It is not uncommon for Americans (or other foreigners) to buy property in Latin America, but those who are considering making such a purpose and have not done so before must take note of the various restrictions that apply in most countries. Many countries restrict the purchase of beach property and/or agricultural lands. Some countries forbid foreigners from owning land within a certain distance of national borders. Several countries require foreigners to pay additional fees, set up trusts and acquire a tax ID number for transactions, while a few countries have no restrictions at all. The point is to hire a local attorney to help with these and other issues before buying. For more on this continue reading the following article from Pathfinder.
A reader contacted us recently who was traveling in Argentina and Chile. He was enjoying his trip and wanted to spend more time in South America. He liked the look of some of the beach homes he’d seen in Chile and the historic city apartments in downtown Buenos Aires. He was now seriously considering buying a vacation home. But before he kicked off his property search, he had a question. Can foreigners buy property in Latin America?
The short answer is yes (with the obvious exception of Cuba). But there are restrictions in most countries. And those restrictions are something you need to pay close attention to when you’re buying a property overseas.
One restriction is that foreigners usually can’t buy or own land within a certain distance of national borders. In Panama, for example, foreigners can’t own land within 10 kilometers of the borders with Costa Rica or Colombia. The distance from the border varies from one country to another.
You’ll often see property advertised for sale to foreigners within border areas. The seller may even tell you that you can get round the restriction by holding the property in a corporation rather than in your personal name. That’s certainly possible – but it’s still illegal.
Then there’s buying beach land. Beaches are public across most of Latin America. Ownership of beach land within a certain distance of the high water mark is restricted or controlled, both for foreigners and locals. Mexico’s laws look the most restrictive at first. Here, foreign buyers purchasing a property within 50 kilometers of the coast need to set up a 50-year bank trust known as a fideicomiso to hold the property. But the fideicomisos provide a perfectly legal way to own beach property in Mexico. You can renew the trust, sell the property, use the property, and pass it to your heirs.
Another restriction relates to buying raw land or larger land parcels. We’ve seen the headlines about Brazil and Argentina restricting the purchase of large tracts of agricultural land. But it doesn’t just apply to buying thousands of acres of farm land. In some countries, you’ll need permission to purchase a plot that’s more than half an acre in size.
Some countries (such as Chile and Brazil) require you to get a local tax ID before you can own a property. That sounds complicated. But the process to get the tax ID is actually straightforward. It’s simply another step in the buying process.
Caribbean islands look gorgeous – but you need to pay close attention if you’re thinking of buying a home. In many Caribbean islands foreigners need to get official permission to purchase property of any kind. That usually carries a cost, and sometimes it’s quite steep (up to 22% of the purchase price, for example). Foreigners may also have to buy property of a minimum value. That means purchase prices on the higher end of the scale, and limited availability.
In some Caribbean islands, foreigners can’t buy undeveloped land. You also face restrictions after you buy. Buy a lot or home site, and you may need to build a house of a certain size, standard or build cost within a certain timeframe. Sometimes you can’t build more than one house, or convert a larger property into smaller units. You may find that you can’t rent your home out after purchasing it, either.
Yet in other Caribbean islands, like the Dominican Republic, foreigners face no restrictions when buying property.
This all serves to emphasize the #1 rule when buying abroad: Hire a good local attorney before you buy, and before any money changes hands. I can’t stress this enough. Before you get carried away and sign a sale contract or commit your life savings to that dreamy beach condo, get your attorney to check it out. And that means starting with the basics – can you buy that property as a foreigner?
If you can’t, or you face restrictions you can’t live with, move on. Keep looking. Don’t fall into the trap of getting emotionally attached to a home and trying to figure out a grey area where you think you’ll comply with local laws. Latin America’s a big place. You will find a place that’s right for you, where you won’t have to compromise.
This article was republished with permission from Pathfinder.