Expats who can only criticize the country in which they choose to live are like a sailor who demands the wind blows only according to his skill.
Should You Rent or Buy a House Abroad?
Every teacher has an “aha” moment that changes the way they look at their topic.
One of my “aha” moments came when I read Barry Golson’s excellent book- Retirement without Borders: How to Retire Abroad in Mexico, France, Italy, Spain, Costa Rica, Panama and Other Sunny Foreign Places (and the Secret to Making it Happen without Stress). In the book, Golson recommends that anyone thinking about retiring overseas rent rather than buy a property.
Until I read this book, I always thought that I had to gear my classes toward students who wanted to buy a house and set up a whole new life like the one they left behind in the US—complete with a car, picket fence, and garage. Most of the books on expat life are written toward this audience and many students have asked me questions that indicated that this was their desire.
For me, Golson’s advice was a simple yet radical departure from conventional wisdom. It led me to explore other ways that my students could make the transition easy for themselves (hence the genesis of this chapter).
Until I read Golson’s advice, I always felt a little odd every time I taught this class. I never had a desire to buy a property overseas, but I always knew that I would live overseas for much of my life. Whenever, I’d talk about the process of dealing with all the logistics outlined in Chapter Seven, I could not avoid the feeling that my students would simply replace one rat race with a new one consisting of daily barrages of paperwork, inefficient bureaucracies, and a struggle to get anything done.
The simple fact is that dealing with the exigencies of life overseas is daunting, requires a lot of patience, and a strong stomach for ambiguity. Getting and keeping visas; buying, renting, (and particularly building) a home; keeping up with foreign currency fluctuations; setting up bank accounts; paying bills; getting mail; making a living; importing pets; moving furniture, etc. can easily become its own rat race.
My experiences living abroad have, however, always been really easy. (In fact, I’d say I find trying to live the “American Dream” to be the most stressful part of my life”). How do I keep my life simple? The answer –I avoid most of the logistical issues by renting rooms from people overseas (including food and sometimes even laundry) and living as a perpetual tourist (I’ll talk about this later in this chapter) rather than a full-time expat overseas.
Golson’s advice made me go over some of the experiences I’ve heard from students/expats. I realized that more students than I thought previously were interested in living abroad part time, renting rather than buying, and moving abroad to simplify their lives.
His advice also made me reflect on the experiences of students and expats that I’ve interviewed that have lived abroad. The people who seem to have had the most difficult experiences tried to create an American style life (including buying, or worse, building a large home) in a place off-the-beaten path while those who seemed the happiest with their experiences did not choose to recreate their lives abroad like the ones they left behind in the US.
I acknowledge that not everyone can, or should, simplify their lives to make their transition abroad easier. Many expats want to move abroad for reasons that have nothing to do with creating a simpler life – i.e. making money off real estate investments, living a lifestyle they could not afford in the US, etc. Some people even enjoy the challenge of dealing with these rat-race-like daily issues. I don’t want to discourage these people, merely to make sure that they have considered the alternatives
I do, however, believe that too many people just replicate their lives in the US because they haven’t really given much thought to what they want from their life abroad. CHANGE TO REFLECT MY FEELING ABOUT MERIDA- LIKE THE CITY AND LIFESTYLE- BUT AM NOT SURE THAT RETIRING THERE IS FOR ME. BUT WANT TO KEEP A HOME BASE, USE IT FOR EARNING EXTRA $/EXCHANGING HOMESI like living abroad, for example, because I need to be constantly learning in order to feel alive. Living abroad always enables me to learn about myself, find out how other cultures survive and thrive, and discover the mysteries and beauties of past civilizations. I don’t care about living extravagantly. I merely want to keep my brain occupied. For that reason, I’ve decided to keep my life overseas very simple and to live with locals (who serve as my teacher and informants) as much as possible.
Thinking back, I realize one of the best things about living abroad is that it can be as stressful or as stress free as you want it to be. It is just a matter of setting up your new life in the right way for you.
Barry Golson’s advice comes from his experience buying a house in Sayulita, a small but upcoming expat haven north of Puerto Vallarta, Mexico. (Note: Golson’s experiences in building a house are detailed in his book: Gringos in Paradise. Interestingly, while he did suffer a fair amount of angst building his home in Sayulita, I was struck by his general good luck with builders. I have heard many worse horror stories than his!)
While building a house is much more difficult than buying a home (particularly if it doesn’t need any repairs), buying a home does involve a lot more logistical issues than just slapping down enough money to buy a home. It also induces a lot of anxiety among a lot of people because it ties them into a society that they don’t necessarily understand or feel comfortable in.
Golson’s book provides an excellent checklist of the benefits of renting vs. the pitfall of buying a home. Here is what he says (and my comments) are some of the reasons renting is better than buying:
- As a renter, you no longer have to do all that research. (My comments: Most potential home purchasers don’t even realize that a real estate ad may not be talking about what you think it is. In most of the world, the square footage (usually measured in meters. There are a little over ten square meters in a square foot) includes anything under a roof including balconies, patios, and garages. In much of Europe and parts of South America an unfurnished home could mean that there are no cabinets, countertops, floor coverings, and light fixtures. (A furnished place, on the other hand, will be what we consider “unfurnished”.) These same issues can arise between landlords and tenants as well. Also keep in mind, as discussed in Chapter Seven, that you may have to do more research than you would in the US to find a place to buy or rent in the first place.)
- You don’t have to figure out if the price is right (My comments: you may at least initially, however, be overcharged for rent. See chapter 7 for details.)
- You don’t have to worry if real estate goes bust. (My comments: This a great reason to be a renter since as we’ve learned over the last couple of years, even the most “secure” seeming markets can go bust.)
- You don’t have to distrust everyone (My comments: Almost everyone who builds or buys a house overseas at some point thinks that people are ripping them off. Renters usually don’t have these worries, though they may have to be careful in how they deal with their landlord.)
- You don’t have to take a crash course in titles, deeds, permits, taxes – the whole twisty, unknowable, foreign, bureaucratic nine yards. (My comments: Basically true, though you should be aware of rental law because most countries allow landlords to kick out tenants at the end of their lease in order to move their family into an apartment).
- You won’t be responsible for floods, hurricanes, robbery, raging bulldozers, toppling trees, new boilers, and the rest. In fact, you won’t care about any of it, other than getting out of the way of the flood and the hurricane (My comments: you may have to assume the loss, however, of your own belongings – and improvements).
- You won’t have to worry about not having the right documents, leading to a knock on the door. (My comments: I’m not sure what this means. I think Golson is referring to the fear that you won’t have the right documents to live in your home or reside in the country. It is true that as a renter you will lose a lot less if you get into trouble with documents.)
- You don’t have to worry about property taxes. And owner’s insurance. (My comment: In many EMERGING countries property taxes are minimal, though it can be hard to find out where to pay the bills. In addition, most countries require you to spend more than in the US on transfer taxes, mortgage origination fees, and real estate commissions, etc.)
- You won’t have to learn who are the best builders, masons, painters, and carpenters in town –that’s mostly up to your landlord (My comments: Realize, however, that you may pay for repairs as a renter, see chapter 7).
- No big deal if you don’t speak the language. (My comments: If you are going to live in a “local place” you should learn the language rather or not you are a renter or homeowner. However, you will have to learn a lot of specialized language as a homeowner— i.e. plumbing and electrical terms—that you can avoid as a renter.)
- You don’t have to figure out how mortgages work. (My comment: that is if you can find a mortgage at all, see chapter 7 for details).
- In many countries, if a dispute arises, the law favors the renter. (My comment: in addition, more places overseas also have rent control than in the US).
- You pay far less in fees to lawyers, brokers, accountants, local government.
- You don’t – and this is a big one- put your savings at risk. No big down-payment or all-cash purchase. You keep your principal. (My comments: That said: (1) you can buy a cheap place and minimize the risk; and (2) in some places in the world, so few people can afford to buy a home that the rents are high and cost of real estate is low)
(Keeping your principal) has these effects:
- The interest from the principal will boost your retirement income.
- You can have a higher standard of living (My comment: keep in mind, however, that over time, your rent will go up and may eat into the principal and lower your standard of living)
- You can go out more
- You can travel more
- You can see your friends and family more often
- You don’t have to worry about currency fluctuations. You keep most of your principal in a bank in the US. (My comment: This is a particularly good reason to keep your principal when, in times like now, the dollar is strong).
- You’ve burned no bridges; all you will have is a lease.
- You don’t have to worry that it will be harder to sell than it was to buy. (My comments: Keep in mind that if you are living in an expat haven, the ease or difficulty of selling a house will reflect the US market as well as the local one).
- You can-and this is a big one-move on.
(Moving on) will have these effects:
- You’ll have the time and freedom to see where the best rentals are. (My comments:1) I would recommend that you try to avoid keeping things in an expensive storage locker in the US t until you find a new home abroad. Keeping things in storage has a tendency to make people move faster than they should and 2) if you are going to buy a place off-the-beaten-path you should be prepared to spend a lot of time looking for a home, as long as a year, to buy. Almost all of the good deals will be found through word-of-mouth and will take a while to buy because most people- who have lived in the same place for their entire life- are not in a hurry to sell their home).
- You can find out if the living is easier (somewhere else)
- You’re not stuck forever with neighbors from hell. (My comment: you also don’t have to be that nervous about future developments in your neighborhood).
(Renting) will let you look at retirement (living) abroad in a whole new way:
- You don’t have the existential angst of thinking “I’m stuck! I’ve made the mistake of my life.”
- You’re not stuck anywhere. You can go back home.
- You can retire somewhere else altogether on short notice – you still have all that principal, no sale necessary.
- You can ignore all the advice intended to get you through the rigors of a permanent move
Against all that the thrills of ownership
- Possible appreciation. Or not. (My comments: The majority of people I’ve met who bought a home overseas made a fair amount of money. That said, however, you should be aware that capital gains overseas, even in countries with low property taxes, can be high).
- Rent can’t be recouped
- Possible rent increases (long-term leases are the way to go).
- Possible unavailability of cheap rentals
- Bragging rights