watched the half-built structure degrade in the sun and rain of Bali, a wasted investment. You would instead be better off selling the land, saving the money, and returning when you have enough money for the build.

But the point is, you don’t have to pay for this at inception.

Last, you need to furnish the place. And I was surprised that in paradise, good furnishings don’t come cheap.

However, you don’t have to furnish immediately.

If you’re short on cash, you can always lease out your home as an unfurnished rental, and save the proceeds to pay for your furniture at a later date.

Ultimately, if you don’t have a ton of cash now, it is still very possible to build abroad. Simply save and tackle the process in logical phases.

Note that if you don’t plan on building within 3 years, avoid countries that lease land instead of sell it (Indonesia, Thailand, the Philippines, and Sri Lanka) and opt for places where you can buy land and own it outright (Europe, Latin America). This allows you to wait as long as you need to for the build, without taking a financial hit.

4. Leveraging an existing business to finance the property

One of the many reasons I urge nomads who are freelancers and solopreneurs to formalize their businesses is due to the credibility it lends and the financial opportunity it lends, which could be a backdoor to financing your property abroad.

If you have an LLC or S-Corp with a history of operations, income, and profitability, you will be allowed to apply for loans and credit. These loans could be from private banks, the SBA, or even peer-to-peer lending. Read the fine print on these loan opportunities because though loans may allow for the purchase of real estate, like the SBA 7a loan, it may only be allowed for building facilities for the business to operate from. But, what if your business was…yoga retreats? Or co-working and co-living spaces? Or a hotel? There is a lot of fine print to read through, and you should consult an accountant and a lawyer, but there is money available, and if you have a good business use that accompanies your home abroad, your business and its reputability may be the key to financing that dream.

Additionally, there are constructs in which your business could offer you a loan, depending on the country your from, and this loan could confer some tax benefits and otherwise.

In any case, for solopreneurs and freelancers, I highly recommend formalizing your business to support your own “escape.”

5. Bonus option: Shop cheap with Akiyas, €1 house, and alternative markets…then refurbish over time

One good shortcut for paying for something is to look at a comparable option that is more affordable.

With shrinking populations and shifting population centers in Europe, the last 10 years have seen a rise in cheap properties for sale as a social benefit, particularly Akiyas, in Japan, and €1 houses, in Europe.

Most of these homes (at least 50% of the ones I’ve seen listed) have been abandoned for some time and do require work, but, there is no pressure to refurbish the property immediately. This flexibility means you can not only buy a cheap property, but you can get it to complete at your own pace.

For inspiration, I highly recommend following a handful of Instagram accounts that entertainingly share listings and the possibilities of going the Akiya and €1 house route. But, what exactly are these?

Akiyas: Cheap houses for sale in Japan, to combat the effects of Japan’s population crisis

As the population of Japan continues to shrink, there are fewer people to occupy the many houses in the archipelago. As owners grow tired of paying taxes for or maintaining the homes, they become an eyesore and an inconvenience, to the point that Japanese society has decided to put these so named “Akiyas” on sale.

Akiyas come with a fair bit of leg work, as well as research, renovation, and the hurdle of navigating everything in the Japanese language and getting a visa. BUT, many akiyas are available for $50,000 or less, with a significant chunk being under $35,000 and free.

To see what Japan’s Akiya market has to offer, I highly recommend following these Instagram accounts.

https://www.instagram.com/cheaphousesjapan

https://www.instagram.com/akiyamart

I will be visiting Japan later this year to visit Akiyas and size up the opportunity, and I’ll look forward to reporting back to you with good news.

€1 Houses

Though the idea of the Spanish, Italian, or Greek countryside appeals heavily to me and many other nomads, it doesn’t appeal to many Spanish, Italian, and Greek youth. As a result, a huge swath of houses in these countries and beyond in Europe have created such a worry that they are now being sold for €1.

Keep in mind that these homes will be in disrepair and may require $100,000+ in renovations, however, the product will be something that would be impossible to buy with $100,000 elsewhere. Additionally, you will be free to invest in the improvement of your home at your own pace over a few years, within the guidelines of the local government.

But, if you have a little free cash, it may be worth investing a slight bit more now. For the same price as an Akiya ($15,000 to $50,000) there are plenty of turn key ready, charming homes in Spain, Italy, Greece, Portugal, Norway, Sweden, France, and all over the rest of Europe.

In any case, if the idea of a $50,000 home in the European countryside appeals to you, check out these Instagram accounts for inspiration:

https://www.instagram.com/cheappropertyeu

https://www.instagram.com/cheaphouseseu

Next year, I will be traveling Europe and in that time looking for a €1 house to take on as a project and size up this opportunity as well.

What next?

Start narrowing down where you might like to live by checking out this list of the 47 cheapest cities in the world to live.