Why You Should Rent First—And Perhaps Forever
Dear Student,
By this point in the program, you should have narrowed your list of dream havens to one or two based on your lists of personal preferences, priorities, and agendas, as well as the residency visa, health insurance, and tax considerations we’ve walked through.
The next step is to begin the work to identify where exactly you might want to live. This is a two-part agenda. First, you need to narrow your focus within the place (not only to a city or a region, but to a particular neighborhood). Second you need to identify suitable digs. Both of these things are difficult to accomplish long distance. To be sure where exactly you want to live in any country or city, you need to show up and take a look around. We’ll get to that (the Showing Up) later in the program.
Likewise, finding an apartment or house that suits you is best done on the ground in person. However, you can (and should) carry out some prep work in advance of your scouting expedition (which, again, I’ll walk you through as part of later steps of this course).
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 (not the end of the world… but that’s a discussion for another day). 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. I’ve yet to meet a single expat 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. This is the first and primary reason why I strongly recommend renting first.
In both Ireland almost 20 years ago and then, seven years later, when we began spending time in 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. Ideal… on paper. In fact, though, 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 more than six 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. I believe that property, especially land, especially productive land, is one of the soundest investments you can make in the current global climate. On the other hand, property as a place to live, in retirement or otherwise, might best be rented rather than acquired. Certainly, again, you want to rent first. But renting rather than owning your dream home overseas also has long-term advantages.
Specifically:
#1: You’re mobile and flexible. No matter how much you enjoy your new location, maybe, sometime down the road, you’ll decide you’d like to find out what it’d be like to spend time someplace else. Maybe you’d like to move again… or perhaps eventually you decide you’d like to divide your time among two or three destinations each year—springtime in Paris, summer in Buenos Aires, and winter in the Tropics, for example. It’s easier than you might imagine to organize a wandering nomadic expat life along these lines… especially if you haven’t invested in a permanent residence in any one place.
#2: You avoid the carrying costs of home ownership. A residence of your own means maintenance and repair expense. It requires home-owner’s insurance and care-taking. 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 this expense. 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 places on my Top Havens list, financing isn’t an option. Nicaragua, Honduras, Uruguay, Ecuador… these are cash economies. No local bank is going to lend you, as a foreigner, money to buy a house. You can borrow locally to buy in some overseas jurisdictions, including Panama, for example, 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 United States, you can buy a life insurance policy that will cover you through age one hundred. 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 years old at the time you apply for financing, therefore, you’ll be offered, at best, a 10-year loan. Better than no loan at all, but perhaps not good enough to make the idea of borrowing sensible.
Until a few years ago, the option was to pull equity out of real estate assets “back home.” But that’s not so easy these days. Maybe your place back home isn’t worth what it was worth a few years ago. And maybe it’s not so easy right now for you to get a second mortgage.
So what? You don’t have to own your home overseas to enjoy the overseas life of your dreams. You only have to find it.
It’s important to note, though, that even renting abroad can come with complications you may not expect. We’ll pick up here tomorrow, reviewing the 14 important things to know before you sign a lease in a foreign country.
Kathleen Peddicord
Your New Life Overseas Coach
P.S. You’re off the homework hook with this lesson! No assignment today means you have a chance to catch up if you’ve fallen a little behind in your homework from recent days…
P.P.S. Every point I make here today is true and helps to make a persuasive argument for why it can be wiser to rent your new digs overseas long-term. Still, I have to admit, I prefer to own… and maybe you do, too. We’ll address questions and issues related to home ownership overseas later in the program.