Your Little Piece of Heaven--or Hell Whether your investment in a home overseas is rewarding or an unbearable albatross depends on how much advance work you do.
By Michael V. Copeland

(Business 2.0) – It's every surfer's dream to own a stretch of beach in front of some great surfing spot. Matt Sumner found his while cruising Nicaragua's southern Pacific coast. Sumner wants to keep the exact location of that special break a secret--he is, after all, a surfer. But he says it overlooks a sandy beach and peeling A-frame waves. And it could be his for $13,500.

Back home in the cold fog of San Francisco, Sumner, a photographer, decided he had to have it. "I fell in love with the place," he says. "All everyone kept talking about that day on the boat was buying land before it was all gone." Sumner wired the money for the property to the skipper of the boat, who doubles as a surf tour guide and Nicaraguan real estate agent. "It's dicey buying land in Nicaragua, but I figured the guy wasn't going to rip me off," Sumner says. More than two years later, though, Sumner still didn't have the title to his piece of beach, and he wondered if he would ever see his money again.

In the postvacation glow, who hasn't dreamed about owning a piece of a charming village in Provence or that mountain retreat in Bali? But buying property abroad--whether it's an empty lot on the Panamanian coast or a 17th-century Tuscan villa--isn't for the faint of heart. Nonetheless, if you aren't averse to risk or some serious legwork, you can invest in your own international hideaway as a second home or an income-generating rental. Here's what you need to do to pull it off.

Pick your spot.

That sounds obvious, but you have to know whether you really want to return to the same place year after year, especially if it's at the end of a 10-hour flight and three hours of moon-crater road. "I'd live six months in a place if I could, or go back four or five times at a minimum," recommends Roger Gallo, a Panama resident and the founder of, an international real estate website. Learn the language and make sure you're comfortable with the culture. Remember, today's weak dollar buys less overseas, so you may fare better in Argentina, Brazil, Central America, and the "wild East" emerging markets of Croatia, Hungary, and Romania. There are also values in recession-racked nations like Indonesia and Singapore.

Analyze the market.

Knowing which way real estate prices are headed is nearly impossible. It's even tougher when your money will be invested thousands of miles away. Think about who will buy your property a decade from now. Is the country producing a growing middle class full of potential buyers? Then think about the current income stream. Are you buying into a fading trend? You'll know you are if nearby homes are going unrented. In a popular tourist spot, you should expect to rent your property 25 weeks of the year at healthy enough rates to net a 5 percent annual return. But even places where rents are rock-bottom can be good deals. On the Croatian coast, where a four-bedroom villa on the beach goes for $1,500 a week in the high season (compared with $4,800 for a Tuscan villa of similar size), you'll probably make your money on the rapid appreciation of the property. That's happened on the southwest coast of Turkey, where vacation-home prices have surged 15 percent annually for the past couple of years.

Get a lawyer.

The restrictions and requirements for foreigners owning property vary from country to country. Gringos can't own Mexican real estate within 60 miles of the border and 30 miles of the coast unless a bank holds the title in trust. The Indonesian government makes it easier for foreigners to lease land in Bali for 30 years than to buy it outright. If the title of French property is held by an offshore company, taxes are 3 percent of the property value, but taxes are only 1 percent if you hold the title in your own name (but then you are subject to a Napoleonic inheritance law that gives preference to your children rather than your spouse). In short, get a lawyer in the country in which you want to buy, preferably in the specific locale. Make sure he speaks a language you are unquestionably fluent in--like English--so you'll understand all the subtleties.

Expect to shell out more.

Closing costs, for instance, are typically much higher than in the United States, where they average about 3 percent. They can go as high as 11 percent in Italy and 20 percent in Bermuda (though there are other tax incentives there). If you're going to rent out your house, consider the cost of having a property manager and staff, and what that will eat up from your proceeds. And there are other fees you may not anticipate. In Costa Rica, for example, you'll need to hire someone to keep out squatters, who have the right to occupy a portion of your land unless they are evicted within three months.

Know how to bring your dollars home.

Before you put money in, find out how you can get it out. Many developing countries have currency controls that limit repatriation of rent payments or sale proceeds. Worse, some governments are prone to devaluations that quickly erode the value of bank accounts full of rupiah or pesos. That's one reason Panama is attractive: Transactions are conducted in U.S. dollars. In the Bahamas, another favorite, after you register your investment with the central bank, you're allowed to take out that amount, plus any appreciation, in U.S. dollars.

Sumner, the surfer, didn't get far enough to worry about the endgame. He never got his property. "I felt like I had chased a dream like a fool," he says. To his relief, his money was eventually returned, minus only a $20 service fee. Did he learn anything from the experience? It's hard to know. He's too busy right now looking for his little piece of paradise.

Michael V. Copeland ( is a senior writer at Business 2.0.