Real Estate Abroad: Important Things You Should Know Before Buying

Buying real estate abroad is becoming an increasingly popular investment among Estonians, but the dream of a sunny home in Southern Europe or elsewhere in the world requires thorough preparation and often professional help to navigate local laws, regulations, and bureaucratic procedures. Kinnisvara24 CEO Urmas Uibomäe shares advice on where to start when buying real estate abroad.

Before purchasing foreign real estate, conduct a thorough analysis: choose a region that offers you an optimal environment in terms of climate, cultural compatibility, and convenient transport connections. Uibomäe recommends visiting the chosen country and region at least several times before making an investment.

"There are several ways to find suitable real estate, from hiring a local real estate agency to exploring various real estate portals. Since summer last year, Kinnisvara24 also offers, as the only domestic portal, the possibility to buy, sell, and rent real estate abroad owned by Estonian people," said Uibomäe. The real estate abroad environment offers the opportunity to communicate directly with a fellow countryman property owner whose background you can verify, who knows the peculiarities of the local market and legislation, and with whom it is easier to conclude a transaction in your native language. Today there are over 200 listings from 20 countries.

Regulations and procedures differ in each country

According to Uibomäe, when buying real estate abroad, you must take into account local bureaucracy, laws, and tax specifics, with all affairs often conducted in the local language. Even within the European Union alone, taxes and requirements related to real estate vary greatly from country to country, not to mention the rest of the world.

For example, in the popular tourist destination of Bali, foreigners cannot have full ownership rights to real estate but can enter into a 25-30-year lease. In Thailand, on the other hand, foreigners can buy real estate starting from the second floor, but they are not allowed to own land or ground floor properties. In Dubai, on the other hand, every country's citizen can freely buy, sell, rent, and inherit real estate.

„To simplify the process and avoid problems, it is worth hiring a real estate agent and local lawyer to conduct the transaction," recommended Uibomäe. In Dubai, for example, you cannot buy new developments without a real estate agent, as developers do not want to deal with individual buyers themselves. According to Uibomäe, in many popular areas you can find Estonian real estate agents, in Dubai, Spain, Thailand, and Bali. Many of them also offer apartments and houses for sale in the Kinnisvara24 environment.

Engaging a professional legal advisor is also indispensable in most countries. The lawyer conducts a thorough legal inspection of the property's obligations and debts. Otherwise, the previous owner's old debts come with the real estate purchase and will be collected from you.

The lawyer also prepares all necessary documents before signing the purchase and sale agreement. For example, in Spain, original documents are required when concluding a purchase and sale agreement. If even one document is missing, the notary refuses to execute the transaction. In Spain, a lawyer can also arrange a foreign person's identification code (NIE code), a bank account, and perform all transaction-related actions on your behalf using a power of attorney. After concluding the transaction, the lawyer also executes new contracts with water, electricity, and internet providers and registers you with the local municipality. Attorney fees in Spain are usually 1% of the transaction value.

You should also consider that tax systems also differ significantly from country to country. In Spain, a real estate tax of 10-13% is added to the purchase price, while Dubai offers tax exemption on real estate transactions. The property price typically includes a 4-percent land tax and a fee for document preparation. In Dubai, the buyer must open a bank account or use a deposit account, the service fee for which ranges from 1-2 percent of the deposited amount.

Getting a loan to buy real estate abroad

There are two options for financing real estate purchases abroad – either take a loan from a bank in the country of residence or use an Estonian bank for this. In the first case, you should use the services of a loan broker who collects offers from all local banks and helps compile the necessary documents.

Most Estonian banks also offer loans for buying real estate abroad. According to Karin Ossipova, Head of Coop Bank's Home Loan Business Line, the rules for buying real estate abroad are exactly the same as for any other loan: a private person borrower for a real estate loan must have sufficient creditworthiness to service the loan and must follow responsible lending rules. The collateral for the loan must be located in Estonia.

"When buying real estate abroad with a loan, you should consider that the interest margin on the loan may be higher than it would be, for example, for real estate purchased in Estonia. You should also consider that if, for example, in Estonia you can take out a home loan up to a maximum of 85% of the market value of the collateral (up to 95% when using EIS housing loan guarantee), then for real estate purchased abroad, this rate is lower, up to 80%. The exact loan rate always depends on the condition and liquidity of the collateral itself," explained Ossipova.

You can get acquainted with the real estate abroad website here: https://kinnisvara24.ee/kinnisvara-valismaal