Tuesday, December 28, 2010

The 8 BIGGEST Mistakes in Offshore Real Estate…and How to Avoid Them

It doesn’t matter if you are a broker, agent, loan officer or an investor, whatyou DON’T know exceeds that which you DO know when it comes to investing outside of the United States. For most people, this “unknown” is enough of a hindrance to prevent us from enjoying the tremendous upside of investing abroad.

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 thatFannie Mae and Freddie Mac were in trouble? Even the most optimistic agent or investor understands that the majority of potential buyers currently suffer from a “deer in the headlights” approach to real estate. Many investors and Realtors are frozen with fear and indecision regarding how to clearly capitalize and thrive in the current market.

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 use the slump to their benefit. The ultra-wealthy have ALWAYS made more money during volatile times than in good times. Who do you think is buying up all those stocks and real estate when the market tanks? Wealthy, fearless and wise investors, that’s who.

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


String Ray off Pier in San Pedro, Belize
WHY they are talking to you! Obviously salespeople make commissions and developers have land to sell. Their information is relevant as long as you acquire it with the context of THEIR interest. When it comes to moving and investing your money, it is always a wise idea to also get information from current investors who have already been researching, analyzing and investing what you are interested in. Investing offshore can dramatically accelerate your retirement plans and give you the opportunity for a tax-haven previously known only to the ultra-wealthy.

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.

BONUS:

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.

####

For more information please contact:
Bob Burns
about.me/RobertKBurns
Email:sec8@planocho.com or
call (305) 586-5280

Wednesday, December 22, 2010

Make sure you have the mail forwarded to your business address after you purchase a new investment property....Why?

I made the mistake of purchasing a property for rehabbing for about 50K and not forwarding the properties mail to my business address. It was a duplex but both buildings were gut jobs. See pictures! The City of Miami placed a violation on the structure for being unsecured. This violation was mailed to the property address but since the property did not have a mail box, the post office refused delivery. One of the terms of the violation was the structure must be secured within so many days or a $250/day fine would be imposed.

Guess What?

This violation was written before I even purchased the property. It had been sitting abandoned for years so you can imagine the size of the fine. My Title company missed it so I was never aware of it until I started to repair the property.

Well the fine had accumulated to $250K. Now, I do not know about you but I wasn't going to pay a fine that was more than the property was worth. So after speaking with the Title company, the area inspector, the City of Miami mitigation committee, I was able to mitigate the lien down to a manageable level. I would tell you how I did it but that is another blogging event.

 So the violation was resolved! The City doesn't want to make it impossible for you with unmanageable fines. Their objective is to make you correct the violation and comply. I was doing them a favor by bringing an abandoned property back online and producing additional tax revenue. The moral of the story is to make sure you are getting the properties mail. I would have known about the violation a lot earlier in the process if I forwarded the investment properties mail to my business address.

Written by +Bob Burns.

####

The Internet Kahuna Bob Burns MREIA Logo"Pain is Temporary, Regret is Forever!"
Bob Burns Print Signature for MREIA
MREIA's President
about.me/RobertKBurns
Telephone #: 305-586-5280
email: sec8@planocho.com
MREIA's Web Page: www.miamireia.com

Tuesday, December 7, 2010

Real Estate Investment Clubs

Investment clubs provide a great resource for beginners and experienced real estate investors. Real estate investment club is a place to meet and network with other investors. Members with investment knowledge and information is a basic requirement for a successful real estate organization. Success in real estate should be a combination of investment knowledge and market information. A real estate investment club provide ideas for investments as well as all the necessary information to make a reasonable investment in real estate.

Since competition in the field of real estate is high, real estate investors need to keep themselves continuously updated on the new tendencies and development of investing in real estate. There may be new laws and fees for real estate. All this is difficult to maintain if you are not a real estate investor. An Investment Club is an ideal place for you. All matters with respect to investment properties can be discussed and sorted through the clubs experts. Part of the Club's benefits is access to experienced real estate investors and should be part of the club's strategy to become a successful organization.

Details of all other aspects of investments relating to property may be discussed such as mortgages, private money, hard money, rehabbing, land lording and much, much more. Most members of the Real Estate Club provide information via the Internet. Software programs are available for several different real estate markets, which help investors in real estate. Before you select software, you can discuss it with the members of the Real Estate Club, which may have been already used and have opinions. A good Real estate Investment club may act as a good forum to clear any doubts with respect to investment properties.

Click HERE for more information about the Miami Real Estate Investors Association MREIA
about.me/RobertKBurns

Written by +Bob Burns.