If you have watched the real estate markets for more than a dozen years, you’ve seen ups and downs before, of course. Why is it then, that THIS particular downturn seems different? Is it the rapid decline of values? Was it the news that
Some savvy investors saw this downturn coming years ago. Many did not. Those that did already made the shift in their strategy, marketing, sales and investments to
You can too.
We all start with the premise of not understanding enough about foreign markets in order to make a decision. Therefore, the ONLY decision you can make right now is the decision to learn about how, where, and why to invest abroad.
It is safe to say that most people in the United States are comfortable with understanding the basics of our economy and the relationships they have with their brokers and advisors. We trust others with our financial future because it is the details and nuances that most of us either don’t understand or don’t have the time to learn. The fears most people have are normal, but they do not have to prevent you from expanding your reach, diversifying your portfolio, and earning tremendous returns for yourself and your referrals.
Investing offshore is actually SIMPLER and EASIER than trying to understand the beta and QMV price of a stock. Knowledge and the comfort that knowledge provides us when it comes to our money is easily acquired when you know WHO to talk to and
There are 3 KEY factors that one should consider to set themselves up not only to survive this market, but to thrive. It is not the acknowledgement of these 3 keys which is important, but the full confidence and belief that without them, you will be ignorant of the philosophy and actions of the ultra wealthy, especially in matters of offshore and worldwide money, assets and wealth.
A. Economic Give and Take. When one area of the world has a slowing economy, often there are other areas which thrive in relation to it. (A weakening US dollar provides currency volatility for FOREX traders) Natural markets act very similar to nature. Nature abhors a vacuum. When panic or fear hits a market, more people are selling than buying which often lowers prices below their true value. The contrarian investor is there to pick up the bargains and realize the gains.
B. Different Rules for Different Investors. Ultra wealthy investors don’t participate in the financial markets the same way the average person does. They don’t necessarily “cheat” but they do set their own rules. These rules are not truly “secret” but often take a re-framing of our mindsets to learn their code. Wealthy people don’t think or believe that the masses do. As sad as it sounds, the masses are nearly always wrong when it comes to investing.
C. Fear Keeps You Ignorant. Fear and ignorance of IRS rules keeps most people from even learning how offshore investing/banking/finance works. The US government, particularly the IRS is professional intimidators. Every year there are billions of dollars scooped up by the IRS from taxpayers and their accountants who fear an audit more than being accurate with their deductions. When it comes to offshore, the easiest and simplest methods are always the best. Pay your taxes. Using an offshore entity to shelter what is owed is not good advice.
NOTE: The IRS taxes all worldwide income of its citizens. Therefore the trick is not to try and hide your income. That is a HUGE red flag and you will probably get caught. The trick is to have equity gains abroad, not income. Additionally, the proper entity structure can reduce or eliminate your exposure to IRS taxes. The only way to do this is to use their own rules to your advantage.
Walking onto Belize Property Video
Nearly half of ALL equity funds are not marketed in the United States. The stringent rules of the SEC have made it too expensive for many companies, funds, and securities to be marketed in the USA. Most people are unaware that there are savings accounts available with double digit returns in other countries. US citizens are unaware because those banks are not allowed to advertise in the USA.
When it comes to investing in real estate beyond the borders of the USA, these same issues are compounded by fear, lack of knowledge of foreign exchange rates, governments, culture and language.
When one opens their mind up to the possibility of investing in foreign markets, these limitations begin to fade away. Once the limitations are gone, the opportunities are sure to keep you awake at night with excitement! The possibilities of secure wealth, lifestyle, and a reduced tax-burden are enough for anyone to “get in the game,” learn all they can, and get started!
Here are the 8 things to INSIST upon when it comes to investing abroad:
1. Government. After speaking with hundreds of investors, the question of banana republic’s and dictatorships comes up a lot. When you preview property in a foreign land, check out the history. How did it become a republic? Who was in charge before? What legacy did the previous government leave behind? No matter who is in charge now, there are ALWAYS people and power centers left from previous administrations. Be sure to work with countries with a long history of stability. Even if the new administration seems democratic, we all know from experience that graft and corruption are everywhere. How is it handled in your target country? (For example, in the USA, a lobbyist with tremendous money and influence can do more to influence legislation than a group of concerned citizens from a small county) How does your targeted country handle itself?
2. Tax Haven. It is important to not only work with democratic governments, but ones that are friendly…very friendly to foreign investors (That’s you!). Owning property abroad may relieve you of income taxes (The USA doesn’t tax assets, just income). What are the real estate and income taxes of your targeted tax haven? Do they allow foreign corporations to own property? What are the costs and procedures for establishing a “domestic” corporation in your country of choice? What about anonymity? In the USA, if a banker does not disclose private information to the authorities upon request, they can be prosecuted. In tax-haven friendly countries, the opposite is true. If a banker reveals private information to the authorities, the BANKER can be prosecuted! A low or non-existent tax rate for foreign investors is preferred. Any lack of banking privacy is a non-starter. For example, in November 2001, the Cayman Islands concluded a tax information exchange agreement (TIEA) with the U.S. that provides for exchange of information relating to U.S. federal income tax. In the summer of 2009, UBS was required to reveal the names of 5,000 of its customers who had bank accounts in Switzerland! The old story about a numbered Swiss bank account being anonymous is now old news.
3. Land Ownership. US land owners take for granted the idea of property rights. Even countries based on English common law don’t have the same protection that we take for granted. In the Turks and Caicos, deeds are the responsibility of the crown and not supervised by a third party. A US based title insurance company is best for security, peace of mind, and reduces the learning curve. Title insurance is vitally important in a country where you may not have your domicile. In Costa Rica, squatters have reclaimed thousands of acres of land from foreigners who were unable to keep them from simply homesteading on land that did not belong to them. In some cases, foreigners were hiring people to simply watch over large tracts of land they had purchased, not to protect it from vandalism, but from squatters who after a certain amount of time, can RIGHTFULLY claim and take possession of land that they didn’t pay for. Can you even own property in the country you are investigating? Mexico, for example, requires a foreigner to co-own property with a domestic person or entity. Yuk! Equally important, does the developer “own” the land? Not only on title, but what about encumbrances? Select developments where the land is paid for, that way, any delays in development won’t compound the developers’ finances.
4. Team. A project is only as solid as the team behind it. When it comes to getting permits, title, surveys, and entitlements, does your project have a manager who is local? Is the manager experienced? What are his credentials? Do they have an inside track on the national, regional and local regulations? Does the project manager have friends in the government? It doesn’t matter WHAT country we are discussing (USA included) the more connections your project manager/developer has with his suppliers and governments, the easier the project will be completed. Is the developer perceived as a foreigner or a local? Are they using local labor? Is the master plan designed by professionals? Are there any sales? How have the sales been proceeding? Has anyone asked for a refund of their deposits? Why? What is the reservation and refund policy? Analyzing the team is as important as understanding the project and you must know WHO you are dealing with.
5. Language & Culture. Going offshore means you WILL be experiencing a new culture. The only way to become comfortable is to understand that culture, accept the differences and embrace the common elements. With regards to language, be sure you speak it. Using a translator is inefficient and dangerous. Contracts not written in a language you understand is like playing with fire. Even if the contract is bi-lingual, in a court of law, the dominant language is the one that will prevail.
6. On-site Visit. In order to truly understand a project and the opportunity, an onsite visit is a must. This is only true for investments of a significant nature (In my opinion any investment in the six figure range or higher is significant, regardless of your wealth). For investments in the 5 figure range, you should be able to conduct enough due diligence in order to feel comfortable and secure. Ask the developer if there is a “window of opportunity” where you can come and visit the project at a later date. As an investor, I would never trust an agent who had not taken his time and money to travel to the project and “put their feet in the sand.” As an investor, it is a great tax-deductible trip…and gives you firsthand knowledge of the area, people and project.
7. High-end usage. Many investors start out with affordable housing rentals as their entry into the market. It appears less expensive, but management headaches are going to be high. When investing abroad, it makes sense to cater to people of high net worth. They travel more, sale prices and rents are higher, and the wealthy are immune to economic swings. With proper management in place, upper-end properties are safer and more lucrative.
8. Location. Yes, the old adage, “Location, location, location” is still true when investing in other countries. Understanding values, appreciation, and market demand is very similar to what we do when performing due diligence in the states. For an extra layer of comfort, be sure to invest in properties that not only have great locations but have stellar locations! When investing in tropical areas, be sure to check out the neighbors. The Caribbean is known for having beautiful resorts residing next to dilapidated shacks. Proximity to activities, shopping, and services is important, so be careful if you find that perfect private island getaway! If it is too far from civilization or any amenities, demand could be weak.
There are other, less significant areas which you need to become informed on when investing abroad. The biggest hurdle will be your own fears and “ramp up” time on the culture, opportunity and the people you are looking to become involved with. Don’t ever say “no” because you don’t understand something. It is always better to simply ask for more information so that you can make an informed decision. A confused mind always says no and closing the door to the opportunities of the world never made anyone rich.
If you truly want to make a TON of money in this marketplace, you need to invest in it yourself. Nothing compares to the credibility of being an owner AND an agent. By owning a part of the project yourself, you set yourself apart from all other agents/ Your referral commissions can increase exponentially when you have not only taken the time to learn about a project, but have the confidence to invest in it yourself.
I love my country and like having more than one child, I have learned to love other countries as well. Foreign real estate investment and ownership has more…more growth, more tax advantages and more lifestyle. Now is the VERY BEST TIME to learn more, and take action!
This was an article produced by Doug Crowe. Doug has spoken several times at MiamiREIA www.miamireia.com meetings about the advantages of investing offshore. Doug is currently constructing a major offshore development in Belize. For more information about Doug go to: www.dougcrowe.com
|Written by +Bob Burns.|
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