Navigating Foreign Real Estate Regulations for US Expats & Investors
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Contents
- A New Global Landscape for Foreign Buyers
- Spain: A Struggle with Housing Prices
- Portugal: Goodbye to Real Estate Visas
- United States: Subtle Signals at Home
- Why the Global Shift?
- What You Can – and Can’t – Buy Abroad
- Ownership Restrictions: Know the Rules, Find the Path
- Residency by Investment: Still a Valuable Option
- Geographic Limits: Some Areas Are Off-Limits – But Most Are Not
- Strategic Markets for US Buyers
- Planning Your Investment
- Do Your Homework: Smart Due Diligence Pays Off
- Common Mistakes and How to Avoid Them
- Financing Foreign Real Estate: What to Expect
- US Tax Rules for Foreign Property: What You Need to Know
- A Smart Step Toward Global Wealth
A villa in Portugal. A condo in Panama. Farmland in Uruguay. It sounds simple – buy some property, enjoy the upside, maybe build a Plan B.
While the US has been famously open to foreign real estate investors – more than $1.2 trillion has flowed in since 2009 – Americans often face a few more foreign real estate regulations when buying abroad.
None of this is insurmountable, but it’s something you need to plan around.
But some countries limit what foreigners can own. Others require local residency or specific legal structures. And for US citizens, there’s the added layer of making sure the structure works under both local law and US tax rules.
Still, when done right, offshore property can be a powerful tool – not just for investment growth, but for estate planning, asset protection, and long-term global flexibility.
In this article, we’ll show you how to navigate foreign ownership rules the smart way and why – with the right planning – it’s worth the effort.
And when you’re ready to make your move or want expert eyes on your plan, this is exactly what we do. If you have any questions or need guidance, feel free to get in touch – we’re here to help.
A New Global Landscape for Foreign Buyers
The rules around buying overseas property are constantly changing. What worked five years ago might not work today. Some opportunities that attracted lots of buyers previously no longer exist.
Here’s a sample of some of the most notable ones that have affected our clients looking to buy overseas.
Spain: A Struggle with Housing Prices
In early 2025, Spanish Prime Minister Pedro Sánchez proposed a 100% tax on property purchases by non-EU, non-resident buyers. His goal: cool off rising housing prices by discouraging foreign investment.
If passed, this would effectively double the cost of buying property in Spain for Americans.
Not long after, Spain confirmed it would close its investor visa program – one of the most popular residency routes for real estate investors – as of April 3, 2025.
Portugal: Goodbye to Real Estate Visas
Portugal made headlines in late 2023 when it officially removed real estate from its Golden Visa program – one that a number of our clients have used to get long-term residency in the country.
The place still welcomes foreign buyers, but you’ll now need to qualify through investment funds, research, or cultural contributions – not bricks and mortar.
United States: Subtle Signals at Home
Here in the US, more than half the states – 26 and counting – have imposed new restrictions on land purchases by foreign nationals.
Fifteen states added new rules in just the last year. Most are aimed at buyers from “adversary nations.”
Why the Global Shift?
Three key pressures are driving these changes:
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Housing Affordability: In Spain, according to Sánchez, 27,000 homes were purchased in 2023 by foreigners “not to live in,” but to rent or flip. Governments are stepping in to protect housing supply. This is also why Portugal, in response to similar concerns, removed the real estate investor qualification from their Golden Visa program.
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National Security: In the US, new rules often target land near military bases, airports, seaports, or agricultural zones, citing food and defense risks.
Foreign real estate isn’t going away. But it’s not a “just sign here” process either.
In today’s environment, success depends on the right planning – legal, tax, and strategic. The right plan not only gets you in the door. It keeps the door open long after the ink is dry.
What You Can – and Can’t – Buy Abroad
It’s not always a wide-open field – but that doesn’t mean the doors are closed. In many cases, it’s more like a gated neighborhood: some gates are open, some require a key, and others just take a bit of planning to get through.
Here are the key regulatory hurdles to consider.
Ownership Restrictions: Know the Rules, Find the Path
Take the Philippines where we have US expat clients, for example. While land ownership is off-limits for non-citizens, foreigners can still buy condos and long-term lease rights. It’s about understanding what’s allowed – and what alternatives exist.
Even in more open markets, there are often conditions tied to ownership:
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Minimum investment thresholds.
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Residency requirements.
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Geographic limits near borders or coastlines.
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Rules on the type of property (residential vs. commercial or agricultural).
Canada’s recent foreign buyer pause is another example. Since January 1, 2023, most non-residents haven’t been able to buy homes there – and that restriction now extends to 2027. But the policy includes exceptions for international students, temporary workers, and other qualifying groups.
Residency by Investment: Still a Valuable Option
Many countries still offer residency in exchange for a real estate investment – often through programs like the previously mentioned Golden Visas.
The Dominican Republic remains a powerful option:
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Buying real estate valued at around $200,000 or more can help support a residency application, especially under the investor or retiree residency categories.
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With the right planning and documents, temporary residency can often be approved in as little as 3 to 6 months.
Bonus: The country uses the US dollar in many real estate transactions, and English is widely spoken in resort areas.
In Panama, real estate now plays a key role in qualifying for the Friendly Nations Visa – one of Latin America’s most well-known residency programs.
To apply, you’ll need to make a real estate investment of at least $200,000, fully paid in cash (mortgages do not qualify).
Approved applicants first receive a 2-year temporary residency. After that, you can apply for permanent residency, assuming all requirements are still met.
While the process isn’t instant, it remains straightforward and predictable – especially with the right planning. For investors looking to build a long-term connection to Panama, it’s still a strong option.
These programs are quite attractive because they offer a clear and legal path to residency, flexibility, and long-term planning – all backed by a real, tangible asset.
For globally minded families, that can be a powerful combination.
Geographic Limits: Some Areas Are Off-Limits – But Most Are Not
Some countries limit where foreigners can buy property. These rules often protect military areas or sensitive borders. But they’re usually specific – and easy to work around with good planning.
In Greece, for example, non-EU buyers can’t purchase property near:
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Military bases.
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Certain borders and coastlines.
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Some islands in the Aegean Sea.
But the rest of the country is still open – including popular areas like Athens, Crete, and the mainland.
Denmark has its own approach. If you’re not an EU resident, you’ll need permission from the Danish Ministry of Justice to buy real estate – and that permission is usually given only if:
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You plan to use the property as your primary home, or
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You’ve had strong personal or work ties to Denmark for several years.
Vacation homes are generally off-limits unless you’ve lived in Denmark before or have close connections.
These rules aren’t directly meant to block foreign buyers. They just need a little more planning. Once you understand the local laws, you can often find a path that fits your goals.
Strategic Markets for US Buyers
Americans looking to invest in foreign real estate have a few options at their disposal that continue to welcome smart, well-structured investments.
Portugal: Still Open for Business
While Portugal removed real estate from its Golden Visa program, it still welcomes foreign buyers – and remains one of the most livable, investor-friendly countries in Europe.
Tax Efficiency
Rental income on Portuguese real estate is taxed at a flat rate of 28% for non-residents (owned individually). Golden Visa-eligible investment funds often come with tax exemptions, especially if you’re not a tax resident in Portugal.
Affordable Living
Compared to neighboring Spain, Portugal offers value. Portugal’s cost of living is about 6% lower, and restaurant prices are 17.4% less, according to Numbeo.
Mexico: Close to Home, High on Value
Mexico remains one of the most accessible and attractive markets for US investors – thanks to its proximity, low cost of living, and strong expat communities.
Fideicomiso: A Trusted Workaround
Foreigners cannot directly own property in certain restricted zones (like coastal areas), but a Fideicomiso – a Mexican land trust – allows full legal ownership through a local bank.
It’s pretty much the default for Americans looking to have a property in coastal areas or near a border.
Panama: Equal Rights for Foreign Owners
Foreigners in Panama have the same property rights as local citizens. There are no extra hoops to jump through, and the buying process is relatively simple.
Combined with Panama’s growing popularity as a second residency destination, it remains a top choice for long-term investors.
Panama is one of the most cost-effective destinations for US expats. Living expenses are low, and English is widely spoken in major cities – making it easier to settle in without a steep language or financial barrier.
For many, it strikes the right balance between affordability, accessibility, and quality of life.
Planning Your Investment
Not just where, but how you own your foreign real estate has a big impact – both in the country where the property is located and back home with the IRS.
With the right planning, you can keep things simple, legal, and efficient.
Here’s what to consider.
Direct Ownership: Simple and Straightforward
Buying in your own name is the easiest option – and in many countries, it works just fine.
Why it appeals:
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Lower setup costs.
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Fewer ongoing requirements.
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Rental income can be reported directly on Schedule E of your US tax return. (Usually.)
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Capital gains are taxed like any other personal investment.
If the local government allows it – and if you don’t need extra protection or estate planning – direct ownership can be a clean solution.
Corporate Ownership: Sometimes Required
In some countries, foreigners must use a local company or structure to hold property. When that’s the case, planning ahead becomes even more important.
What to expect:
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More setup steps and higher annual costs.
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Additional US tax forms may apply – such as Form 5471, 8865, or 8858, depending on the type of entity.
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These forms report foreign ownership and help the IRS track compliance.
Corporate structures can offer benefits like liability protection, asset separation, and better access to local banking – but they do require more upkeep.
Trust Structures: Useful in Special Cases
Some ownership models, like Mexico’s fideicomiso, are trust-based. (That’s why it’s often called a “Mexican Bank Trust”.) In Mexico, this is how Americans can buy property in restricted zones near the coast or borders.
How it works:
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A Mexican bank holds the title in trust.
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You retain full control over the property.
The good news? You don’t need to be an expert on how this all works – but your advisor should be.
Do Your Homework: Smart Due Diligence Pays Off
Buying real estate overseas is exciting – but it also comes with more moving parts than buying at home. A little extra homework now can help you avoid big problems later.
Here’s how to make sure your investment is solid.
Understand Local Laws
Every country has its own rules for property ownership – especially when it comes to foreign buyers. Some require special permits. Others limit where or what you can buy.
Before you commit, make sure you (or someone on your team) understands:
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Who can legally own the property.
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What kind of structure is required (personal name, local company, trust, etc).
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Any special conditions tied to the land or title.
Always Run a Title Check
A title search checks whether the property is free from:
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Legal disputes.
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Unpaid taxes.
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Debts or old claims.
This step is easy to overlook – especially if the seller seems trustworthy. But in many countries, title systems are less transparent than in the US. Planning with the right professionals is worth every penny.
Know the Market
Beyond the legal details, take time to understand the broader picture:
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Is the country’s economy stable?
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How is inflation trending?
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What’s the long-term demand for real estate in that area?
Also: don’t rely on glossy listings alone. Some sellers target foreigners with overpriced properties – assuming you won’t know the real market value. Others play a game of bait and switch.
Build the Right Team
Foreign real estate investments work best when you have boots on the ground and advisors who understand both the local and US side of the deal.
The right team helps you avoid common mistakes – and sets you up for long-term success.
Common Mistakes and How to Avoid Them
Overseas property can be a smart move, but it comes with a learning curve. The rules are different, and small missteps can lead to surprises.
Misunderstanding Local Rules
- Extra permits or approvals.
- Ongoing rules about taxes or property use.
- Reporting requirements that don’t exist in the US.
Ignoring Currency Fluctuations
When you buy or sell property overseas, your returns are tied to the exchange rate. Even if the local price stays the same, a weaker dollar can make your taxable gain look bigger in US terms – and raise your US tax bill.
Good planning can reduce the impact – but it starts by being aware.
Skipping US Tax Requirements
If you earn rental income from your property, you must report it on your US tax return.
If you hold foreign bank accounts as part of your structure, you will need to file special IRS forms like FBAR or FATCA Form 8938 once you meet the thresholds.
Missing these can lead to penalties, even if you didn’t owe any tax.
And Don’t Forget Local Taxes
Taxes in other countries can work very differently from what we’re used to in the US. Some are common overseas — but may not exist at all here.
Examples include:
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Stamp duties or transfer taxes when you buy the property or convey it to an entity you control, often 5% to 10% of the purchase price.
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Flat rental taxes with little or no deductions allowed. In some places, foreign owners pay a set rate on rental income by default — like 25% in Mexico or 28% in Portugal.
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VAT (value-added tax) on new homes bought from a builder — something not charged in the US, at the federal level at least.
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Wealth taxes in places like Spain or Colombia, based on the total value of what you own.
Learning how local taxes work — before you buy — can save you from unexpected costs and help you plan better.
Overlooking PFIC Rules
Many foreign mutual funds, ETFs, and real estate funds may be treated as PFICs (Passive Foreign Investment Companies) under US tax law.
PFICs come with special reporting rules and, in many cases, higher tax rates. We usually steer clients away from foreign funds unless there’s a strong reason.
If you’re going to buy foreign real estate, it’s best to buy it directly through your own name, or through an entity you control. Don’t buy into a company that invests in the property unless you are 100% sure the owner understands the American tax picture… or you are willing to take on the burden of having a PFIC.
Assuming Property Equals Residency
Buying something in another country doesn’t automatically give you the right to live there.
Some countries allow second-home stays for a few months at a time. Others may require a visa or a residency permit. Property ownership and immigration status are two separate systems, and it’s best to plan for both if your long-term goal is to live abroad.
Financing Foreign Real Estate: What to Expect
Financing overseas property isn’t always as simple as applying for a mortgage in the US – but with the right approach, there are still good options available.
Here’s what to know before you start.
US Bank Options: Limited, But Worth Exploring
Some US banks, like Citibank, offer international mortgage programs, often in partnership with local banks overseas. But these programs are limited and usually require a strong credit history, a larger down payment, and extra paperwork.
Still, it’s worth asking your bank if they have relationships in the country where you plan to buy.
Local Bank Mortgages: Read the Fine Print
Some foreign banks do offer mortgages to non-residents, especially in places with a strong real estate market. But be prepared:
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Down payment requirements are often higher.
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Interest rates may be above US levels.
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The loan process may be slower – and fully in the local language.
Always review the terms carefully, or work with trusted professionals who can help you navigate them.
Developer Financing: Flexible and Direct
In some countries, real estate developers offer their own financing plans for new or pre-construction properties.
For example, in the Dominican Republic (and others), developers may offer:
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Flexible payment schedules.
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Lower upfront costs.
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Direct deals without going through a bank.
Just be sure the contract is reviewed by qualified advisors – developer deals can vary widely in quality and risk. We review a lot of purchase agreements. Some are quite fair and balance the interests of the buyer and seller. But many – especially those sold to foreigners – are often extremely biased AGAINST the foreign buyer. We could tell you stories…
One of the most common risks with pre-builds is project delays. A trusted contact of ours in Playa del Carmen – a hotspot for American expats – recently noted that nearly 4 out of 10 developers were running behind schedule. In Tulum, 7 in 10 were behind.
As with most construction ventures, it’s smart to expect some bumps in the timeline.
Cash Buyers Often Have the Advantage
Paying in full with cash isn’t always possible – but it can make your life a lot easier when buying property abroad.
Here’s why cash helps:
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You may get a better price by avoiding financing delays.
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Transactions move faster and with fewer complications.
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You avoid local mortgage regulations and sometimes higher interest costs.
Financing is possible – but it works differently overseas. A little preparation goes a long way in helping you choose the option that fits your goals, timeline, and comfort level.
US Tax Rules for Foreign Property: What You Need to Know
No matter where your foreign real estate purchase lives, you still have tax responsibilities back in the States.
That doesn’t mean the deal is off – it just means you’ll need to follow a few extra steps to stay compliant.
Buying Property? No Tax – Yet
The good news is, simply buying a foreign property does not create a US tax bill. You don’t need to report the purchase itself on your tax return.
But once the property starts generating rental income or if you eventually sell it – that’s when the IRS expects to hear from you.
Reporting Rental Income
If you rent out your foreign property, the income must be reported on Schedule E (Form 1040), just like a rental in the US. (Assuming individual ownership.)
Even if the income stays overseas, it still counts as part of your worldwide income.
Depreciation Works Differently
US rental properties can usually be depreciated over 27.5 years. But foreign residential properties fall under a different system.
As of 2025, they must be depreciated over 30 years using the Alternative Depreciation System (ADS). This affects how much you can deduct each year.
Selling the Property
When you sell, you must report the capital gain on your US tax return – even if the property is outside the country.
But here’s the upside: if you pay capital gains tax to the country where your property is located, you may be able to use the Foreign Tax Credit to reduce your US tax bill and avoid being taxed twice on the same gain.
Reporting Foreign Accounts and Holdings
There are a couple of extra forms that may apply depending on how you hold the property and where the money goes.
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FBAR: If you keep rental income in a foreign bank account and the total balance of all your foreign accounts is over $10,000 at any point in the year – no matter how brief – you must file an FBAR (FinCEN Form 114).
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FATCA (Form 8938): If you hold property through a foreign corporation, trust, or other entity, and your total foreign assets exceed certain limits, you may need to file Form 8938 under FATCA rules.
With proper planning, these tax requirements are very manageable. The key is to know the rules – and work with professionals who understand both US and international tax systems.
A Smart Step Toward Global Wealth
Foreign real estate can offer much more than a place to stay – it can provide income, diversification, and global flexibility for you and your family.
The key is planning:
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Choose the right country for your goals.
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Structure the investment for tax efficiency and legal clarity.
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Work with professionals who understand both US and international systems.
Opportunities exist in places like Portugal, Costa Rica, Mexico, and Panama – each with its own strengths for investors looking to grow and protect their wealth.
At Nestmann, we’ve helped clients take these steps for decades. If you’re considering a foreign property investment, feel free to get in touch. We’ll help you explore your options, avoid common mistakes, and build a strategy that fits your long-term goals.
A smart international real estate strategy starts with the right guidance — and the right team.
About The Author
Need Help?
We have 40+ years experience helping Americans move, live and invest internationally…
Need Help?
We have 40+ years experience helping Americans move, live and invest internationally…
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