When I was a poor college student, I wanted to go traveling. I was sad that I would never be able to afford it.
One of my professors, who had spent years sailing around the world, told me I was wrong.
He insisted you didn't need much money to do it, just the will to do it.
My reaction was anger. He just didn't understand my situation, etc.
Then a year later, without much money, I traveled for one year all around the world.
It was one of the greatest experiences of my life.
While I was angry with my professor at the time, he did plant the idea that maybe I could afford it.
I have traveled extensively since as well as bought and sold overseas property.
Two things, that at one time, I thought I would never be able to do.
One that will lead you to become an international real estate investor.
You never know.
This means that you refinance an existing house loan for a larger amount than the existing mortgage loan. Then you (the borrower) will get the difference between the original amount of the loan and the higher refinanced amount in cash.
You can do anything you like with that cash.
For instance, you could refinance your house in Houston, Texas. Take out the extra cash and use it to buy some property in Panama.
Investing that cash in something with a higher return than the new and higher refinanced amount of the loan is your smartest option.
We did used this type of refinancing to buy a rental property in the US. It turned out to be an excellent investment for us.
I don't know who else can do this, but Canadians can borrow up to an amazing 80% of the value of any Canadian real estate to take out ‘cash’ to purchase your overseas property. And it is at a very low interest rate.
For this loan a maximum amount of money is lent for an agreed upon period (term). The collateral is the borrower’s equity in their house.
It is smart to set up an Home Equity Line of Credit, even if you don't think you will ever use it. You won't be charged any interest unless you use it.
We always have an equity line of credit. It gives you the flexibility to quickly get cash.
Something you sometimes need to do to quickly capitalize on an amazing property bargain.
This is a loan in which the borrower uses the equity of his home as collateral.
A reverse mortgage is another way to use the equity you have built up in your home.
It is available to homeowners who have equity in their home and who are 62 years or older . It allows them to convert part of their equity in their home to cash.
The great thing about reverse mortgages is that there are no monthly payments. The loan is paid off when you sell the house.
If you qualify, you can tap into your home's equity to buy your dream property in Panama.
This is a specific type of asset-based loan financing. THe borrower receives funds that are secured by the value of a parcel of real estate that he or she is purchasing. These "hard money" loans are typically issued by private investors or companies.
Generally speaking, this type of loan is easier to qualify for, but the loan also comes with higher fees and interest rates.
This can be either an unsecured or secured loan.
This is one of our favorite types of loans. We have been both lenders and borrowers of personal loans.
Especially if you are self-employed, as we are, it can be next to impossible to get a loan from a bank these days.
Of course, you have to know people who not only have "extra" money, but with whom you feel comfortable asking to borrow it. Depending upon the type of property you are investing the money in, you will have to figure out if you will make payments with interest over time, give them a portion of the deal, or some other renumeration.
We have had great success with this method. Of course, you must have a clean financial track record with the person who you ask to borrow money from. In general, it is a win-win situation.
Self directed or self managed IRAs give you complete control over selecting and directing where to invest your IRA - including real estate.
If you have an IRA at a traditional brokerage, you can roll it into a self directed IRA. Then you can use your IRA to invest in overseas real estate.
However, this option is not for everyone. You need to be actively involved in managing your IRA and to learn the rules of the self-directed IRA. Also, depending upon how it is used, it may generate taxable income.
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Most credit cards allow you to withdraw cash either from an ATM or over the counter at a bank or other financial institution.
This allows you access to quick cash if you stumble upon a great real estate bargain.
You take your credit card, head on over to an ATM, and withdraw cash. Or you might be able to do a balance transfer straight into your checking account.
This is especially appealing if you have a card that offers 0% interest for cash advances for say 6 to 12 months.
That way you can buy that great piece of property and then pay back the original amounts before you ever get charged interest. Nothing better than an interest-free loan for a good investment.
This is like the Cash Out Refinance on your home. It is a refinancing of an existing auto loan, where the new auto loan is for a larger amount than the existing auto loan, and you get the difference between the two loans in cash.
You can do this if you have a paid off car. You can then secure a new auto loan, and use that cash. If the interest on the car loan is less than you will think you will make on the investment, especially if its a short-term investment, it is a sound option.
You have money invested in the stock market that you instead use for overseas real estate
Cash out some of your stocks or bonds and invest the proceeds in real estate.
Make sure you factor in the capital gains tax you will have to pay on the sale of those stocks and bonds
This is another option for getting around the more traditional loan route.
Some sellers offer to finance your purchase of their property. This way you can avoid dealing with a bank or mortgage company.
Seller financing is a good option for buyers who want to buy a home in Panama, but need to sell their current home to pay for it.
You will need to negotiate the financing terms directly with a property owner for all or part of the purchase price.
You can also get a loan directly with the developer of a property rather than the bank or mortgage company.
This is very common with pre-construction and during-construction developments.
It usually consists of small down payments, small monthly payments, and then a balloon payment once your property is complete.
This is when you apply for a mortgage loan from a local bank.
Two banks, of many, that offer mortgages in Panama are MultiBank and Global Bank.
Most banks in Panama will give you a mortgage on a property in Panama.
The banks are mostly interested in your ability to pay back the loan given your assets and income.
Your credit record is of secondary importance to getting a mortgage in Panama.
Click here to read my post on how to get a mortgage loan in Panama
In Central America there are international banks that will provide mortgage financing in 2 or more central american countries.
Toward the bottom of this banks of Panama link, the international banks of Panama are listed.
If you are planning on investing in Panama and another Central American country, you may want to develop a relationship with one of those types of banks.
International banks such as Lloyds TSB International will often finance overseas properties in a range of countries. These larger banks will sometimes finance up to 70% of the value of the property.
Sometimes when you cannot get financing for a specific type of property from one sector of the banking community, another will find it more attractive.
When you have an investor provide the capital, but who is not involved in the day to day decision making of the investment property.
This works well when you have time and know-how, but no money. And you know someone who has money, wants a good investment, but has no time.
In a nutshell, you provide that on-the-ground labor of finding the property and making it look good for resale. Your silent partner provides the money.
This arrangement is unique to each partnership. You will have to hammer out the details, it might be investment specific, or you might have an open line of funds to access.
If you make your first investment a cash-flow property, you can use the proceeds to buy or finance future properties.
The CAP rate can be excellent. We know some people in Puerto Armuelles who paid rent of $500/month to an expat who had just bought the rental house for $50,000. You do the math.
Even without looking at the CAP rate, the investor is making 12% a year plus appreciation. Right now in Puerto Armuelles, property is appreciating at 10% or more a year.
Crowdfunding is increasingly popular for a wide range of projects, including real estate.
Typically crowdfunding is done via the Internet. It allows you to get a large number of people to pool their funds together.
There are more and more online resources where you can invest a little bit of money, with other investors, to buy real estate.
Here is a link citing the Top 10 sites for real estate crowdfunding.
Taylor White's post on the "17 Ways To Finance International Real Estate" both inspired and greatly contributed this post. Thank you Taylor.
