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Citizenship-by-Investment: How to Buy a Home That Could Come With a Foreign Passport or Residency Permit

Marjorie Garrett loves the 3,500-square-foot custom home she and her husband built. The couple designed it for indoor-outdoor living, allowing them to slide open their window-walls in the morning and enjoy the breezes all day.

Of course, Mrs. Garrett, 67, occasionally has to relocate a scorpion. That’s because she and her husband, Jim Garrett, 70, live in Ojochal, Costa Rica, where they moved after retiring from the air-conditioner manufacturing business they owned in Frederick, Md. The two obtained temporary residency status in Costa Rica through the country’s residency-by-investment program by purchasing their home there, and they’re on the path to becoming permanent residents.

Sunset view from the terrace of Marjorie and Jim Garrett’s home in Ojochal, Costa Rica.

Although Mrs. Garrett declined to say how much they paid for their new home, similar models at the Ventana Costa Rica development in which they live sell for about $1 million, according to Craig Studnicky, chief executive officer of Miami-based ISG World, which handles sales and marketing for the project.

“There’s a lot of grumpiness going on in the States, and a lot of divisiveness, and I don’t sense that as much down here,” Mrs. Garrett said. “We also looked at moving to Portugal, but Costa Rica just fit the bill, and it’s been a great decision.”

The Garretts are among the many Americans who are opting to become expatriates, seeking residency or even citizenship in other countries to lower their cost of living, receive tax benefits, add to their passport portfolio or improve their quality of life. According to the Association of Americans Resident Overseas, nearly nine million Americans (excluding military) live abroad in more than 160 countries.

But rather than traveling on a tourist visa, which limits how long a visitor can stay in another country, residency acquired by Americans through a residency-by-investment program allows them to live, work or study in another country and may even include access to the local healthcare system. In some cases, it enhances visa-free travel as well. One of the easiest ways to obtain residency or citizenship is through the citizenship-by-investment or residency-by-investment programs offered by numerous foreign nations.

Early in the Covid-19 pandemic, when international travel was limited, those with multiple citizenships and passports found they had more options to enter foreign countries or relocate. “A lot of our clients talk about passport portfolios, where they have a few passports that give them the ability to not only travel visa-free but to settle,” said Mehdi Kadiri, managing partner and head of North America at Henley & Partners, a residence and citizenship advisory firm. “When you acquire citizenship in the European Union, for example, it gives you access to live, work and study in the other 26 European Union countries in addition to the country in which you acquired citizenship.”

Mr. Kadiri said that the most popular countries now with his clients are Portugal, which offers a residency-by-investment program that requires a minimum real-estate investment of €280,000, about $320,000, depending on the type and location of the property, and St. Kitts and Nevis, which offers citizenship by investment.

The interior of the Garretts’ home.

Developers are capitalizing on the increased interest from Americans in purchasing homes abroad, often offering assistance to those seeking permanent residency or citizenship. While Bahamian law does not specifically provide for a minimum investment to make a buyer eligible for permanent residency, under government policy the minimum real-estate investment required is $750,000, according to Khaalis Rolle, president of Sterling Global Advisory Services, an affiliate of Sterling Global Financial. Sterling Global Financial is the developer of Montage Cay, a mixed-use development in the Bahamas that will include 48 residences starting at $5 million and a hotel. Mr. Rolle, who previously served as minister of state for investments in the office of the Prime Minister of The Bahamas, said that an application for residency will not be advanced to the immigration board if it does not meet the $750,000 minimum threshold.

According to the Government of Grenada’s citizenship-by-investment website, the country’s program is open to those who spend at least $220,000 on a home in an approved project there. Citizens of Grenada can travel, visa-free, to more than 140 countries, including China.

“Grenada has no foreign income tax, wealth tax or inheritance tax, so a lot of people look at Grenada as a tax haven,” said Kandace Douglas, sales and marketing director for Silversands Villas in Saint George’s, Grenada, where pricing starts at $7 million. Sales launched in April 2021.

According to the U.S. Department of State, a U.S. citizen may accept citizenship in a foreign country without risking his or her U.S. citizenship.

Here are some things to consider if you’re interested in obtaining residency or citizenship in another nation.

Rent before you buy. “The biggest mistake I see people making is they think they are going to run away from their problems by being down here,” Mrs. Garrett said of living in Costa Rica. “This is a Third World country. We may lose electricity periodically or have to drive miles out of our way because of a mudslide. You have to understand the culture. Do your due diligence, and take your time.” Consider renting a home for several months or more before moving ahead with a purchase.

Expect to pay cash. Mortgages in a foreign country may be hard to come by. According to Mr. Studnicky, conventional mortgage financing is impossible to find in Costa Rica. Mr. Kadiri said that to qualify for residency-by-investment in Portugal, financing is available only for the portion of the purchase price over and above the minimum investment required for residency.

Beware the consequences. Establishing residency or citizenship in another country may have legal, tax and estate-planning consequences. Mr. Kadiri said he heard a horror story in which an American worked directly with a real-estate agent in Portugal to purchase a home and then found out the property didn’t qualify for the residency-by-investment program. Property rights are another issue. Americans cannot own real estate outright in some countries, said Mr. Studnicky, who also suggests looking into import taxes for vehicles and personal belongings, which can be steep. And remember that just because you reside in another country doesn’t exempt you from paying U.S. income taxes.

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