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One of the first and most important decisions to address as you consider a plan for retiring overseas is where, exactly, you might want to live. This is a two-part agenda. First, you need to narrow your focus within the country you’re considering, not only to a city or a region, but to a particular neighborhood. Second, you need to identify suitable digs.
The fundamental question related to finding a place to lay your head has to do with renting versus buying. Which is better? Almost without exception, I recommend that you rent first, at least during your first six months living in a new place. Maybe your chosen haven won't turn out to be all you imagined it to be. Or maybe you'll find that the country suits you fine, but the neighborhood where you've settled for your trial living experience doesn't. In nearly 30 years covering this beat, I've yet to meet a single expat retiree who regrets having made the move overseas. However, I have known a number who weren't happy with their initial location choices. That's no problem as long as you haven't invested in the purchase of a home.
In both Ireland and Paris, we rented for nearly a year before buying, and in both cases we were glad we did. In Ireland, at first we thought that we wanted to be in Waterford City center. We rented a small house on the river within walking distance of our daughter's school, which was ideal on paper. But we realized quickly that Waterford City living wasn't for us, and we began looking for a place in the country. When our lease in town ran out, we were ready to take up more permanent residence in the old Georgian farmhouse we'd found 20 minutes outside the city, with fields of sheep and cows and low stone walls all around. LaHardan House, as the place is known, was our comfortable and cozy Irish country home for seven years.
Likewise, in Paris, we'd always thought we wanted to settle in the 5th arrondissement, in the heart of the city. A few months in a rental apartment across the Seine from Notre Dame cured us of that idea. We realized that, in fact, we wanted something a little quieter and more removed from the tourist throngs. We found and purchased an early 18th-century apartment on a narrow street in the 7th arrondissement that few tourists ever find. We were tucked away from the beaten path, yet only one block back from the river and five minutes' walk from the Louvre.
In some cases, you may want not only to rent first, but to rent, period. Renting rather than owning your retirement dream home overseas has not only short-, but also long-term advantages:
1. You're mobile and flexible. No matter how much you enjoy your new location, maybe sometime down the road you'll decide you would like to find out what it would be like to spend time someplace else. Maybe you'd like to move again or perhaps divide your time among two or three destinations each year, such as springtime in Paris, summer in Buenos Aires, and winter in the Tropics. It's easier than you might imagine to organize a wandering retirement along these lines, especially if you haven't invested in a permanent residence in any one place.
2. You avoid the carrying costs of homeownership. A residence of your own means maintenance and repair expenses. It requires homeowner's insurance and caretaking. In some places, it obliges you to pay property tax. And, if you buy with financing, it necessitates, in much of the world, an investment in life insurance. Renting, you have none of these expenses. Only rent.
3. Investing in a home in a foreign country means you need a will in that country. Otherwise, what happens to the asset when you die?
4. If you buy a home, you've got to furnish it. Investing in your own place means investing, as well, in tables and chairs, beds and dressers, throw rugs and flowerpots. Rent furnished, and you simply show up and settle in.
In addition, here's another reason why you might want to rent rather than buy: You may have no choice. In some of the world’s best places to think about retiring, financing isn't an option. Nicaragua, Honduras, Uruguay and Ecuador, for example, are cash economies. No local bank is going to lend you, a foreigner, money to buy a house. You can borrow locally to buy in some overseas jurisdictions, including Panama and most of Europe, but to qualify for a local mortgage you'll be required to obtain local life insurance for the entire term of the loan. In the U.S., you can buy a life insurance policy that will cover you through age 100. That's not true anywhere else. Typically, in the rest of the world, you won't be able to obtain a policy to cover you beyond age 70 or 75. If you're 65 at the time you apply for financing, you'll be offered, at best, a 10-year loan. It’s better than no loan at all, but perhaps not good enough to make the idea of borrowing sensible.
But you don't have to own your home overseas to enjoy the retirement of your dreams. You only have to find it.
How, exactly, do you do that? You can research long distance with the help of the Internet, of course, but that can be a risky way to identify a place to live in another country. Committing to a place sight-unseen based on how it’s represented online can lead to unpleasant and maybe unacceptable surprises when you finally see the accommodation in person. To be sure what you’re getting is what you want and get the best deal, the best approach to finding a rental in a new place is simply to make a reservation at a hotel in the area where you think you'd like to live. In advance of your arrival, gather as much information as possible, then show up, check in, and hit the streets. Look for "for rent" signs. Check notice boards in grocery stores and restaurants. Ask everyone you meet if he or she knows of an available rental. Check bulletin boards in grocery stores, cafes, English-language churches, and laundromats. Read the local papers and chat with anyone who might have a lead. In small towns, visit the local tourist office.
Keep an open mind, but, at the same time, remember what's most important to you. In a tropical climate, you should look for a place with an outdoor sitting area. In a big city, try to locate yourself near to public transportation and grocery shopping. In a small town, you probably want to be in the center of town, living like the middle-class locals.
When a deposit is required, amortize it over the number of months you intend to rent. That will give you what could be the real cost of the place if your deposit isn't returned. This isn't normally a problem, but, remember, in a developing country, you have no easy resource for help getting your security deposit returned if the landlord decides he'd rather keep it in the end.
If you don’t speak the local language, you may want to engage the help of a rental agent. In most markets, the landlord pays the fee, though, in some, it's split between the owner and the renter.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter. Her book, "How To Retire Overseas—Everything You Need to Know to Live Well Abroad for Less," was recently released by Penguin Books.