8 Pitfalls of International Real Estate
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Contents
- The Big Picture: Why Buy International Real Estate?
- Pitfall #1: Not Understanding Local Laws and Rules
- Who Can Own What?
- Zoning, Building, and Environmental Oversight
- The Fix: Local Legal Expertise
- Pitfall #2: Currency Risk Can Undermine a Good Investment
- The Fix: Planning for Currency Swings
- Pitfall #3: Financing Can Be Harder Than You Think
- Cross-Border Banking and Transfer Hurdles
- The Fix: Start With the Payment Plan
- Pitfall #4: Unexpected Extra Costs and Taxes
- One-Time Buying Costs
- Ongoing Taxes Abroad
- Your US Tax Reporting
- The Fix: Build a Complete Budget
- Pitfall #5: Missing Proper Due Diligence
- Title and Ownership Questions
- What Else to Review
- The Fix: Don’t Skip the Due Diligence Process
- Pitfall #6: Political and Economic Considerations
- What Can Change?
- Why the Local Economy Matters
- The Fix: Choose Wisely, Monitor Thoughtfully
- Pitfall #7: Managing From Far Away
- Why Property Management Matters
- Bridging Distance and Communication
- The Fix: Build the Right Team and Set the Right Expectations
- Pitfall #8: Fraud & Misrepresentation
- Common Types of Misrepresentation
- Red Flags to Pay Attention To
- The Fix: Stay Structured, Not Rushed
- The Bottom Line
International real estate can play a valuable role in a well-structured wealth plan. It offers geographic diversification, long-term lifestyle flexibility, and – when done right – can even help simplify inheritance and reduce exposure to US taxes and bureaucracy.
But like any investment, it comes with details that matter. Details that, if overlooked, could make the process more expensive or complex than it needs to be.
At the Nestmann Group, we’ve spent over 40 years helping Americans with overseas planning. We’ve seen what works well, and we’ve also helped untangle things when the planning didn’t go far enough.
This article walks you through key considerations to keep in mind before buying international real estate – and how to approach it in a way that complements your overall wealth protection strategy.
The Big Picture: Why Buy International Real Estate?
Owning property internationally can be a smart addition to your overall wealth plan. It offers diversification – not just of investments, but of jurisdictions. And in a world where US tax policy and regulatory change can feel unpredictable, having real assets overseas can bring peace of mind.
It also follows the good old investment advice not to keep all your eggs in one basket.
That said, buying foreign real estate isn’t quite the same as buying it at home. Every country has its own rules, expectations, and legal processes. You may encounter different tax systems, title registration procedures, foreign exchange considerations, or requirements for local representation.
The good news? Most of these challenges are entirely manageable when you know about them in advance – and structure things properly from the start.
With a bit of planning (and the right cross-border expertise), international real estate can fit smoothly into your overall wealth protection strategy without surprises down the line.
In this article, we’ll share some of the most common pitfalls we see, based on what we’re actually seeing in working with clients.
If you’re considering buying property abroad and want to structure it the right way from the start, please get in touch.
Pitfall #1: Not Understanding Local Laws and Rules
Who Can Own What?
In some countries, foreign buyers can purchase real estate freely. In others, there are restrictions on location, land type, or the type of title you can hold.
For example:
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In Indonesia, foreigners aren’t allowed to own property in their own names. You may be able to obtain long-term leasehold rights (Hak Pakai), but these don’t offer the same legal protections as freehold title.
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In Dubai, foreigners can only buy property in designated “freehold” zones, and ownership outside these areas isn’t permitted.
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In Panama, foreigners can own property in their own names, with few restrictions—making it one of the most flexible jurisdictions for foreign buyers.
These legal distinctions can affect your ability to buy, inherit, or even sell the property later. Just because something “worked fine” in one country doesn’t mean the same approach applies somewhere else.
Zoning, Building, and Environmental Oversight
If you plan to build, renovate, or develop, be prepared for a very different regulatory process. Most countries require:
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Municipal zoning approval.
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Environmental impact assessments.
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Proof of compliance with national and local building codes.
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Multiple layers of permits, often in a foreign language.
Missing a step in the local approval process doesn’t always lead to major issues, but it can slow things down and increase your costs unnecessarily. In our experience, most complications come from miscommunication or assumptions – not bad intent.
Fortunately, when you understand the local process early and work with someone who knows the system, those delays can usually be avoided.
The Fix: Local Legal Expertise
Navigating foreign property laws isn’t something you want to figure out as you go. It’s important to work with professionals who understand both the local legal system and how those rules interact with your broader wealth plan.
Getting the legal foundation right doesn’t just avoid problems. It sets you up to hold the property in a way that aligns with your bigger goals – whether that’s privacy, tax efficiency, or a clean handoff to your heirs later.
Before you sign any dotted lines, you should completely understand how your foreign real estate buy relates to your US tax planning strategies.
An example: A client was previously advised by a Portuguese lawyer to set up a real estate structure that seemed perfectly normal under local law. But the structure didn’t account for US tax rules – and, without extra planning, would likely trigger Controlled Foreign Corporation (CFC) reporting and potential double taxation.
His situation is in good hands now. But the lesson remains: always plan around US law first before considering foreign structures.
Pitfall #2: Currency Risk Can Undermine a Good Investment
Foreign real estate returns aren’t just about local property values. Currency plays a major role – sometimes a bigger one than most buyers expect.
Exchange rate fluctuations can significantly impact both the value of the property and the income it generates when converted back into US dollars.
A property that appreciates in local terms can still deliver a loss once you factor in a weaker exchange rate. The same applies to rental income – what looks like a steady cash flow locally might drop noticeably in dollar terms when the exchange rate shifts.
This doesn’t mean you should avoid international property. It just means you need to understand your exposure and plan for it accordingly.
The Fix: Planning for Currency Swings
Before you buy, it’s important to consider how currency movements could affect your investment – both over time and at key decision points, like when you sell or repatriate income.
Pitfall #3: Financing Can Be Harder Than You Think
Financing a property overseas works very differently than taking out a mortgage in the United States. In many countries, local banks can still be reluctant to lend to (or do any business with) Americans thanks to the Foreign Account Tax Compliance Act (FATCA) controls – especially non-residents without a local income stream or credit history.
International lenders may be an option, but they often require:
Large down payments (sometimes 50% or more).
Extensive documentation on income, assets, and source of funds.
Personal guarantees that may expose other assets.
Cross-Border Banking and Transfer Hurdles
Even if you’re planning to pay cash, it’s worth thinking through the mechanics of moving funds internationally.
Large transfers today are subject to routine compliance checks. That just means banks may ask for supporting documents about where the funds came from and where they’re going. When that information is prepared in advance, the process is usually straightforward.
In some countries, there may also be:
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Rules that limit how much foreign currency can be transferred at one time.
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Slight differences between quoted and actual exchange rates, which can affect final costs.
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Local documentation requirements that add a bit of time to the process.
These aren’t dealbreakers – they’re just details worth planning around. We often see wire transfers for smaller jurisdictions held up in compliance. The wires are never lost, but they can be delayed.
Understanding the flow of funds and the timeline involved helps ensure your transaction moves smoothly, without surprises.
The Fix: Start With the Payment Plan
Before you begin looking at properties, it’s critical to understand how you’ll pay for one and what constraints might come with each financing option. Whether you’re considering local lending, international financing, or private funding, each approach comes with its own timing, compliance requirements, and tax implications.
We usually help clients think through this piece early – well before the funds move – so the structure and timing support the rest of their plan. That way, a promising deal doesn’t get derailed by something as avoidable as a wire transfer delay.
From Our Case Files
An American client originally from Ukraine once lost access to his Czech bank account — despite owning property there.
Why? Because during a routine compliance update, the bank decided they didn’t like that he was a US citizen of Ukrainian origin. After numerous attempts, he couldn’t get a Czech bank to open a new account for him. Property ownership wasn’t enough.
It took nearly 7 months, 4–5 rejections, but we were finally able to get two banks to say yes.
Even with real estate on the ground, cross-border banking access is never automatic. It takes structure, local insight, and persistence, especially in today’s compliance-heavy environment.
Pitfall #4: Unexpected Extra Costs and Taxes
When buying property overseas, the price on the listing is only part of the equation. To plan well, you’ll need to account for additional costs—some at the time of purchase, others on an ongoing basis.
One-Time Buying Costs
Most countries have extra fees built into the buying process. These can vary a lot by location, but common expenses include:
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Transfer taxes (sometimes 5–10% of the purchase price).
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Notary fees and legal documentation.
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Registration and title costs.
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Survey and inspection fees.
These costs often add up to 5–15% above the property price, depending on the country. That’s not unusual—it just means you’ll want to build them into your budget early on.
Ongoing Taxes Abroad
After the purchase, you will often have ongoing tax obligations in the country where the property is located. These can include:
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Annual property taxes.
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Rental income taxes.
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Capital gains taxes if you sell.
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In some cases, wealth taxes or inheritance taxes on foreign-owned property.
None of this is unusual – it’s just different from what you may be used to in the US. And like most things in international planning, once you understand the rules, it becomes much easier to manage.
Your US Tax Reporting
Owning foreign real estate doesn’t change the fact that you’re still a US taxpayer. So if you earn rental income, use a foreign bank account, or hold the property through a structure, you may need to file:
Schedule E (for rental income), unless otherwise structured.
FBAR (FinCEN Form 114) if you have foreign accounts.
Form 8938 (FATCA) if your total foreign assets cross certain thresholds.
This may sound like a lot, but it’s routine for Americans investing internationally. The key is getting ahead of it – not trying to sort it out later. (This is, incidentally, something we help clients with. Feel free to get in touch).
The Fix: Build a Complete Budget
Before you buy, make sure your financial plan includes the full cost of ownership, not just the sale price. That means understanding taxes, fees, and reporting obligations on both sides of the border.
Pitfall #5: Missing Proper Due Diligence
Reviewing a property overseas takes more than just a walkthrough and a contract. The process can look very different from what you’re used to in the United States – but with the right checks in place, it’s entirely manageable.
Title and Ownership Questions
In some countries, title records are incomplete or not digitized. In others, legal ownership can be split across multiple entities or family members, making verification more complex.
Even in jurisdictions with solid land registries, it’s important to confirm:
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That the seller has full legal ownership.
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That there are no hidden liens, mortgages, or debts tied to the property.
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That the property hasn’t been involved in past disputes.
Title insurance may not be available – or may not function the same way it does in the US. This makes pre-purchase title review even more important.
What Else to Review
Beyond the title, there are several other important elements that should be reviewed as part of due diligence:
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Building permits and construction approvals.
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Zoning and environmental compliance.
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Structural inspections and condition reports.
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Existing tenants or rental agreements.
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Tax history and any outstanding obligations.
These are all standard parts of a well-run process. They just may require more hands-on coordination when you’re buying across borders.
The Fix: Don’t Skip the Due Diligence Process
When you’re buying property internationally, due diligence is not just helpful – it’s essential.
That includes confirming title, reviewing the property’s legal and financial history, and making sure the structure of the deal supports your long-term plans.
It takes a bit more work upfront, but it’s what protects you from surprises later – and makes your investment one you can rely on.
Pitfall #6: Political and Economic Considerations
Political stability and economic health both play a role in any long-term international investment – foreign real estate included.
Some countries welcome foreign investors and offer strong legal protections. Others may be subject to more frequent shifts in policy or regulation. Understanding these dynamics ahead of time can help you choose a country that supports – not complicates – your long-term planning goals.
What Can Change?
Government policy changes may impact:
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Foreign ownership rules.
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Taxation of real estate or rental income.
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Currency exchange regulations.
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Property rights and land use laws.
These changes aren’t necessarily common, but they do happen. In most cases, they’re entirely manageable when you’ve chosen the jurisdiction thoughtfully and you’re keeping an eye on developments that might affect your position.
Why the Local Economy Matters
Real estate values don’t exist in a vacuum. Local factors – like inflation, interest rates, employment, and infrastructure investment – can all influence the health of a property market over time.
Understanding the basics of a country’s economy can help you choose markets that are more likely to deliver stable long-term value. You don’t need to be an expert economist, just informed enough to make choices that align with your risk tolerance and planning goals.
The Fix: Choose Wisely, Monitor Thoughtfully
The goal isn’t to avoid risk entirely. It’s to understand how political and economic dynamics might affect your property – and to build that awareness into your planning from the start.
Pitfall #7: Managing From Far Away
Owning property in another country brings long-distance management challenges – but with the right preparation, it’s entirely workable.
Whether you’re renting the property through Airbnb or VRBO, putting in a long-term tenant, or just looking for a place to call your second home, a clear management plan helps avoid misunderstandings and keeps things running smoothly.
Why Property Management Matters
A strong local property manager can make or break your experience. Their role includes:
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Ongoing maintenance and repairs.
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Compliance with local regulations and licensing.
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Oversight of tenants or guests.
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Timely rent collection and financial reporting.
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Handling issues that arise when you’re not on-site.
The key is not just finding someone capable but someone reliable, communicative, and aligned with your expectations.
Bridging Distance and Communication
Cross-border communication can bring small challenges – different time zones, languages, and business norms. But those are easily addressed when you’ve set expectations clearly and chosen partners with experience working with international clients.
We often advise clients to think about communication before the purchase, not after the first maintenance issue arises.
The Fix: Build the Right Team and Set the Right Expectations
Long-distance property management works best when you assemble the right team ahead of time. That usually includes:
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A trusted property manager.
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Legal and tax professionals familiar with foreign investors.
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Local service providers who understand your standards and schedule.
With the right structure in place, managing property from afar becomes not just possible but surprisingly straightforward.
Pitfall #8: Fraud & Misrepresentation
While most international property markets function transparently, some do present risks – especially when transactions move quickly or lack proper oversight.
Fortunately, with strong due diligence and the right checks in place, these risks are almost always avoidable.
Common Types of Misrepresentation
Occasionally, fraudsters market properties with inaccurate or misleading details. In some cases, they may be:
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Listed by someone who doesn’t actually own the property.
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Part of a development that doesn’t have the required permits.
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Appraised at inflated values not supported by local comps.
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Structured to require large advance fees with no safeguards.
These situations are the exception, not the rule. But they’re worth watching for – especially in jurisdictions with less oversight or when buying off-plan (before a project is completed).
One fairly common “scam” in the foreign real estate business is something called “phantom listings.” Usually put together by real estate agents, they feature a property that’s not actually up for sale. When a potential buyer inquires, the agent responds with something like, “Oh, it just sold.”
The agent will then redirect the buyer to a property they do actually represent.
Most of the time, this behavior – although very unprofessional – is fairly harmless.
Still, if your time is important, feel free to get in touch. We work behind the scenes to source good quality properties, conduct all the due diligence, and present them investment-ready.
Red Flags to Pay Attention To
Most of the time, the warning signs are clear. Be cautious with any property that involves:
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Urgency or pressure to commit quickly.
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Unusually low prices or returns that seem too good to be true.
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Limited access to inspect the property or verify documents.
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Large upfront payments without escrow or legal review.
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Sellers or brokers who are unwilling to meet or communicate clearly.
These are signals to slow down and verify before moving forward.
How common are these actually? More common than you might think.
A few months ago, a client brought us three deals from three different countries, all promoted by one of those so-called “offshore real estate gurus”. All three of the deals were terribly biased to the seller.
In one case, the seller required a 100% up-front payment to reserve his apartment, which hadn’t yet started construction and wasn’t expected to be delivered for three years.
Needless to say, our client didn’t move forward with any of them.
The Fix: Stay Structured, Not Rushed
Real estate fraud becomes more likely when deals move too fast, involve unfamiliar parties, or lack proper oversight. That’s why process matters more than speed.
International property ownership isn’t about guessing right – it’s about planning right. When the right steps are followed, risk becomes much easier to manage.
The Bottom Line
International real estate can be a powerful tool in a well-structured wealth protection strategy when approached with the right planning and perspective.
Yes, there are extra considerations. But those challenges are manageable when you understand the local landscape and structure the investment properly from the start.
When done right, international real estate can help you:
- Diversify across currencies and jurisdictions.
- Create new income streams.
- Enhance privacy and asset protection.
- Support second residency or citizenship goals.
- Hedge against domestic economic and political shifts.
We help clients cut through complexity and make smart, strategic decisions about international property. Our role is to make sure the real estate you own abroad supports – not complicates – your broader goals.
If you’re considering foreign property as part of your wealth plan, we’re here to help you think it through. The opportunity is real. And with the right guidance, it can become one of the most stable and rewarding parts of your global strategy.
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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