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Dear Reader,
When speaking about overseas real estate – there’s one question that’s asked more often than all the other questions, combined.
It’s asked more often than “where’s the hottest place to buy right now?”
Or even “If you had ‘X’ amount of dollars where would you invest?”
It’s this one “how can I find money to buy overseas real estate?”
My first purchase inside the U.S. was for a $114,000 condo that I got with a 100% mortgage.
I put down none of my own money, the bank financed the entire purchase, I had the seller pay most of my closing costs, and any money needed to show cash reserves or excess closing costs I got from credit card cash advances.
I’m not telling you to do this – it’s simply what I did.
My first purchase overseas was for an apartment in Buenos Aires Argentina, at an overseas conference in Southern California, using an agent I never met, in a country I’d never been to, where I reserved a pre-construction apartment in a building not yet complete, with a relatively small $2,500 deposit using a check, that was from a HELOC (more below), that I learned later was never cashed.
And, I’m definently not advocating this one either.
So, how can you get the cash together to buy overseas real estate?
I wanted to compile a list of 17 ways you can either get the cash to buy overseas real estate and/or how it can be done with little or no money out of YOUR pocket.
Some you might find stupid, some might not apply to you, some you might consider brilliant.
I’m practicing my idea muscle – and here’s what I’ve come up with.
1) Cash Out Refinance – Refinancing of an existing mortgage loan, where the new mortgage loan is for a larger amount than the existing mortgage loan, and you (borrower) get the difference between the two loans in cash.
Simply put – You refinance your house in Boise Idaho, take out some cash, and use it buy that beach condo you wanted in Bahia de Caraquez Ecuador.
Personal story – I’ve routinely bought a property, did a cash out refi when there’s equity, and then used those proceeds to invest in another property.
Further Resource – Marty Goldstein from GEM Mortgage
2) Home Equity Loan – Loan in which the borrower uses the equity of his home as collateral.
3) Home Equity Line of Credit (HELOC) – Loan in which the lender agrees to lend a maximum amount within an agreed upon period (term), where the collateral is the borrower’s equity in their house.
Simply put – You tap into your property’s equity by getting a loan (#2) or a line of credit (#3) and use the cash to buy your Medellin Colombia penthouse in El Poblado.
Personal story – Once buying a property and there’s equity, I’m a big fan of getting a HELOC, so I’m able to pick up another property if I see a great value there. The big takeaway is that a HELOC is used if/when you want and a loan is being charged interest from day 1.
Further Resource – Ellen Davis from Corridor Mortgage
4) Reverse Mortgage – Loan available to homeowners who are 62 years or older that enables them to convert part of their equity in their home to cash.
Simply put – You meet the age requirements needed, have equity in your house, and tap into it with a new loan to buy that Argentine vineyard you’ve always talked about.
Further Resource – Tim Lucas from My Mortgage Insider
5) Hard Money Loan – Specific type of asset-based loan financing through which a borrower receives funds secured by the value of a parcel of real estate. Hard money loans are typically issued by private investors or companies.
Simply put – You might not be able to get “traditional” financing through a local bank or mortgage company and instead seek out private money who’s usually a private investor or company. Generally speaking – easier to qualify for – but comes with higher fees and rates.
Further Resource – Lee Arnold from COGO Capital
6) Personal Loan – Is a type of loan that can be unsecured or secured
Simply put – You go to a family member/friend/blog reader and ask “how about you loan me $25,000 to buy a deeply discounted house in Cuzco Peru, and once I fix it up, and sell it, I will pay you back.” They might charge no interest, low interest, a portion of the deal, etc.
Personal story – I borrowed $25,000 at 20% interest for 2 years, used that money as a down payment for an apartment in Panama, sold the apartment for a healthy return, paid back the personal loan, everyone was happy.
7) Self Directed IRA – Is where you can have your retirement account invest in real estate.
Simply put – You have a retirement account with a traditional brokerage, you roll it into a truly self directed IRA, you use it to invest in overseas real estate.
Further Resource – Jordan Sheppherd from Check Book IRA
8) Credit Card Cash Advance – Provided by most credit card or charge card issuers where you’re able to withdraw cash either from an ATM or over the counter at a bank or other financial institution.
Simply put – You take your credit card, head on over to an ATM, and withdraw cash. And/Or, you might be able to do a balance transfer straight into your checking account.
Personal story – I’ve often been issued credit cards at 0% interest for cash advances and/or for balance transfers for an extended period of time – say 6 to 12 months. I’ve used the money for real estate related investments and then paid back the original amounts before I started getting charged interest.
9) Auto Loan Refinance – 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.
Simply put – You have a paid off car, you secure a new auto loan, and use that cash.
Personal story – Bought a nice older car for cash. Found a pre-construction buy on a trip I didn’t plan on. Took out a used car loan, used that money as a down payment for the pre-construction purchase, and made the small monthly car loan payments. The pre-construction buy was leveraged so percentage wise I ended up coming out much further ahead.
10) Brokerage Account – You have money invested in the stock market that you instead use for overseas real estate
Simply put – You have money sitting in stocks, bonds, cd’s and instead divert that money into overseas real estate.
11) Seller Financing – When you obtain a loan directly from the seller of a property rather than the bank or mortgage company.
Simply put – You deal directly with a property owner who will finance part or all of your purchase.
12) Developer Financing – When you obtain a loan directly with the developer of a property rather than the bank or mortgage company.
Simply put – You deal directly with the developer to finance all or part of your purchase – very common in pre-construction and during construction housing developments, condo buildings, etc.
Personal story – I’ve used developer financing when buying in new developments and pre-construction apartments in buildings. It usually consists of small down payments, small monthly payments, and then a balloon payment once your property is complete.
13) Overseas In Country Bank Financing – When you obtain a loan directly from the bank to buy in country real estate.
Simply put – Deal directly with a bank (maybe Panama) where they will give you a mortgage loan on a property located inside it’s borders.
Personal story – I’ve received numerous mortgage loans in Panama and the banks care more about your repayment ability (documented monthly income or assets) versus a 700 credit score.
14) Overseas Regional Bank Financing – In certain regions (Central America comes to mind) there’s international banks that will provide mortgage financing in a few countries.
Simply put – There’s specific banks (like Caye Bank in Belize) that will give you a mortgage loan if you buy real estate within the region they service (like Central America).
15) Crowdfunding – When you get a larger number of people to pool their funds together and typically done via the internet.
Simply put – There are more and more online resources where you can invest a little bit of money, with other investors, to buy real estate.
Further Resources – David Manshoory and Aaron McDaniel
16) Silent Partner – When you have an investor provide the capital but not involved in the day to day decision making.
Simply put – You deal with people who have a bit more money to invest, looking for better returns, don’t have a lot of time, and you do the work. This might be a one time and done, it might be investment specific, or you might have an open line of funds to access.
17) Seed Capital – Money used for the initial investment to get things going.
Simply put – You seek out an investor to put the initial funds in a deal to get things going and it’s often in small amounts to attract larger amounts of money.
How about you?
What strategies have you used to find money to buy overseas real estate?
To finding the cashizle,
Taylor
P.S. I’m not a fan of theory, will never talk about things I’ve never done, and despise real estate hawkers who’ve never bought and sold real estate in the areas they promote – just to earn a marketing fee.
I’m not an overseas real estate guru, nor play one on the inter webs, but do know a thing or two about specific strategies.
If you’re more into actionable tips, than the “the next big thing”, than we will get along just fine.
