Success stories are regular features of The Motley Fool's Rule Your Retirement newsletter service, where we share profiles of people who have become financially independent. One of the most remarkable stories we've come across is that of Akaisha and Billy Kaderli, who retired two decades ago at the age of 38 and began traveling the world. They wrote the popular book, The Adventurer's Guide to Early Retirement, and The Guide to Chapala Living. Here they discuss how you may want to reconsider your options before purchasing a home overseas.
Home sweet home.
Or is it?
There's a powerful love affair with the idea of retiring overseas and buying real estate. From Belize to Panama, Costa Rica to Nicaragua, Lake Chapala to the other ex-pat enclaves of Mexico, the touts are pushing this idea hard and to a willing audience. "Buy, buy, buy! It's your last chance! These homes are going fast! The prices will only go up! Hurry, hurry! The time is now!"
Before you jump, though, take a breath. Have you thought this through?
There's a big difference between traveling to an exotic location with warm breezes, sunshine, and beaches for a vacation, and actually living there permanently. Consider a scenario we've seen happen time and time again.
How it'll all play out
Sure, you may have done your homework and read about all of the "opportunities" of retiring to some faraway place. Perfect weather, low cost of living, affordable health care, and great home prices ... at least compared with where you currently live.
So in your excitement, you jump on the plane, fly down to Somewhere, and can't believe what your money will purchase. You find the perfect place that just happened to go up on the market, so you contact a real estate agent and make an offer the same day. Wonder of wonders, it's accepted and you now own your dream retirement home. This is it. You're planning on living out the rest of your days right here in this tranquil, peaceful paradise.
Returning home, you sell your current house if you're lucky, and then ship, fly, or drag everything you own down to your new digs. You've settled into the perfect life of a retiree in an exotic location.
Days turn into weeks and weeks turn into months as you meet other expatriates, swapping tales from previous lives as well as current information. Family members and friends all come down to visit, clearly envious of your new lifestyle, and for a while your new hosting role is exciting. Could it get any better?
Then it happens.
Your friends don't make the trip down this year. Your kids are busier than ever with their own lives and families. Grandbabies are born, and you're beginning to feel as if you're missing out on their lives. The bloom is coming off the rose.
Your next-door neighbors start a home-based business creating havoc with parking, and a nightclub opens a few doors down, where the noise can be heard well into the night. Horror stories of friends' homes being robbed and cars being broken into add up and intrude into the self-confidence you had about living overseas. You contemplate leaving your "paradise."
Even condos can present unexpected problems. If neighbors don't pay monthly maintenance fees, repairs can pile up and your investment can go down the drain, causing costly legal fights and making relationships among neighbors untenable.
Don't count on ethics
Don't be fooled. You won't find a regulatory governing body that supervises real estate sales in most of these tropical Edens. Often, anyone can become a real estate broker; Billy has even been approached on a couple of occasions to join them. No license is needed, no schooling, no bonding, and no continuing education. All you need is enough money to print some business cards, and voila! You're a broker. Selling real estate is a popular first job for expatriates.
Without real estate laws to protect you, it's 100% buyer beware. You're buying what you see, not what's in those glossy brochures.
Try before you buy
Our advice has always been to rent first. After all, it can take months for a town or neighborhood to reveal its true character. What seems like a quaint difference in culture could become a sore point later down the line. You might learn that a particular area is not right for you and that a place a few miles away is preferable.
Go ahead and rent a place. Get to know and live alongside the local culture. Travel around the area and learn the ins and outs of a city or town. Don't get caught up in the sales hype encouraging you to buy now.
Neighborhoods can change in unpredictable ways
Living in many foreign countries isn't like living back home. You won't always find zoning laws or city planning. So if you sink a large portion of your wealth into a house and your surroundings become undesirable, you'll find yourself stuck with a place that no longer works for you.
One couple we know purchased a run-down lakefront home. Putting in hours of sweat equity and a good deal of cash, they made the place into a beautiful show house. Then a high-density housing development was built near them, stressing the utilities and bringing thousands of shady characters with it. The couple sold out and moved back to the States.
Dealing with foreign laws and economies
Expatriate homeowners and their money can also become prime targets of the local governments. Nations around the globe have been hurt by the sluggish economy and are always looking for more revenue. They can raise taxes or even alter immigration requirements for their own gain.
If you have all your money invested into your home, and the local housing market goes south, you may find that your options to return north of the border have withered. A new life abroad is a bit like a fantasy, and fantasies can go sour.
Sometimes people take this leap of moving abroad only to find that the promise is often greater than the fulfillment. It's up to you to make a new lifestyle work, and both dreams and marriages can collapse under the pressure of a move overseas, as one spouse gets homesick and misses family connections.
Remember, it's a lot easier to buy a home than to sell, and for every buyer, there's a seller who wants out. Ask yourself why the sellers want to give up their paradise. You might learn something useful and save yourself a boatload of money.
Fool contributors Billy and Akaisha Kaderli write regularly for the Fool's Rule Your Retirement newsletter. They retired in 1991 from the brokerage and restaurant businesses to a life of international travel. Visit their website at RetireEarlyLifestyle.com. The Fool has a disclosure policy.