Where I'm Investing In 2014
As the year comes to an end, I’m reviewing the 2013 investment plan I had for myself. On the list of countries I wanted to research and perhaps invest in last year were Ireland, the Philippines, Uruguay, and Peru. How did I do with the objectives I set out for this past year?
I didn’t make it to a single one of those countries.
It’s not that I changed my position on any of these markets, and each, I believe, still holds interest and offers opportunity. However, my travel schedule these past 12 months took me elsewhere.
What Did I Do In 2013?
I invested further in Belize. Specifically, in this country I bought a plot of land in the Cayo to use as a hobby farm and a backup plan (should I need one). My wife and I are building a house here to use for family vacations, and we plan to engage someone to work the land for us. I like the idea of being a gentleman farmer. I also like having this escape hatch for my family. Plus I enjoy spending time in the Cayo. It’s relaxing.
This year, I also invested further in Paris. I’m in the process of closing on the purchase of another apartment in this city, this one in Montmartre. This market fell off in 2008/2009…rebounded…and then softened again this year. I saw this dip as a chance to buy something that my wife and I have been thinking about for some time—a Euro-base for the Live and Invest Overseas operation.
Even with the dip this year, prices in Paris aren’t cheap on a global scale, but we’re buying into a neighborhood with the potential both for upside in the form of capital appreciation and decent rental yields along the way. Plus, low mortgage rates help to make the overall investment prospect interesting.
I’ve begun a negotiation to invest further in Panama City. Since we moved here five-and-a-half years ago, everyone has insisted that Panama City has been positioned for collapse, that it’s a bubble about to burst. I’ve never seen this market that way. Values fell post-2008 but not far, and we’ve seen appreciation again in the past couple of years. Looking ahead, I believe this market is going to enjoy another perhaps significant bump when the Panama Canal expansion work, currently under way and on schedule, is completed. Certainly, I do not see values in this town falling again anytime soon.
Meantime, we’re tired of paying office rent.
I took a look this year at Greece but found it not as interesting as I had hoped. This crisis market was still on a downward path when I visited over the summer, and I saw no reason to think the real estate market here would turn around in the near term.
I also looked at Kenya. This was an exciting place to visit, but foreigners are not allowed to own property directly. Further, I found values inflated.
As I said, Uruguay was on my radar at the start of this year. My focus for the past several years has been agricultural investing, and Uruguay is one of the best places in the world to invest in farmland. I wasn’t able to focus on this in 2013, but the idea remains on my list.
A colleague in this part of the world has set up an agricultural fund. The fund isn’t buying land but leasing it and hiring operators to farm it. As an investment strategy, this makes sense (and I intend to report on this opportunity in detail for my Marketwatch members). However, I want my own piece of land in Uruguay, so I’m still shopping.
The Philippines, too, is still on my list even though the recent storm wiped out a big chunk of it. This is a growing tourist destination, especially among Asians, as well as a growing retirement destination among Westerners. The expanding influx of foreigners of both those descriptions will have a positive impact on real estate prices long term. Note, though, that this is a market that restricts foreigner property ownership to condos. This is ok, though, as I see condo rentals, especially condo-hotel units, in this country as good buys.
Peru is mostly a curiosity. A number of colleagues have invested here and encouraged me to do the same. Ireland has been on my radar for the past few years, as I’ve been watching for the bottom…which may finally have been reached.
Where Else Will I Be Looking In 2014?
Kathleen and I are traveling to Morocco early February. The Moroccan government is making an investment in attracting both tourists and retirees, and the north coast of the country has been targeted for development. Already, a number of projects geared toward European retirees are under way. Kathleen and I are in Marrakesh for business meetings the first week of February and then are staying on to scout real estate investment opportunities. Again, Marketwatch members will hear first about anything I find.
In July we’re planning an extended visit to Eastern Europe. Specifically, we’ll be looking at Budapest, Bratislava, Prague, Krakow, and maybe St. Petersburg, Riga, Tallinn, and Vilnius, schedule permitting.
My fundamental interest, though, remains agriculture. This is where much of my time and effort has been focused this past year, behind the scenes, working to identify new markets and new products.
“Lief, I wanted to know if you have to report to the IRS foreign corporations whose only holdings are your house?
“I have tried to look online for this information and can’t find it. Perhaps you might know or can direct me to someone who does know.”
Assuming the foreign corporation is more than 50% owned by U.S. persons, then, yes, it must be reported to the IRS.
You have several options for how to handle this. You could report the corporation on Form 5471, but that is a bit onerous if the sole use of the corporation is to hold the one piece of real estate.
If that is indeed the case, you could be able to have the corporation treated as a disregarded entity under IRS rules using Form 8832. Not all foreign corporations can be disregarded so check the instructions for the form. If you can (and do) have the corporation disregarded, then your only filing requirement is Form 8858, which is much easier to deal with than Form 5471.
An offshore LLC can always be disregarded, but you still have to complete the initial election form (8832).