Investing And Doing Business Offshore

Emergency Exit

Aug. 29, 2010, Panama City, Panama: As the United States bids farewell to the Bush tax cuts at the end of this year, new and higher taxes will have a huge impact on every American’s pocketbook. To protect your wealth, you have one sensible course of action: Go offshore.

AND: Ah, The Abruzzo--This Is The Real Italy...Journey To Alleppy...Getting Cash On The Go...Four Good Reasons Not To Buy In A Foreign Country...

Dear Overseas Opportunity Letter Reader,

Like many Americans, you may already have seen your nest egg shrink, the value of your home fall, your investment portfolio lose half its worth or more...

The really bad news is that there's more hardship to come. As the United States bids farewell to the Bush tax cuts at the end of this year, new and higher taxes will have a huge impact on every American's pocketbook.

And it's not just your finances that are at stake. Crazy new laws have been crafted to restrict and control the foreign investment activities of U.S. citizens. That's an attack on your personal freedoms.

Effectively, what this means is that the more assets you have in the United States, the less control you have over them.

So, if you really want to protect your wealth, now and for your future--and prevent your estate being reduced potentially to 30 cents on the dollar (it happens all the time)--you have one sensible course of action:

Go offshore.

This is an idea whose time has come.

Opportunities for going offshore come in all shapes and sizes. But, generally speaking, going offshore involves moving your assets, your business, your banking--or even yourself--to a safe haven...to a place where it's harder for anyone to lay claim to what you've got.

Diversifying your portfolio into foreign investments, particularly foreign real estate investments, and foreign currency is another important aspect to going offshore.

If visions of precious metals locked away in the vaults of a faraway haven are enough to make your palms sweat, let me reassure you that going offshore isn't anything as cloak-and-dagger...or glamorous...as it may sound.

It's about legally defending what's yours in a way that makes it more difficult for creditors to attack. Offshore strategies include trusts, foundations, international life insurance, and owning a foreign bank account, to name a few. These are all legal ways for you to build a wall around your assets. Pretty boring stuff, really.

And you don't need to be a multi-millionaire to benefit from going offshore. You could get started by simply opening a bank account in a haven that offers true banking secrecy. This is the easiest and the most sensible first step.

Can't meet the minimum deposit of US$100,000 required to open an Austrian bank account? Then why not try Belize...

In this little Caribbean haven, you can open a private bank account today without depositing a single dollar. And you can set this up--and manage deposits and withdrawals--all from the comfort of your own home.

Opening a foreign bank account is just one of the important offshore strategies we'll be exploring at the Emergency Offshore Summit we're convening this December.

Your wealth is affected by all sorts of things that often you feel you have no control over.

But, I say again, you still have a card to play, and you still have time to play it. By going offshore, you get to hold on to more of your assets, to protect them so that they grow safely, even tax-free.

That's why we're convening this Emergency Offshore Summit before year-end in Panama City. With the help of an army of offshore experts, with, among them, many decades of experience using offshore strategies to protect assets, we'll look at the biggest risks to your wealth today...and then we'll show you how you can exercise control over each one so that you're able to keep and to enjoy more of what's yours.

Right now, the U.S. government is preparing to make it more difficult than ever for you to hold assets anywhere outside the United States. This obstacle comes in the amended Hiring Incentives to Restore Employment (HIRE) Act, due to come into effect from Jan. 1, 2011. Stated in the new act are laws affecting the holding of foreign assets. And foreign banks that fail to comply with these laws face huge penalties.

How these new laws got mixed up in an employment act is beside the point. What matters is that the 20 or so pages of legalese related to the reporting of foreign holdings could be summarized in one page: The window of opportunity available to you to take advantage of overseas investing and banking options is closing.

Time is running out to take advantage of important opportunities to protect what's yours--before it becomes too difficult (and costly) to do so.

Here, therefore, is what I strongly recommend:

First, pay attention this week. With the help of some of the savviest offshore pros we know, we're going to explore some of the best opportunities for taking your assets, your business, and yourself offshore and for diversifying into foreign investments all this week in these daily dispatches.

Then, plan to join us in Panama City Dec. 2-3, when we're going to convene with all these offshore experts in person.

We'll have complete details of the program we're planning for our Emergency Offshore Summit available for you within the next 24 hours.

Kathleen Peddicord

P.S. What else this week?

• "'BARGAIN! Independent house, 130 square meters on two floors, composed of: living room with fireplace, large kitchen, two bedrooms, bathroom. Private garden of 2,000 square meters. Good condition, recently restored. €75.000.' 
  
  "Considering this house is in Loreto Aprutino," writes Euro-editor Roseanna Keats, "it sounds like an outstanding bargain to me, too. Just under US$100,000 for a home in Italy--and not just anywhere in Italy. Loreto Aprutino is one of the most enticing hill villages in the Abruzzo.
  
  "Ahh, the Abruzzo--it's hard to think of a lovelier corner of Italy. Its beaches are golden, and the sea rolls out like a giant bolt of turquoise silk. Eagles swoop down from craggy eyries...wild peonies and gentians color the alpine meadows...

• "Vicki and I like India," writes Intrepid Correspondent Paul Terhorst.
  
  "Beautiful beaches and quiet backwaters, simple villages and lively towns, delicious eats and so many friendly smiles. 
  
  "But, like nearly everyone here, we dread moving around. The failed infrastructure challenges even savvy travelers. For example, most local maps are wrong. Not just out of date, but drawn wrong. So you need to ask people how to get from place to place. Indians, like so many others in poor countries, tend to make up answers rather than admit they don't know where you're talking about.
  
  "Frustrating. Difficult. Think of moving around India as travel through a potholed Twilight Zone, with millions of others alongside.
  
  "So we try to stay put. But, after two relaxed weeks on the beach at Kovalam, we wanted to move up the coast to Alleppy...

• "A big travel problem these days," writes Intrepid Correspondent Paul Terhorst, "is paying and getting cash.
  
  "Visa and MasterCard have so restricted card use that, unless you're careful, you can run out of money abroad. Arrive at the airport, plug your card into the ATM, and more than likely you'll see 'Transaction Denied' or some other vague comment. Your card issuer seems to prefer that you rely on the kindness of strangers.
  
  "A friend traveled to Mexico recently and found both his debit cards blocked. Vicki and I arrived in Malaysia recently and found our main debit card blocked, too. One card issuer told me they prohibit ATM usage altogether in some countries, and apparently Malaysia is one of them. Note that the above were all clean cards--that is, without history of loss, unauthorized transactions, theft, or disputes...

• Without question, you should rent in your new home overseas for the first few months at least, to give yourself a chance to try your chosen Shangri-la on for size.
  
  But should you rent longer-term, as well...or invest in a place of your own?
  
  Let's make a list.
  
  Here are the advantages to renting rather than buying long-term...

ALSO From Global Real Estate Investing Guru Lief Simon:

As Kathie has reported, she and I were in Medellin this month to scout real estate investment opportunities. Entering a new market, as we were, is no easy thing, even if you've done it as many times as we have. For the first-time investor, the experience can be overwhelming.

Your first instinct these days when doing anything for the first time is to go to the Internet and google for help. In the case of entering a new real estate market, you're tempted to go to a search engine and look around for local agents and listings.

Try this in English, and you'll find all the gringo agents in town and maybe a few locals who speak English. You can start here but understand that, at this point, you're operating in this market at the gringo level.

Working with a real estate agent who speaks English will make your work easier, but it won't get you all the information you need or even accurate information. For that, you'll have to expand your search to include local agents.

If you don't have the language skills to communicate with them directly, engage help from a friend who does. Or, at least, use them as a source of listings to compare with what you get from the gringos.

Also speak with an in-country real estate attorney, a local accountant, a banker, and other expats if you can find them. If possible, speak with more than one real estate attorney and try to speak with locals not in the real estate business about the real estate market.

In Medellin, for example, Kathie and I had a helpful conversation with an antiques dealer whose shop we stopped in one Saturday afternoon about real estate for sale in his neighborhood. Smart, successful local businesspeople can give you valuable insights into a market that a real estate agent might neglect to mention.

Ask everyone you speak with the same questions. You'll be surprised by the variety of answers you'll receive. Some will be completely contradictory. In some cases, you might ask six people the same question and get six different responses.

In Medellin, we asked one real estate agent we met with if it were possible for a foreigner to open a bank account in Colombia. "Yes, of course, no problem. You just need your passport," he told us.

We asked another real estate agent we met with the same question. "To open a bank account in Colombia, a foreigner needs a cedula. Do you know what that is,?" he asked.

Yes, we know what that is. A residency card. Issued only to those with legal foreign residence status.

"Are there easy options for a foreigner to obtain legal residency?" we asked.

"Of course, no problem," the agent replied...

I'm not prepared right now to tell you whether it's possible or not for a foreigner to open a bank account in Colombia or how easy it is for a foreigner to obtain legal foreign residency. Kathie and I continue our research.

In addition to these questions related to opening a bank account and obtaining residency status, you should also ask everyone you encounter in any new market you enter:

• Which are considered the "nicest" neighborhoods?...

• Which are considered the up-and-coming neighborhoods?...

• How much does an apartment cost? Boil this down to a per-square-meter price so you can compare among areas within the country and among other countries...

• Where are most foreigners buying?...Why?...

• What types of properties are most foreigners buying (one-bedroom apartments, houses, undeveloped land, etc.)?...Why?

• Are most foreigners buying for personal use or for investment?...

• Is there an active rentals market? Short-term, long-term, or both?...

• How much would a particular property rent for per month long-term or per week short-term?...

• Where would you (speaking to a real estate agent, an attorney, a business owner, an expat, or a taxi driver) invest yourself right now?...Why?...

• In which direction is the market moving?...

In addition, ask general questions about the local economy and local industry. Ask about the current president or whomever is in charge of running things. Not to be political but to get a read on the political situation from the man on the street.

Ask about taxes. Are they high? Do people pay them? How are they collected? Is there a property tax? On what value is it based?

Again, you'll be amazed at the variety of answers you'll receive. All this input, conflicting as it will seem, will help give you the lay of the land. The more conflicting the responses, the wilder the market. In Medellin, I'd classify many of the responses we received as wildly conflicting.

Next step is to begin to get a handle on procedures. As I said, you want to meet with more than one attorney if possible. For each one you meet with, ask:

• What are the transaction costs for buying and selling real estate? You'll want to know the "round-trip" costs, as I refer to them, for a single piece of property. In some markets, it is more expensive to buy than to sell, and vice versa. You don't want to find out too late that, while it cost only 2% to get into an investment, it's going to cost you 15% to get out...

• What is the buying process? What documents are required? What is a typical down payment? Are there any local nuances you should know? In Colombia, we were told, it's common practice for the purchase price for a piece of real estate to be under-stated (perhaps significantly) on the sales documents. This can have advantages (when it comes to paying property taxes, for example), but it also can create big problems down the road, especially in a place like Colombia with foreign exchange controls in place...

• Which leads to the next important question to ask every attorney you meet with: Will you have any trouble taking your money back out of the country when you decide you're ready to do so? That is, are there exchange controls or other obstacles in place?...

While you're playing private detective and asking everyone you meet the same series of questions, you also want to be observing. As you mkae your way around the area, do you notice signs of an active economy? Are people out at the malls and restaurants shopping, spending? In Medellin, the answer was a strong yes.

What's the infrastructure like? Are the roads well-maintained? Are the parks and public areas taken care of? Again, in Medellin, we were impressed by the superior level of the infrastructure everywhere we went, from the pot hole-free roads to the like-new aboveground Metro system. 

Do you see garbage in the streets or on the sidewalks? Medellin is one of the cleanest cities I've ever visited, by the way.

When a strong local economy exists, that can be one possible exit strategy for your real estate purchase. This is the case in Medellin.

If no local economy exists or if the local economy is small and limited, then you're likely going to be stuck selling on to another foreigner when the time comes for you to cash out. This is the case in many resort markets in Mexico and Spain, for example.

Having a local market can reduce your investment risk.

Your first visit to any new market, see as many properties in as many different neighborhoods and areas as you have time for. You want to get a feel for the type of construction, the options for building materials, common amenities, etc. See how apartments are typically laid out. Is space well used? Collect and catalogue every listing sheet for every property you view.

Then go home. Don't buy anything your first trip no matter how tempted you are.

Take all this boots-on-the-ground information with you back wherever you came from. Sift through it. Compare responses. Fact-check what you can with as many sources as possible.

You're ready for your second trip.

Kathie and I will be returning to Medellin within the month. And, yes, we're thinking we'll buy. My complete report on current buy opportunities is forthcoming for Marketwatch Members.