Offshore Living Letter Build Wealth and Protect Your Assets Thu, 14 Dec 2017 22:21:22 +0000 en-US hourly 1 68055050 Don’t Risk Your Retirement By Not Investing In Cryptocurrency Thu, 14 Dec 2017 12:30:13 +0000 The post Don’t Risk Your Retirement By Not Investing In Cryptocurrency appeared first on Offshore Living Letter.


The Long-Term Risks Of Not Owning Cryptocurrency

The risk of owning cryptocurrency is pretty simple.

You could lose money… but that’s a risk that comes with any investment.

Every sane crypto investor understands this going in.

But what about the risks of not owning cryptocurrencies?

Those are very real too…

What if bitcoin ownership goes from less than 1% to 10%? How about 35%?

What if current debt-based monetary systems are doomed in the long term?

What if central banks lose their monopoly on legal tender? (It already happened in Japan.)

What if our savings continue to be debased by reckless monetary policy?

What if cryptocurrency prices only peak and stabilize after decades, when the majority of people are invested?

What if bitcoin owners shift some profits into other cryptocurrencies that have improved on the original idea?

What if we could choose from many different types of money?

What if we don’t need banks?

Finally, what if we’re in the early stages of a financial revolution?

These questions should reinforce the magnitude of what we’re talking about here.

If you don’t own any, you risk missing out on what could be the greatest wealth generation event ever.

Cryptocurrency A No-Brainer For Retirement Planning?

I believe cryptocurrency should be part of every investor’s retirement portfolio. It doesn’t have to start out as a big chunk of your holdings. But for the reasons I explained above, I believe the risks of not owning it are high.

Cryptocurrency is technologically superior to traditional monetary systems. It is independent, decentralized, and has crazy momentum going for it.

We’re adding millions of new owners per month. This is exactly how the beginning of cryptocurrency going mainstream would look.

Institutional interest is rising, and many firms are now dipping their toes in. Coinbase just announced a custodial service for hedge funds and other financial groups looking to diversify into cryptocurrencies. It thinks there could be $10 billion in institutional money on the sidelines. I suspect it’s higher than that.

So why wouldn’t everyone invest a bit today, just in case this mainstream scenario happens? I believe that’s what we’re starting to see play out right now.

And, keep in mind, that if cryptocurrency succeeds (which I believe it will), it will reward owners proportionally to how early they got in. Hence the recent buying frenzy…

So why not buy a little and hold it for a decade or so? It could make all the difference in the quality of your financial future.

To be clear, I’m not saying cryptocurrency going mainstream is a slam dunk. There are real risks. I’m simply saying that the potential rewards far outweigh the risks.

Why Bitcoin Should Be In Your Retirement Portfolio

People think you should buy bitcoin because the price might go up.

But the real reason you should own bitcoin—especially in your retirement portfolio—is that it’s a bet on a monetary revolution.

Crypto assets are all about cutting out the banks, middlemen, financiers, and academics who control our current monetary system.

The monetary policy of today’s world is a mess rife with conflicts of interest and bad incentives. Every country does it similarly. And government is always tempted to print money. It punishes savers and rewards borrowers.

A well-constructed cryptocurrency, on the other hand, has a hard cap on the number of “coins” in existence.

There will only ever be 21 million bitcoins. You can’t change that number. There are a little more than 15 million available today.

So if we’re looking at bitcoin as a competitor to the dollar, there’s no contest. The U.S. government, for example, borrows more than $1 million each minute… printing money like crazy all the while.

That’s why bitcoin has risen from around $0.005 in 2010 to more than $5,000 today.

Bitcoin is a call option on a future where it is mainstream money. You don’t sell for double or triple what you put in; you hold on and hope it keeps going up. Less than 1% of people own bitcoin today, and if it becomes mainstream money, today’s bitcoin owners may be tomorrow’s new 1% of earners.

But it’s not just bitcoin anymore. There are hundreds of interesting cryptocurrencies out there—all competing against each other, sharing code, and breaking new ground.

Here’s what’s really revolutionary about it…

All these “coins” or “tokens” (digital assets) have their own funding mechanism—the initial coin offering, or ICO—in which well-run projects raise tens of millions of dollars each week… hundreds of millions in many weeks, actually.

So they don’t need the stock market or venture capitalists. Crypto is its own funding source.

These crypto projects are trying to do big things like overthrow large incumbent financial institutions, software companies, and (in some ways) governments—or at least loosen their monopoly on money.

After all, there’s no good reason a government should have a monopoly on legal tender. Libertarians like Ron Paul have long been calling for “currency competition.” We shouldn’t be forced to use dollars that erode in value.

The stakes are high.

Crypto has the potential to be a better form of money compared to the current (barbaric) methods employed by most governments.

So that’s why you would want to own at least a little bitcoin in your retirement account. Capital gains taxes can be major there. Because if the crazy revolution happens, you’ll do very, very well, as long as you buy before half of the country gets in.

If it becomes popular as a way to store value for even 10% of the population, that’s more than enough to take it to at least $100,000 per coin by my rough estimates. It’s hard to say exactly, but demand is high and rising fast.

Each bitcoin is divisible into 100 million pieces. Each piece is one “satoshi.”

If bitcoin continues to rise in value, we may start thinking about prices in satoshis, not bitcoins. Bitcoins will be for very large purchases, and satoshis will be for everything else.

This is already happening in the crypto community. When we buy other cryptocurrencies, we usually buy them with bitcoin. It’s easier to think about thousands of satoshis than it is to think about tiny fractions of a bitcoin.

You don’t need to buy a whole bitcoin. Start small, and it could still turn into a great deal of money one day.

If you’re looking to do it in a retirement account, the most well-known player in the space is fittingly called Bitcoin IRA. The company takes a 15% upfront fee, but the tax savings down the road could be tremendous if bitcoin goes mainstream.

If you’re intrigued by bitcoin and the idea of investing in smaller (new) cryptocurrencies, one of the better and safer ways to invest is to follow my recommendations in a new investment service I’m making available to interested readers of Offshore Living Letter.

If you’re interested, just click here for more details on how you can join us… I will even give you $250 in bitcoin as a “token” of my appreciation.

Good investing,

Adam Sharp

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How The IRS Could Bring Rain On The Royal Wedding Mon, 11 Dec 2017 12:30:13 +0000 The post How The IRS Could Bring Rain On The Royal Wedding appeared first on Offshore Living Letter.


Dear Prince Harry, Here’s What You And Your Bride-To-Be Need To Know About U.S. Taxes

When the engagement between Britain’s Prince Harry and actress Meghan Markle was announced a few weeks ago, the press began to speculate about what affects Ms. Markle’s status as an American citizen might have on the royal family once she becomes part of it.

Specifically, what about required reporting under FATCA and other IRS rules?

Speculation continues as to whether Ms. Markle will renounce her U.S. citizenship as part of her new life plan. Of course, she wouldn’t be able to do that until after she’s been naturalized in the U.K., as it doesn’t seem she currently holds a second passport.

While I’m sure Ms. Markle has access to excellent U.S. tax advisors, here are a few simple suggestions for strategies that could keep Prince Harry’s financial information private from the IRS…

Some Recommendations For Ms. Markle

I’d recommend that, once married, Ms. Markle file her annual U.S. tax return using Married Filing Separately (MFS) status. This could mean some potentially negative tax implications for Ms. Markle, but I’m sure Prince Harry would be up for compensating his bride for any additional taxes she might become liable for as a result of opting for MFS status.

Specifically, the downsides could come in the form of reduced deduction opportunities and ineligibility for certain tax credits. A bigger hit could result from the tax rates that Ms. Markle would be subject to filing separately.

On the other hand, Married Filing Separately status would eliminate the requirement to report the spouse’s (that is, Prince Harry’s) assets on Form 8938. This form, a byproduct of FATCA, requires all U.S. persons to list all their foreign financial assets. As Prince Harry’s wife, his assets become Ms. Markle’s assets…

So, again, I’d bet Prince Harry and his family would be up for covering any additional tax expense in the interest of keeping their family finances in the family. Indeed, many U.S. citizens married to non-U.S. persons file separately to keep their spouses’ income away from the IRS’s purview.

Using the MFS status would not eliminate Ms. Markle’s filing requirement for the Foreign Bank Account Report (FBAR). That form must be submitted to the U.S. Treasury by any U.S. person who has US$10,000 or more in any non-U.S. bank accounts.

Important in this context is that it’s not only accounts that the filer owns personally but also accounts for which he or she has signatory authority.

This could be a good loophole for Prince Harry…

“Honey, it doesn’t make sense to add you to any palace bank account. This way, none of the royal accounts are reportable on the FBAR. Surely, you understand, dearest…”

If Ms. Markle were to give up her U.S. citizenship, then the ongoing tax filing issues would become moot.

However, if she does decide to renounce, she’ll face the so-called “exit tax,” assuming her taxes paid or total net worth meets the thresholds.

The Exit Tax comes into play if the renouncer has paid an average tax of US$160,000 or more over the last five years. That figure is for taxes paid (not income) and is an annual average over five years.

In other words, few people qualify under this threshold.

The net worth threshold is US$2 million, taking into account all assets including your home. More people meet this threshold and it’s one that Prince Harry may want to pay attention to if Ms. Markle does in fact intend to give up her U.S. citizenship at any point. Any joint assets or any property gifted could easily push her into this category.

The exit tax is on the way out the door. The young couple may or may not ever have to worry about it. Meantime, while Ms. Markle remains a U.S. citizen, the couple should be paying attention to the gift tax. Any gift worth more than US$100,000, including gifts from related parties that total more than US$100,000, have to be reported to the U.S. IRS on Form 3520.

Of course worry over taxes and tax filings shouldn’t distract the couple from their engagement euphoria and wedding planning.

But I hope that the couple’s advisors are keeping them apprised of the requirements. I’d hate to read headlines at some point down the line about Princess Meghan ending up in an orange jumpsuit because she neglected to report the value of an expensive wedding present.

Lief Simon

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EU Blacklists 17 Tax Havens, Another 47 On Gray List Thu, 07 Dec 2017 12:30:57 +0000 The post EU Blacklists 17 Tax Havens, Another 47 On Gray List appeared first on Offshore Living Letter.


What The New EU Black And Gray Lists Mean For You

The EU has this week released a short list of 17 countries it is officially putting on notice because of their taxation policies.

Panama is on that list.

So is South Korea… as well as the U.S. territories of American Samoa and Guam.

In addition to this so-called blacklist, the EU has also named 47 countries to its gray list. This list includes several U.K. territories as well as eight Caribbean countries hit by hurricanes this year. The EU took pity, it seems, and decided to give these nations struggling with their natural-disaster recoveries more time to comply with the EU requirements before being moved to the dreaded blacklist.

Neither list includes any EU countries… even though several are well known for their favorable tax policies. There’s a reason big companies like Apple and Amazon have decided to base activity in these EU jurisdictions and it has to do with minimizing their overall tax hits.

Ireland, Luxembourg, and Malta, for example, are all considered by many in the offshore world to be especially tax-friendly and so, by rights, should have been included on the black and/or gray lists. The EU seems to have chosen to ignore its own backyard.

Meantime, it is considering adding the United States to the list if the corporate tax rate is reduced from 35% to 20%, as is currently being discussed.

While tax evasion is illegal and should be controlled, capital goes where it’s best treated. Apple and Amazon realized they would be taxed less if they had headquarters in Ireland, so they moved to Ireland.

The Panama Papers and the more recent Paradise Papers have brought big-time negative attention to countries where companies and individuals set up business and asset-protection structures. Panama was the center of the thereby-named Panama Papers, but the law firm outed in that scandal had offices in many countries and used jurisdictions other than Panama for most of the structures they set up.

Bermuda was at the center of the Paradise Papers debacle… but for some reason not named on the just released blacklist.

I know many Europeans who have chosen to live in countries that take a jurisdictional approach to taxation and, as a result, pay no income tax. These countries include Nicaragua, Costa Rica, Belize, and Malaysia, but none of those countries are on the blacklist just released either.

Portugal has its own blacklist that includes all no-tax and jurisdictional taxation countries. Use an entity from one of those countries to hold property in Portugal, and you’ll be liable for penalty taxes in Portugal.

France, too. Hold real estate in this country in an entity from a blacklisted country and you pay an extra annual tax based on the value of the property.

Individual European countries have long kept their own tax blacklists, but now the EU is trying to standardize the lists and work as a single group to force countries worldwide to adhere to their taxation values or face consequences.

What This Means For The Future

No consequences have been laid out formally with the announcement, but EU institutions are not permitted to work with blacklisted countries and financial transactions from those countries are expected to be more closely scrutinized.

On a practical level, those of us trying to diversify internationally and protect our assets through corporations or other structures in blacklisted jurisdictions will find investing and doing business in the EU more complicated.

In France, for example, banks are again lending to nonresidents. However, if you use an entity (a corporation that you use to hold real estate, for example) from a blacklisted country… or generate any income from a blacklisted country (rental income from a Panama apartment, say)… banks in France won’t talk to you.

They’ll see “Panama” in your file and move on. They don’t want the hassle… the extra scrutiny from their bank regulators that lending to you might bring.

Despite the fact that you’ve done nothing illegal.

For most people, the EU blacklist won’t matter. However, as the world’s larger economies continue to try to squeeze the smaller countries that don’t share their taxation philosophies, you need to be aware of the complications that can arise as you work to diversify and invest overseas.

I’m speaking now with my offshore contacts to try to get a handle on the best options and opportunities going forward.

One country that isn’t on the EU blacklist (or Portugal’s either) is the Dominican Republic.

I’ll be in the DR next week and plan to discuss the EU’s new list with my attorney there… and to think through with her how the DR could now play a bigger role in my overall global-diversification strategy.

One more reason this country stands out among all your go-offshore options.

Lief Simon

The post EU Blacklists 17 Tax Havens, Another 47 On Gray List appeared first on Offshore Living Letter.

Top 5 Rental Markets In The Dominican Republic Today Mon, 04 Dec 2017 22:30:41 +0000 The post Top 5 Rental Markets In The Dominican Republic Today appeared first on Offshore Living Letter.


5 Places To Buy For Cash Flow In The Caribbean

For the last four years, we’ve been touting the Dominican Republic as a place where investors can find quality overseas rental property investment opportunities that don’t require huge initial investment sums.

Plus, local bank financing is available in this country for nonresidents and foreigners.

Today, global property investors, particularly North Americans, are starting to take notice… and, as a result, the Dominican Republic is looking more and more like a bona-fide 21st-century gold rush.

This country’s economy is booming…

It is investing heavily in infrastructure development… making itself more appealing both to foreign investors and tourists with each passing month…

Indeed, the DR is the undisputed king of Caribbean tourism right now, welcoming record and growing numbers of visitors from North America, Europe, and South America (direct flights are available from all three continents)—meaning it isn’t relying on just one market for incoming tourism capital.

Plus, the interesting real estate investment opportunities here are not limited to only one part of the country.

At the current prices, it’s still a buyer’s market… but I believe that window is closing.

If you’ve been sitting on the sidelines waiting to pull the trigger in this market, I’d advise you get in game now or risk having to pay a premium to get in in the future.

Recently, I had boots on the ground in the Dominican Republic, first in Santo Domingo and then along the Caribbean coast from La Romana to Punta Cana, touring different developments and getting status updates on construction, remaining inventory, and new projects coming online.

As a result of my extended scouting experience, I’ve identified five top markets of particular opportunity for both short- and long-term rental cash flow.

Top Locations To Buy For Rental Properties

#1: Santo Domingo, Quintessential Colonial Capital

The country’s killer beaches are the DR’s main draw, but Santo Domingo adds one of the biggest and oldest colonial town centers to the mix of sites to see and lifestyles to enjoy.

Santo Domingo is the first permanent European settlement in the New World and the Caribbean’s only medieval Spanish city. The city’s extensive colonial zone offers interesting options for both investment and lifestyle.

The abundant presence of multinationals in the Dominican Republic’s capital city translates to an opportunity to capitalize on short-term (fewer than 30 days) and extended-stay (1 to 6 months) rental markets catering to business executives… in addition to the demand for long-term leases.

#2: Juan Dolio, Original Seaside Escape

Juan Dolio, just 45 minutes east of Santo Domingo, was one of the first areas in the Dominican Republic to be developed for tourism. It was home to some of the country’s first tourist resorts. This is where the idea of the all-inclusive resort was pioneered.

Its main attraction, of course, is the beach, Playa Juan Dolio, popular among locals and tourists alike. Then you’ve got the town center where you’ll find a variety of local and international restaurants, plus cafés, bars, and small shops. Nearby are two major golf courses.

And Juan Dolio is only 25 minutes from the Las Américas International airport, making it very attractive for international visitors.

#3: La Romana, The DR’s Luxury Side

La Romana, making a name for itself on the global tourism scene, is home to several luxury beachfront resort communities, including Playa Nueva Romana and Casa de Campo, one of the largest exclusive resorts in the Dominican Republic. It has its own international airport that takes in more than 200,000 visitors annually.

An investment in a luxury, master-planned beachfront community in La Romana is an ideal option for generating good and reliable rental income. If you’re looking for rental income plus capital appreciation, I recommend Playa Nueva Romana by Bahia Principe.

#4: Punta Cana, Tourist Hotspot

Punta Cana, situated on the easternmost tip of the country, with 32 kms of white-sand Caribbean coast, is growing up to become Cancún-light. The white-sand beaches are lined with all-inclusive resorts and condo complexes set up as rentals, and the streets behind them offer strip malls, restaurants, and shops, adventure parks, and other entertainment options.

It’s the typical vacationer’s paradise and recognized as the Dominican Republic’s most popular tourist destination as evidenced by the more than 6 million travelers to its international airport over the last two years. This huge, established, and continually expanding tourism market is a rental investor’s dream.

#5: Las Terrenas, Euro-Chic Beach Town

We’ve seen our share of Caribbean beach towns… Las Terrenas is that but more.

Scratch the surface, and you find one of the most interesting expat communities you’ll encounter anywhere in the world. Americans are in the minority; this is a majority French expat population, bolstered by Italians, Brits, Danes, and Germans.

The white sandy coast of this part of the DR and the dancing topaz waters that lap it could be mistaken for their counterparts over on the Med. Onshore, you hear more French spoken than anything else, the baguette in town is authentic, and people kiss on both cheeks in greeting. Antiques shops offer toile-covered sofas and other French favorites.

Back in 2005, when we began paying attention to this market, we recommended Las Terrenas as a capital appreciation play. Prices were cheap, and the product on offer was as good as it can get from an investment point of view—white-sand Caribbean shores.

Indeed, appreciation followed, as much as 25% per year for four years running.

Today, Las Terrenas is still a buy but for different reasons. While capital appreciation is likely to continue (though nothing like 25% per year), the strong and increasing demand from tourists, who have a much easier time of it making their way here these days, means today’s investor should buy for rental yield.

Las Terrenas boasts long stretches of sandy coastline. One of the nicest things about them is that they’re not lined with hotels or massive condo developments. Height restrictions keep buildings at the beach to three and four stories, no higher. And, despite a lot of construction over the past dozen years, demand still outpaces the builders.

Omar Best

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3 Solid Reasons To Start Investing In The Dominican Republic Thu, 30 Nov 2017 12:30:47 +0000 The post 3 Solid Reasons To Start Investing In The Dominican Republic appeared first on Offshore Living Letter.


Overlooked But Top Tier—Why The Dominican Republic Is My Favorite Go Offshore Choice For 2018

The Dominican Republic first came onto my radar in 2005. It was the country’s undervalued beachfront property that got my attention back then.

I was among the first to shine the light on the DR for American property investors, but its miles and miles of soft-sand beaches had been attracting foreign tourists and European investors for decades before that. The French, especially, have been moving to and investing in the Dominican Republic for generations.

Today I want to focus your attention on the Dominican Republic in a bigger-picture way.

Now that I’ve gotten to know it as well as I have, I believe this island nation is as close to perfect as an offshore destination gets. It checks nearly every box on my flag-planting list.

I’d go so far as to describe it as the world’s best offshore haven.

Why The Dominican Republic

For the past three years the Dominican Republic’s economy has been the fastest growing in the Americas. The country enjoyed growth rates of 7% per year in 2014 and 2015. 2016 saw 6.6% growth and 2017 continues just as strong as we move through the final quarter of the year thanks largely to millions of tourism dollars from North American and European travelers flocking to those sandy beaches I mentioned in growing numbers.

Alongside economic growth, the country’s recently re-elected President Danilo Medina has made education a priority, sponsoring literacy and vocational training programs for adults and building 2,500 new schools during his four years in office so far.

“The current administration is working hard to get this country beyond developing-world status,” one local businessman I spent time with recently told me.

The country’s infrastructure has improved dramatically since my first visit. Today new highways connect most of the resort and beach areas. The colonial zone in Santo Domingo is enjoying a facelift. New roads and sidewalks are being built, and utility cables are being buried underground.

More flights from the United States make the island more accessible, and major international hotel chains are targeting the DR, specifically Santo Domingo, for new properties. Recently opened are a JW Marriott and an Embassy Suites by Hilton. Under way are an InterContinental and a Hard Rock Hotel.

Meantime, Carnival is bringing a ship a day to Santo Domingo’s cruise dock.

Hard Rock International Hotel Being Built In Santo Domingo, DR.
Hard Rock International Hotel Being Built In Santo Domingo, DR.

The DR will see more than 6.5 million tourists this year; about 60% of these are from North America. President Danilo’s administration is trying to attract more Chinese tourists and has also targeted Israel with success. Charters arrive regularly from that country.

Beyond tourism, the Dominican Republic’s economy relies on agriculture (bananas, coffee, and cocoa) and mining.

That’s the country big picture.

How Does The DR Stack Up As An Offshore Haven Specifically?

How does the DR stack up as an offshore haven specifically? It’s a top-tier choice for these flag-planting activities in particular:

  • Residency: A
  • Citizenship: A
  • Investing: A
  • Taxation: A
  • Banking: B+

The reasons to target the Dominican Republic for residency (either as a backup or because you’d like to live in the country) and alternative citizenship are compelling. This country offers some of the easiest and cheapest residency options available anywhere.

Generally speaking, gaining a second citizenship takes time or money.

The cost of economic citizenship from Dominica (not to be confused with the Dominican Republic), for example, will run you a minimum of US$100,000 plus fees for an individual and at least US$175,000 plus fees for a couple.

Furthermore, Dominica is a budget choice in this context. Other economic citizenship options are more costly.

If you don’t have or aren’t willing to spend the money to purchase second citizenship, you have to put in the time. Most countries require at least five years as a legal resident before you become eligible for naturalization.

The Dominican Republic requires only three years of residency… and that can be fast-tracked.

Dominican Republic Residency Options

The Dominican Republic offers ordinary and fast-track residency options. The fast track includes residency through investment as well as a program for retirees who can prove US$1,500 a month in pension income or US $2,000 in non-pension passive income.

Obtain residency under a fast-track option, and your naturalization process is fast-tracked, as well. You can start the application process for naturalization after just six months rather than waiting the full three years of residency. This means that you can complete the naturalization process in 12 to 18 months from the time you obtain your residency… and the speed of residency processing continues to improve, as more staff is added to the department.

You can’t count on this in every case, but it can be possible to have your residency card in as few as 30 days.

The invest-for-residency option requires an investment of US$200,000. However, unlike economic citizenship options where the “investment” is in fact a donation to a local development fund, you get your US$200,000 back… plus associated investment profits.

To qualify for the invest-for-residency option, you could put your money in a government bond, which are currently paying tax-free (in the DR) interest in the 3.2% range. Or you could put your money in a bank CD to earn between 3.5% and 4%, depending on the terms.

Alternatively, you could set up a company to start a business… or you could set up a company to manage a real estate investment (that is, a rental property).

The option to qualify for residency through an investment in a bank CD is relatively recent. The regulations, requirements, and opportunities associated with qualifying for residency and a passport in the Dominican Republic are changing in real time as the government is working aggressively to attract more foreign investment and more expats and retirees interested in living in the country.

Bottom line, this playing field is continually changing for the better.

I’ve written often over the past few years about real estate investment opportunities in this country. I am as bullish as ever on property markets in the DR in general and in specific target regions in particular. I have been researching and scouting and intend to make a significant investment in property here in 2018.

The taxation in the Dominican Republic is as good as it gets. This country taxes on a jurisdictional basis. This means that, as a resident, you’re taxed only on what you earn in the DR with an exception for some foreign investment income. Nonresidents are taxed on any income earned in the country.

Tax rates are relatively low, with the top marginal tax rate set at 25%. The corporate tax rate is 27%, but, like individuals, DR companies are taxed only on income earned in the country.

The one higher-than-average tax is capital gains tax, which is 27%.

The Dominican Republic has fewer banks and many more limited private and investment banking options than Panama. However, DR banks are more open to working with foreign (including American) clients.

In addition, DR banks will lend to foreigners for the purchase of real estate.

Lief Simon

The post 3 Solid Reasons To Start Investing In The Dominican Republic appeared first on Offshore Living Letter.

Why I’m Applying For Residency In The Dominican Republic Mon, 27 Nov 2017 12:30:13 +0000 The post Why I’m Applying For Residency In The Dominican Republic appeared first on Offshore Living Letter.


This Country Ticks All The Go-Offshore Boxes

About 18 months ago I began the process of applying for residency and citizenship in the Dominican Republic.

My attorney in the DR contacted me last month to let me know that my naturalization paperwork is almost ready.

How soon could I make it back to the country to finalize things, she wanted to know.

Eighteen months from start to finish for residency and naturalization is pretty quick.

However, in the DR, the process can be even quicker.

I’m not an easy client. It took me forever to get the paperwork together, and my schedule hasn’t allowed me to return to the country in a timely fashion as it came time for each next step to be taken.

Dominican Republic: Citizenship and Residency Options

The only faster option for naturalization could be one of the citizenship by investment programs (CIPs) offered by a handful of Caribbean islands… and those, as you know, come at a much more significant cost.

Although you can take the investment route to establish residency in the Dominican Republic, this country’s program doesn’t work like a CIP. You apply for citizenship after you’ve been resident for some period of time. If you qualify for residency under the fast-track residency program, that period of time is just six months.

A DR passport currently allows you visa-free access to just 62 countries. Given that, it may not be the best option for someone looking to give up their current citizenship from a country that ranks high for visa-free travel.

On the other hand, you can’t beat the cost and speed, especially if what you’re after is a backup option for travel and living.

DR citizenship is also a good investment for your family’s future. Once you’re naturalized, your kids can get naturalized, no matter their age, simply by virtue of your status.

The Dominican Republic is a country on the move… a market to get into. GDP growth has averaged 7% per year for each of the last four years… and inflation is low, ranging from less than 1% to 3%.

Tourism is up. Poverty is down.

Of course, this is still a developing country. From an investor’s point of view, that means plenty of unrealized upside.

I’ve been recommending property investment in the DR for the past decade. Over that time, values have increased… but not as dramatically as I predict they are going to move up from here.

Right now, DR property prices are low for the Caribbean… downright cheap in some areas. Rental yields are strong—reaching into double digits—in the beach resort areas and capital city Santo Domingo.

Plus, it’s possible for a nonresident to get a mortgage from a local bank… albeit at interest rates that are higher than in the United States or Europe right now.

In short, the DR ticks all the go-offshore boxes…

Residency is easy and quick.

Citizenship is easy and quick.

Banking options are limited, but the available banks are strong and accustomed to working with foreign clients.

You can finance your DR investment properties locally.

Real estate prices are low.

Rental yields are high.

Taxes are favorable (the DR takes a jurisdictional approach to taxation, with a few exceptions).

Business opportunities abound… especially in the tourist areas.

What About The Hurricanes?

Fair question given the hurricane season we suffered through this year.

The very good news for the DR (and for DR investors and second-home owners) is that the big mountain range running down the center of the country tends to push hurricanes to the side, as happened with Irma this season. The island got lots of rain, but the eye of the storm stayed north.

The Dominican Republic was spared Maria as well; this storm turned away from the DR on its own.

Rains caused flooding, some houses were destroyed, more were damaged by water, but for the most part the country came through unscathed.

Lief Simon

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Celebrating Thanksgiving Overseas Thu, 23 Nov 2017 12:30:56 +0000 The post Celebrating Thanksgiving Overseas appeared first on Offshore Living Letter.


What A Plucking Challenge! The Quest For Turkey Overseas

All American expats I know are today paying their respects… in big ways or small… wherever in the world they happen to find themselves… to the tradition of Thanksgiving.

Including us.

We’re enjoying Turkey Day this year in Baltimore, Maryland, the jumping-off point for my own live-and-invest-overseas adventures some 20 years ago.

This is the first Thanksgiving we’ve spent in the States in years.

I write from the table in my mother’s kitchen. As I work, she’s working, too, preparing all the pieces of a traditional Thanksgiving celebration… just as I’ve watched her do so many years before.

The house smells of melting butter and cinnamon. I can hear the turkey sizzling in the oven as it browns… and the water in the big black kettle coming to a boil on the stove. Time to drop in the potatoes…

My sister’s children and my own are playing video games together in the living room and sharing stories of how they’ve filled the many months since we’ve all seen each other last.

The television is on in the background… some sportscaster is excited about some sport’s event…

It’s a picture of the quintessential American Thanksgiving.

From my perch at the kitchen table, I’m savoring every second of it… and thinking back over where and how we’ve spent other of our Thanksgiving days over the past two decades.

In some ways, for me, Thanksgiving abroad has been more difficult to come to terms with than Christmas overseas. While everyone everywhere we’ve been has joined us in celebrating Christmas, we’ve had to work, as we’ve roamed, to preserve our own Thanksgiving traditions.

We’ve striven each year to have the complete meal—roast turkey, homemade stuffing using my grandmother’s recipe, cranberry sauce, mashed potatoes, gravy, green bean casserole, corn, and biscuits, plus pumpkin pie for dessert—and to share it with as many local friends as possible, everywhere we’ve happened to find ourselves come Thanksgiving Day.

Starting in Ireland.

Trouble was… you couldn’t buy a turkey, plucked or in any condition, really, other than roaming around a barnyard, in Waterford when we first arrived on the scene.

Nor could you find cranberry sauce or pumpkin filling for making a pie in any supermarket.

In Panama City, Thanksgiving was far less of a challenge.

Panama City has been making an effort to import the American way of life for decades, and this is nowhere more evident than in the city’s big supermarkets. At Riba Smith, for example, starting late October, you see aisle displays offering Ocean Spray cranberry sauce, Libby’s pumpkin pie filling, ready-made pie crust, Stove Top stuffing, and oversized roasting pans.

One area of the freezer section is given over each year at this time to turkeys, available in any size you might want, up to 30 pounds and more.

We’ve celebrated many Thanksgivings in Panama City, inviting, each time, a houseful of local guests, including other Americans, but also Panamanians, Germans, Russians, British, and Canadians we’ve become friends with here. For them, the meal is mysterious and exotic.

Thanksgiving In Paris And Ireland

In Paris, too, preparing an authentic Thanksgiving dinner was easy enough, thanks to a store on rue Saint-Paul in the 4th arrondissement that shares the holiday’s name. Each year we spent Thanksgiving Day in Paris, Kaitlin, Jackson, and I would set out early the Saturday before to walk along the river from our apartment in the 7th arrondissement to “Thanksgiving” in the 4th.

It was an hour-long hike that we enjoyed much more going than returning, as, for the walk back home, we’d be loaded down with sacks of American specialty items we indulged in at this time of year only. In addition to cranberry sauce and pumpkin pie filling, the tastes of American life we splurged on included Kool-Aid and Kraft Macaroni and Cheese for Jackson and Aunt Jemima pancake mix and syrup for the bunch of us.

Jackson had never heard of Kool-Aid or Aunt Jemima before our visits to Thanksgiving, so, for him, these indulgences became as associated with the annual American feast day as turkey and mashed potatoes.

The turkey, though, you couldn’t get from Thanksgiving… or from any supermarket in Paris, at least not a turkey of the size we wanted for our big annual Turkey Day. This we had to special-order, weeks in advance, from a boucherie, or butcher.

Fortunately, for us, there was a great one on our block. One year, though, we waited too long to place our order, and our neighborhood butcher wasn’t able to oblige our turkey request.

We found another boucherie, in the 1st, who was. Thanksgiving Day, around noon, Lief set out, on foot (we didn’t own a car while in Paris), to retrieve our roasted bird from the mile-away butcher shop. Lief returned, a couple of hours later, winded and weary. It’s no easy thing, he had learned, to carry a 25-pound turkey, still hot and steaming and wrapped in aluminum foil on a wooden board, a mile through the center of Paris.

Six-year-old Jackson, who’d accompanied his dad for the turkey hunt, had carried back the sack containing the roasting juices.

“I knew I’d better not show up without the juices for the gravy,” Lief explained as he dropped the board with the turkey on the dining room table and then collapsed on the sofa. “Good thing I had Jack to help.”

We’d ordered the turkey roasted, as we’d learned, the year before, that our Paris apartment-sized oven wasn’t Thanksgiving turkey compatible. We could squeeze a 10- or 12-pound bird into our little oven, but nothing bigger.

Likewise, our Paris apartment-sized kitchen wasn’t built for preparing Thanksgiving feasts, but we managed. Lief, Kaitlin, Jackson, and, often, friends of Kaitlin and Jackson, would pitch in. When we ran out of counter space, the kids would stand in the corner of the kitchen, in the hallway off the kitchen, or out in the dining room holding a tray of biscuits awaiting its turn for the oven or a bowl of bread crumbs that would become the stuffing as soon as I found room somewhere to sit a bowl big enough for combining the ingredients.

One year, the second of two trays of biscuits was put in the closet off the kitchen for safe-keeping while the first tray was in the oven. Only in the rush of things it was forgotten. I guess no one wanted to mention the shortage of biscuits at dinner, and I didn’t discover the tray of uncooked dough until the next day when I opened the closet door to put away the table linens from the night before.

We faced our biggest Thanksgiving challenges, though, in Waterford, years ago. As I said, back then, you couldn’t buy a plucked and oven-ready turkey in the supermarket.

Our first Thanksgiving in Waterford, I found this out the hard way, by asking at every market in town. In Waterford, unlike in Paris, I wasn’t even offered the option of special-ordering a turkey, roasted or not. My inquiries met with blank stares.

Finally, I asked a friend, Gerri.

“I understand that you don’t have Thanksgiving here in Ireland,” I said, “but you do eat turkey, don’t you? Where do you get it?”

“You raise it. Or you buy it from a farmer,” Gerri explained.

By the time we left Ireland, seven years later, it was possible to buy a frozen turkey in any of the big supermarkets that opened while we were Waterford residents. However, those first few years, a turkey for roasting was a home-grown specialty.

Our first Thanksgiving in Waterford, therefore, Gerri introduced me to a farmer friend of hers able to oblige my turkey agenda.

We could have paid him to pluck the bird for us, but Gerri thought it’d be fun for me to pluck it myself. So she and I, one cold, misty November Saturday morning, found ourselves in the drafty old barn of her farmer friend, recently dead turkey on the plank table before us.

Here’s what I can tell you from that experience: Turkey skin does not part readily with its plumage.

Happy Thanksgiving.

Kathleen Peddicord

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3 Popular Seaside Towns In Mexico Within Driving Distance Of U.S. Mon, 20 Nov 2017 12:30:00 +0000 The post 3 Popular Seaside Towns In Mexico Within Driving Distance Of U.S. appeared first on Offshore Living Letter.


Your Easiest Second Home In The Sun For Fun And Profit

As I explained to the entire group assembled in Cancún last week for our Live and Invest in Mexico Conference, the most valuable convenience you can hope for when purchasing a home abroad is the ability to load up the car and drive to it.

And this is one of Mexico’s biggest advantages.

During the meetings in Cancún last week, we looked at many appealing and interesting places across this big, diverse country, including three popular spots on the Sea of Cortez, all within a day’s drive of the U.S. border: Puerto Peñasco, San Carlos, and Mazatlán.

The Sea of Cortez is the body of water that separates Baja California from the Mexican mainland; it’s also known as the Gulf of California. It starts at the mouth of the Colorado River and is noted for its warm, calm, and relatively protected waters, as well as for being one of the most biologically diverse seas on earth.

Anyone who has driven to western Mexico from the United States has likely skirted along the Sea of Cortez. This region of Mexico has a great deal to offer both the expat and the overseas property investor, including:

  • It enjoys the conveniences of U.S. living, including franchises, big-box stores, and U.S. products;
  • Many people here, including virtually all service providers, speak English;
  • At specific points you find big English-speaking expat communities;
  • The weather is just about perfect in the winter, with balmy days and cool nights. But it’s far from perfect in the summer. I believe the precise meteorological term is “Hot as Hell”;
  • The sportfishing is excellent on this sea and a big tourism draw for the area;
  • Property taxes are extremely low, even for properties on the beach. You can expect to pay between US$200 and US$400 per year.

Three Recommendations For Your Second Home In Mexico

Here’s what you should know about three particularly attractive choices along this coast both for living and retiring and also for making an overseas property investment:

Puerto Peñasco (AKA Rocky Point), Sonora

  • Drive time from U.S. border: 1 hour 10 minutes, 62 miles (100 kms).
  • No direct flights to the United States or Canada.

Puerto Peñasco enjoys miles of wide, sandy beaches bordered by the waters of the Sea of Cortez… waters that are warm, clear, and calm all year long. The grade going into the water is gentle, making it perfect for small children.

Puerto Peñasco sees 362 days per year of brilliant sunshine… which is about as close to always as you can get. This is no surprise, as the town is on the edge of the Altar Desert, one of the driest and hottest in the Americas.

If you’re a boater, you’ll appreciate the large sheltered marina, which hosts both commercial and pleasure craft.

Best of all, beachfront homes here are a real bargain.

This popular destination is known as Puerto Peñasco in Spanish, Rocky Point in English. Surprisingly, it had its English name first, in 1826, thanks to a retired Royal Navy admiral who was in the area scouting for precious metals. The Mexican president renamed the town in the 1930s.

Any discussion of Puerto Peñasco has to begin with the fact that it’s only 62 miles (100 kms) from the U.S. border, a drive that takes about 1 hour and 10 minutes. It’s just over three-and-a-half hours by car from Phoenix and six hours from San Diego.

Properties in Puerto Peñasco, including properties right on the beach, can be quite a bargain. I particularly like and recommend the beachfront development called Las Gaviotas because it’s on the beach, within walking distance to downtown, and prices are low. Units here rent for about US$125 daily, US$1,200 per month, and you’ll often see listings for US$110,000 to US$150,000.

As of today, a walk-out-onto-the-sand townhouse will run you US$204,000, beachfront condos start at about US$149k in good areas, and an ocean-view home (three blocks in from the beach) will set you back US$109k. Luxury properties in high-end developments can exceed US$500k.

Disadvantages of Puerto Peñasco:

  • Puerto Peñasco does not have an attractive historic center. You have better options for enjoying a downtown lifestyle near the sea.
  • The seafront restaurant district is fairly touristy, so it’s hard to enjoy the malecón (seafront promenade) without the annoyances of vendors and tour guides looking for your business.
  • There are no big cities nearby, meaning you have to travel a bit for the practical items that big cities offer. Your best bet for a real city is probably Tucson, Arizona.

Advantages of Puerto Peñasco:

  • Puerto Peñasco is just over an hour from Arizona. When I’ve made the drive, I haven’t had to stop for any customs or immigration checks after crossing at Lukeville, Arizona. Also, no vehicle permit is required this close to the border.
  • Puerto Peñasco has a large expat community, and you’ll have plenty of neighbors from Arizona and California.
  • U.S. dollars are accepted almost everywhere, except at the gas station. You’ll get a better deal spending pesos, but it’s nice to know you can use dollars in a pinch.

San Carlos, Sonora

  • Drive time from U.S. border: 5 hours and 15 minutes, 261 miles (421 kms).
  • No direct flights to the United States or Canada.

Miles of sandy beaches… clear, warm waters… excellent diving… and a large expat community. These are the things that come to mind when I recall San Carlos.

San Carlos is a popular drive-to destination for people in the western United States and Canada. It’s as far south as you can go in western Mexico without having to get a vehicle permit. I first traveled to San Carlos from Álamos on the recommendation of our real estate agent there who pointed out that some Álamos residents also own second homes in San Carlos.

The city was born as a well-planned tourist destination in the mid-1950s. Before this time, it had been three large ranches. This means San Carlos has no colonial historic center… but neither does it have the poverty or run-down neighborhoods that you might expect in a real city.

The town has a positive, upbeat atmosphere, bolstered by the abundance of cheerful cafés, bars, shops, and restaurants. Most venues cater to the American and Canadian residents, so you’ll see plenty of burger joints along with a good selection of seafood restaurants.

Sandy beaches highlight the entire area, bordering warm, calm waters. The city sits at the top of a giant cove, and the San Carlos coastline actually runs east to west, rather than north to south. In town, the 1.5 miles (2 kms) of beaches are mostly behind oceanfront homes and buildings. But as soon as you leave town and head down the coast, you encounter over 3 miles (4.9 kms) of beautiful, uninterrupted beach. Heading north, it’s just as beautiful.

San Carlos is a noted diving destination, with visibilities commonly in excess of 100 feet (31 meters) and sometimes over 200 feet (61 meters). It’s also a sportfishing destination and a good place for boaters, with two good marinas.

San Carlos is an easy drive down Highway 15 from Arizona, on what they call the “Hassle Free Highway.” (The hassle-free label refers to absence of vehicle permits and customs… not the absence of speed limit enforcement.)

Properties in San Carlos are a good deal. A modern two-bedroom, 1,400-square-foot, on-the-sand condo starts at about US$200,000. The best deal I saw on a house was a two-bedroom, one-bath, 1,300-square-foot (120-square-meter) home just one “realtor block” in from the beach (234 meters actual distance). The asking price was only US$83,000. A nice beachfront house on a large lot (in the Bahia sector) starts at US$325,000.

Disadvantages Of San Carlos:

  • San Carlos is a planned city that came into being fairly recently. It doesn’t have the feel of Mexican heritage that you find in most Mexican cities… though many homes have been built in the colonial style.

Advantages Of San Carlos:

  • It’s an easy drive from the U.S. border, with no vehicle permit required. Like Puerto Peñasco, San Carlos lies in Sonora’s “free zone” and also enjoys reduced customs requirements.
  • It’s a noted dive location, with good diving facilities.
  • San Carlos has two nice marinas with plenty of slips.
  • It’s adjacent to a real city (Guaymas), with good services and commercial establishments.

Mazatlán, Sinaloa

  • Drive time from U.S. border: 14 hours, 723 miles (1,165 kms).
  • Four nonstop flights to the United States and five to Canada.

Mazatlán, where I’m currently spending most of my time, is a long-time, well-developed resort city on the Mexican coastal mainland opposite the tip of Baja California. It’s a fairly large city, with the resort areas and historic center along the coast… and the non-resort sectors—the seaport, tuna fleet, and industrial area—farther inland. As you can imagine, most expats and part-year residents live on or near the coast.

One thing that sets Mazatlán apart is that it has a large and well-maintained colonial historic center. In fact, recently, road crews converted the paved roads in Centro back to cobblestones. They also widened the boardwalk, added bike lanes, expanded many of the sidewalks, and improved the lighting.

However, what originally made Mazatlán famous were the beaches… about 20 miles (32 kms) of white sand, bordering clear, warm waters, with a boardwalk running adjacent to the beach for about 10 miles (16 kms).

Because Mazatlán is a real city as well as a beach town, you’ll also find a good offering of big city amenities… things like hospitals, theater, jazz, classical concerts, and fine dining, along with the waterfront seafood restaurants and beach scene.

The city also offers several golf courses, a large marina district with good marine facilities, and residential developments. Sportfishing is a big attraction in Mazatlán, with a good-sized fleet of boats to service the influx of anglers going for sailfish, wahoo, mahi-mahi, and yellowfin tuna, as well as the area’s record-setting marlin.

Properties in Mazatlán vary from basic vacation construction to high-end luxury. A large, two-bedroom beachfront condo just north of the Golden Zone (away from the historic center) starts at about US$199,000. A three-bedroom, 2,100-square-foot (192-square-meter) waterfront home in the marina districtgoes for US$189,000.

A two-bedroom unit at one of the best luxury addresses on the water starts at about US$340,000. If you want a luxury seafront unit in the historic center, you’ll pay about US$350,000.

Disadvantages Of Mazatlán:

  • If you’re driving, it’s at the limit of a one-day drive. I break it into two days when I travel to and from the United States, while our younger family members do it in one.
  • In the Golden Zone (the main tourist area), you’ll find plenty of touristy annoyances, such as tour guides and vendors. As a resident, you probably won’t spend much time there.
  • Mazatlán is mostly a Mexican resort, and Mexicans are not known for their quiet partying… so it can get noisy downtown on weekends and holidays.

Advantages Of Mazatlán:

  • It offers city amenities, such as theater, orchestra, and city-style shopping.
  • You’ll find plenty of fine dining, cafés, and hole-in-the-wall bars to enjoy.
  • Most of the beaches are directly accessible, without buildings blocking access.
  • You have a variety of lifestyles to choose from: quiet or bustling… historic or modern… expat areas or those more popular with well-off Mexicans.
  • Convenient flights make the trip to Phoenix in less than two hours.

Is A Home On The Sea Of Cortez For You?

Puerto Peñasco is perfect if you’re in the market for a convenient, short-term getaway and I’d say one of the best possible options for the part-time or vacation homeowner. Depending where you live in the United States, it can even be an easy long weekend escape.

San Carlos is still within an easy drive of the United States and offers more amenities for the expat or part-time resident. It’s also a better base of exploration, from which you can discover more of interior Mexico.

Mazatlán is best for full-time or long-term living, offering the chance to combine colonial city living with a beachside lifestyle.

If you’re looking for an easy-access seaside home or rental investment, one of these cities could well be the answer.

Lee Harrison

The post 3 Popular Seaside Towns In Mexico Within Driving Distance Of U.S. appeared first on Offshore Living Letter.

Why International Real Estate Investing Isn’t For Everybody Thu, 16 Nov 2017 12:30:26 +0000 The post Why International Real Estate Investing Isn’t For Everybody appeared first on Offshore Living Letter.


Don’t Invest In Real Estate Overseas If You Share These Views

A reader got in touch recently to say:

“Lief, I have seen a posting online from Cherif Medawar on international real estate investing. It appears to contradict your group’s continued advice on international investments. I’m forwarding it to you for a response because it shows the same concerns I have as a new real estate syndicator.

“How would you respond to alleviate my concerns?

“Here’s what Cherif Medawar wrote:

“‘I do not do any international investing because of many reasons, and here are some:

1) Unfavorable tax structures with the United States both from the point of view of the foreign countries and from the United States regarding foreign income or capital gains…

2) Unfavorable lending rules and guidelines to leverage the investments…

3) Unfavorable laws in foreign countries regarding rights of ownership…

4) Difficult and inflexible international banking systems that would make it very hard to transact as U.S. residents or citizens (with FBAR and FATCA etc.)…

5) Hard to reach on a moment’s notice like anywhere within the United States…

6) Currency exchange risk of devaluation…

“‘I can go on and on but suffice it to say Puerto Rico is as far as any wise small investor should venture.

“‘Unless you are a billion-dollar company like a hotel company or a high-tech company you should not even think outside the shores of the United State of America.'”

Cherif Medawar is right.

He probably should stay out of international real estate investing. He’s too out-of-touch and unwilling to look into the facts with an open mind to do it productively.

Let’s take this point by point…

Taxes vary by country. Americans investing outside the United States likely will owe taxes in the country where they are generating revenue and/or taking capital gains from their real estate investments. However, that’s not true for every country.

Some countries don’t tax capital gains from real estate. This can take the form of an outright exemption for any real estate gains or it could be a phased-out capital gains tax based on how long you hold the property.

Income tax on rental income is generally straightforward. Many countries have a zero tax bracket that means a small investor owes no taxes on rental income. If you do pay taxes on rental income in the country where you’ve invested, you can take a foreign tax credit on your U.S. taxes. You would not pay tax on this income twice.

The point about leverage is generally true. It’s not easy and in some cases not possible, depending on the country, to get a mortgage as a nonresident foreigner.

That said, mortgages are available in many of the countries we recommend, including the Dominican Republic, Belize, Nicaragua, Panama, Portugal, and France. I’ve held mortgages myself in France and Panama.

You may not like the terms from a local bank, and, in many cases, you’ll have to take out a local life insurance policy that will pay off the mortgage to the bank if you die, meaning an extra expense.

Note, though, that mortgage rates are lower in Europe even than in the United States right now.

Things To Remember About International Real Estate

The thing to remember about leverage is that it is a risk for the investor. I’ve known many U.S. real estate investors who have lost all they had in real estate due to leverage. You can be cash flowing one day and then the local market shifts and the next day you find yourself unable to cover your mortgages.

The bank takes your properties, and you’ve got nothing. Again, I’ve seen this happen many times.

Banking regulations are something to consider but not something to be afraid of, as Cherif seems to suggest. Fear is born of ignorance. It’s simply a matter of educating yourself.

For example, an FBAR isn’t required unless you meet the account balance threshold… and in most countries you can easily buy property without a local bank account if you want.

International real estate is hard to reach physically compared with real estate in the States? Well, Cherif is advocating Puerto Rico. Recent unfortunate and disastrous events in Puerto Rico aside… note that it takes as much time and effort to get to Puerto Rico from Los Angeles as it does to get to Medellín, Colombia, from Los Angeles (to offer one example).

Depending on where you are in the United States, it’s easier to get to Mexico, Central America, and other parts of Latin America than it is to get to parts of the United States.

That said, why would being able to get to your property on a moment’s notice (or not) be a deal-breaker? Unless you’re buying the property as part of an end-of-days doomsday scenario and you want to be able to reach it quickly in case of a zombie attack…

In the case of a rental property, the key is a good rental manager. Put good management in place, and you can visit every month or once every 12 or 18 months… as you like.

Plus, remember, the travel expenses associated with visiting a rental property are tax-deductible.

The point about currency exchange risk ignores two things. Along with potential devaluation comes the potential for appreciation. That is, currency exchange rates move both ways.

I’ve enjoyed many experiences where the currency moved strongly in my favor during the holding period of an investment… compounding my return.

More important, by investing in other countries you’re gaining both currency diversification and economic diversification.

Hold all your assets in the United States and in U.S. dollars, and you’re completely at the mercy of the U.S. economy and the U.S. dollar. Holding a highly leveraged property portfolio whose assets are 100% U.S. and 100% in the U.S. dollar is the scariest scenario of all to me.

All that said, the United States is probably the best market for someone looking to create wealth through real estate quickly thanks to the tremendous opportunity for leverage. In addition, transaction costs are low, allowing you to flip in and out of properties efficiently.

However, once you’re beyond putting US$5,000 down on an apartment or small house hoping that you can keep it rented long enough to improve your credit rating to flip it and buy a bigger rental property, you need to consider a broader range of wealth preservation opportunities beyond hoping you don’t lose your US$5,000.

In other words, as I recommend to my readers, it can make sense to start building your property portfolio in the United States, where you can easily and quickly (relatively speaking) build up a nice nut.

Then you want to diversify into other markets. To continue investing and reinvesting in the United States only, never diversifying for currency, market, economy, political regime, etc., flies in the face of all common sense.

Plus, assets you own outside your home country come with a level of privacy and protection that is impossible to achieve in the United States today.

Again, we don’t say you shouldn’t invest in U.S. real estate. In fact, that’s how I got my start… in Chicago, more than 20 years ago.

We say you shouldn’t invest only in U.S. real estate.

Lief Simon

The post Why International Real Estate Investing Isn’t For Everybody appeared first on Offshore Living Letter.

How I Took $5K And Created A Million Dollar Property Portfolio Mon, 13 Nov 2017 12:30:05 +0000 The post How I Took $5K And Created A Million Dollar Property Portfolio appeared first on Offshore Living Letter.


How I Turned US$5,000 Into US$1.2 Million

In 1995, I made my first real estate investment, a three-flat building in Chicago.

I was able to make the purchase with US$5,000.

Two-and-a-half years later, in early 1998, I sold the building for a leveraged return of 1,800%.

I hadn’t planned to sell at that time. My first wife and I were divorcing, and I needed to sell so that she and I could split the proceeds.

After transaction costs, mortgage repayment, taxes, and the payout to my former wife, I walked away from the experience with a lump sum of US$50,000.

I was 29 years old.

What to do next?

I could have put my nut into the stock market, but even at that getting-started phase of my investment career, I found that option limited and risky. Real assets have always been more appealing to me than stocks and bonds.

Very shortly after I closed on the sale of the building, I met Kathleen Peddicord, the woman who would become, just a few months later, my second wife. She and I both had an interest in moving to Ireland, so we made the move together.

That event provided the answer to the question: What should I do with my US$50,000? I used it for the down payment on the house Kathleen and I bought in Waterford.

Now, two decades later and older, I wonder how things might have played out had I… all those years ago… put my US$50,000 into the stock market rather than an Irish country house.

So this morning I decided to try to answer that question.

What would US$50k invested in the U.S. stock market be worth today?

First, what would US$50,000 invested in the U.S. stock market be worth today?

If you’re a mathematician, please bear with me. What follows is definitely back-of-the-envelope figuring…

Using this basic calculator on the CNN website, I see that the S&P 500 Index has been up an average of 5.8% per year over the period in question.

Doing the math, I find that, if I had invested my US$50,000 in the U.S. stock market in 1998 and let it ride, then to today, I would now have about US$140,000.

Instead of putting my U.S. property profits into the U.S. equity market, however, I used them to make my first real estate purchase overseas. That US$50,000 made it possible for Kathleen and me to purchase the home in Ireland that we sold six years later for a leveraged return of nearly 1,000%.

After costs, mortgage repayment, and taxes, we walked away with about US$600,000. Fortunately, in this case, no divorce split was required.

With that US$600,000, we bought an apartment in Paris… and a farmhouse in Istria, Croatia, both of which we still own today.

Based on the current values of those two properties, if we were to sell today, that US$600,000 would be worth about US$1.2 million… allowing for transaction costs and the mortgage.

(As I admitted at the start of these calculations, this is very back-of-the-envelope ciphering. I’m sticking with U.S. dollars throughout, even though we’re talking about Irish punts for the Irish house purchase and euros for the apartment in Paris and the farmhouse in Istria. Fortunately, the euro-dollar exchange rate today is very nearly the same as it was at the time we made the Paris and Istria buys.)

OK… so my original US$5,000 turned into US$50,000… which turned into US$600,000… which today is worth US$1.2 million…

Whereas, if, 20 years ago, I’d put my US$50,000 into the S&P, it’d be worth US$140,000 today.

My overseas property investments in this case have earned me 9% a year on average when looking at total money in and total money out.

However, that 9% jumps to 18% per year on average when you look at the cash invested versus the net cash return (and after factoring in the equity generated from the mortgage payments).

The real annualized return falls somewhere in between.

But let’s just go with the 9%…

That’s a far better return on my money than I would have gotten from an index fund over these past two decades.

And I avoided the ups and downs of the stock market along the way. The worst down year of the period saw the S&P 500 lose 36%. With a loss like that you need a gain of more than 50% just to get back to even.

Real estate has down years, too, of course… and, yes, I’ve made bad buys. Buy me a rum and Coke the next time you see me, and I’ll tell you about my biggest losers.

Further, it can be possible to manage a stock portfolio to avoid the down years and take advantage of the up years… thereby beating the indices. But even the professionals aren’t able to do that consistently.

All that said, after 22 years of experience at this… having made now a total of 69 purchases in 24 countries… I’m more convinced than ever.

When I’ve got US$50,000 to invest… it’s going into real estate…

Lief Simon

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