Belize is emerging as a significant player in the overseas real estate market. The country has an economy growing at approximately 20% annually and new tax incentives to boot. When compared to the U.S., Belize offers more benefits for home and property buying.
Many American citizens are excited about the investment opportunities in Belize. For instance, a foreigner can own property in Belize and has the same rights as a Belizean citizen. Similarly, there are no restrictions on noncitizens owning property, and no capital gains taxes. On top of that, if you resell your property at a greater cost, there is no additional tax on the money gained.
Belize is also famous for its friendly attitude toward foreigners who want to invest in the country. As a matter of fact, the majority of all transactions occur when one or both parties are off the island. However, each purchase has its advantages and its downsides, so you have to be conversant with the risks of buying a property in Belize.
Despite the great prospects, some people have faced a myriad of challenges when trying to invest in the Belize real estate market. That’s why it’s important to get professional help through lawyers and real estate agents.
Is it Safe to Buy Property in Belize?
When it comes to purchasing a property in Belize, it’s wise to be cautious. Despite the numerous advantages, there are many challenges for those unsuspecting folks who dive in before testing the water’s depth.
Like anywhere in the world, local Belize real estate scams do exist. For instance, foreigners are at a distinct disadvantage when dealing with courts, police, etc. Also, political unrest has made parts of Central America appear sketchy to many Americans.
When it’s time for you to purchase in Belize, don’t gamble—consider the security of doing business in a country with high levels of graft. Do your due diligence and know that a little caution goes a long way.
Can a U.S. Citizen Own Property in Belize?
The short answer is: Yes! Belize has a conducive business environment that is ideal for American investors. American citizens who wish to own property in Belize can enjoy the same rights as locals. For instance, U.S. buyers are not required to obtain any license or permit to purchase real estate in Belize. This comes from the country’s British Commonwealth roots and the British Common Law system.
According to Investopedia, Belize is an island country that doesn’t have a tax treaty with the United States. Once you’ve been a permanent resident for five or more years, you can apply for citizenship. U.S. citizens pay no capital gains taxes, and property taxes are so low.
No tax in Belize means no Foreign Tax Credit to net against your U.S. rate. However, the Government Stamp Transfer Tax adds 8 percent to the purchase price.
Related: Cost of Living in Belize
Is it Possible to Get Financing on a Property in Belize?
Many investors think that in order to purchase property in Belize, they have to pay cash for the entire sale. That’s not the case. Instead, there are many financing options available to U.S. buyers. One of the financial options available to non-residents of Belize is a loan from a local bank. This is especially easy if you already have a savings account with the bank.
Bank interest rates typically range from 10-18% interest with fixed terms of one year. The banks provide you 60-80 percent of the purchase price of the property. Remember that many banks in Belize offer more than one type of real estate loan.
If you use a lender in Belize, you must meet qualifications similar to those required by the U.S. based lenders. Fortunately, it isn’t challenging to get a bank to agree to finance the property’s purchase. Alternatively, you can seek financing back home—a great option if you have a good credit score.
The Cost of Buying Real Estate in Belize
Belize is the perfect example of an untapped market. In terms of choosing to live in Belize, you will find the property’s cost to be reasonable. A standard estimate of a beach plot may range from $10,000 to $200,000 onwards. Once you agree with the seller, you must pay 10% of the deposit, which takes the property off the market.
A lawyer will typically charge 2% of the selling price with a minimum charge of $600. This fee is based on evaluation and not necessarily the purchase price. The property transfer taxes in the Belize real estate market are set at 5%. Your attorney usually pays this payment as part of their obligation. Fortunately, the first $10,000 of the purchase price is tax-free.
Fees, Closing Costs, Etc.
When buying real estate, you will have to add other expenses to the property price. It is customary that the purchaser pays for all closing costs under Belize transactions. Fortunately, there are no inheritance taxes, and property taxes are meager at 1% of the property’s value. On top of that, filing and registration commissions are usually around $50USD.
The construction cost ranges from $50 – 80US per Sq. Ft. and $85 – $140 US per Sq. ft. for upmarket constructions. Similarly, agents typically charge a 7% commission on residential property and approximately 10% on land. However, the process for Transfer Certificate may drag on for months and may incur high costs.
With its low cost of living, property taxes of 15-35 USD per year, Belize is an investment paradise. Although there is no way to avoid or lower the mandatory fees, you can protect yourself from paying more in a couple of ways.
Related: Belize Housing
6 Risks Associated with Buying in Belize
Buying Property in Belize comes with several risks. These risks include:
1. Belize Construction Standards
The construction standards in Belize are pretty close to the construction standards in the U.S. However, the days of building what you like and the way you want may soon be at an end.
Reinforced concrete is now the preferred construction for house foundation slabs and walls. Unfortunately, it is much more expensive to build with concrete. At the same time, the Building Act also allows the demolition of buildings erected in contravention of its provisions.
2. Clear Title
You should perform due diligence when buying a property in Belize as there have been highly publicized cases of land title fraud. Forged signatures in transfer deeds, false witnesses, and identity theft are common types of land title fraud.
Clear title fraud typically starts with identity theft, so the criminal can pass themselves off as the seller. However, it’s easy to carry out background checks, which would help show if a seller’s identity is genuine or fake. You should also request an abstract of the land title from the seller and cross-reference it at the Land Registry.
3. Escrow Companies
Property scams continue to be far too ubiquitous in Belize. In that light, escrow fraud is increasingly becoming a problem for consumers and those in Belize’s real estate industry. One particular risk is the risk of fake escrow companies defrauding property buyers.
Another ploy involves a scam artist posing as a reliable escrow firm and asking you to send money to them. The scam sounds simple, but the results are remarkable. And here’s the worst part: there’s probably nothing you can do about it.
Shady home sellers will also attempt to deceive you to get more than the property’s worth. At the same time, many victims are too embarrassed to file complaints, making it harder to catch the escrow scammers.
The annual arrival of hurricane season in Belize is a nightmare to property owners. That’s because home sales happen less frequently and at a lower cost immediately after a storm. Additionally, hurricanes have severe implications for property valuations, rental yields, and rising insurance premiums. As a result, Belize homebuyers are looking for homes that meet the current zoning and hurricane requirements.
As a developing country, Belize is still grappling with endemic poverty. A significant percentage of the population has no source of income, and many are landless. As mentioned earlier, most U.S. investors buy land in Belize without ever setting foot in the country. The result is that owners may leave their unused land exposed to squatters.
It is challenging to keep an eye on unused land in a foreign territory. This situation encourages some locals to invade people’s homes and live in it without the owner’s permission. Ultimately, it becomes difficult and costly to evict the squatters from your land, especially when politicians get involved in the matter.
6. Con Artists
The real estate market in Belize is awash with con artists. Foreigners, especially Americans, have lost vast sums while trying to acquire property in the country. Similarly, many fraudulent companies prepare fake property ownership documents and try to trick unsuspecting Americans.
According to GAB, the country is reeling from a corrupt bureaucracy that unwittingly aids the con artists. It’s also possible for people to “sell” your property without your knowledge. Although con artists are not limited to Belize, they are especially common and more aggressive.
The Central American country of Belize has become very popular among Americans who want to buy property overseas. The prospect of low taxes and high returns is too tempting to ignore. As a result, several investment agencies have sprung up in Belize. Some are legitimate businesses trying to introduce American investors into the Belizean real estate market. Unfortunately, others have ulterior motives.
Many of these investors are successful and do not encounter any problems. But there are many risks of buying a property in Belize that can lead to massive losses. So, the best advice is to act wisely and cautiously. If you are planning on investing in the Belize real estate market, don’t hesitate to contact us for more information.