Timing Currency Rates When Investing In Property Overseas

Why I Don't Try To Time The Currency

June 17, 2014, Panama City, Panama: Which is more important when investing in property overseas—market or currency exchange rates?

Dear Live and Invest Overseas Reader,

The euro is on a downward slide that appears likely to continue in the wake of the recent nominal rate cut by the European Central Bank. Unfortunately for me, I just converted U.S. dollars to euros to buy an apartment in Paris at possibly the worst time in the last two-and-a-half years to have made such an exchange.

As I say often, you can't try to time international real estate buys to exchange rates.

With interest rates so low, why didn't I borrow to buy the apartment? French banks are holding a tight leash on mortgage lending to foreigners...especially self-employed foreigners. The banks prefer if you're working for a large listed company. In their eyes, that suggests stability.

On the other hand, my purchase was well timed from a market perspective (and a personal one). The Paris property market was soft last year, with much of the city seeing slight price declines. Had I waited for currency rates to move in my favor before looking for an apartment, I would have run the risk of prices going back up...as they have done.

I negotiated and locked in the purchase price for this apartment last November. The closing was delayed as I tried to get a mortgage, and we finally closed just a couple of weeks ago. In the interim six months, prices have started moving up again in the arrondissement where I bought. Prices aside, had I held off making the purchase while waiting for the euro to weaken against the U.S. dollar, the apartment I found (and wanted to buy) would have been gone.


Why Nicaragua Is An Emerging Top Retirement And Investment Haven

Nicaragua Rising

June 16, 2014, Granada, Nicaragua: Nicaragua is re-emerging as a top retire overseas choice.

Dear Live and Invest Overseas Reader,

I visited Nicaragua for the first time more than 20 years ago. Imagine the incredulity I faced when I told my family and friends back then that I was traveling (alone...as a young woman) to Nicaragua.

Arriving on the scene all those years ago, I discovered a country not too far down the road from civil war. Barbed wire wound around the outside of every building, and men and boys walked the streets dressed in army fatigues and carrying automatic weapons. Managua was a shambles. The city had not been restored in any real way following the earthquake of 1972. After the earthquake came the civil war. In the early 1990s, when I laid eyes on Managua for the first time, this city was just beginning to pull itself together.

When I looked beyond all that, though, to the rest of the country and its people, I was won over immediately. I'm a romantic who prizes potential over anything else. In Nicaragua's dramatically beautiful coastline...historic colonial cities...charming mountain villages...and irrepressible, resilient people, I perceived enormous potential.

In the two decades since, I have made many return trips to Nicaragua. I have invested in real estate in this country, big and small. I have operated an office here, in Granada. I have led tours, sponsored conferences, met a president, and made contacts. Most important to me, I've also made friends...who have also bought real estate, invested in property developments, built businesses, even raised families in this country. Now that I take a minute to reflect on it, my experience in Nicaragua has been not only long but also deep.


Portugal’s Algarve Region

Europe’s Best-Known Retirement Secret

June 15, 2014, Panama City, Panama: Portugal in general and the Algarve in particular offer an opportunity for an Old World lifestyle at an affordable cost.

Dear Live and Invest Overseas Reader,

Portugal's Algarve, located at Europe's westernmost tip and boasting 100 miles of Atlantic coastline, could be Europe's most famous secret. This region boasts Europe's best beaches, Europe's best golf courses, some of Europe's friendliest folk, and Western Europe's lowest cost of living. It's also Europe's newest tax haven.

European retirees have recognized all that the Algarve has to offer for a long time, and this sunny coastal region is the chosen destination for more than 100,000 of them. Beyond Europe, the Algarve is largely ignored as a retirement haven. If you're looking for a Continental lifestyle and don't have the budget for France, Italy, or Spain, however, it could be an appealing alternative.

Specifically, I'd suggest taking a look at Silves and Lagoa, two municipalities that offer history, Old World charm, and spectacular beaches.

Silves, nestled in verdant valleys on the banks of the Arade River and surrounded by fields of citrus, offers a warm microclimate. It's like summertime all year long. In addition to orange and lemon trees, all around are the olive, carob, and fig trees the region is also known for. Silves' coastal town is Armação de Pêra, with an expansive white sandy beach.

Lagoa, with a capital town of the same name, is a much smaller municipality located close to the ocean and boasting 17 top beaches, specifically around the fishing towns of Carvoeiro and Ferragudo.

Lagoa's history is linked to the sea. Carvoeiro and Ferragudo, in particular, are important to the country's seafood and fish-preserves industries. The villages of Estômbar and Porches were important centers in the Islamic and Medieval periods, and Porches is today the center of the region's pottery tradition.


Deferring U.S. Tax Using The 1031 Like-Kind Exchange

Should You Like-Kind Exchange
Your Foreign Real Estate Profits?

June 13, 2014, Panama City, Panama: The 1031 like-kind exchange can allow you to defer capital gains from the sale of foreign real estate.

Dear Live and Invest Overseas Reader,

A friend is selling a resort property overseas, and I'm helping him think through the tax implications. He's asked me whether I think the 1031 like-kind exchange would make sense for him in this case.

Many, including many real estate and tax experts, think that you can't do a like-kind exchange with foreign real estate. You can. The question, as my friend understands, is whether or not you should.

First, some background. A 1031 like-kind exchange is a section of the U.S. tax code that allows for investment property, real estate or otherwise, to be exchanged for similar investment property. You can exchange a piece of factory equipment for another piece of factory equipment...or you can exchange a commercial building for a residential apartment building (that is, investment real estate for investment real estate).

Of course, generally speaking, things like factory equipment don't appreciate over time, whereas real estate can. Therefore, the ability to exchange an appreciated property for another property and thereby defer the capital gains taxes (both on the absolute appreciation and any recaptured depreciation that would have occurred with a sale) can be an excellent tax-planning tool.

U.S. real estate investors are generally well aware of the benefits of 1031 like-kind exchanges. A whole real estate industry has evolved around the concept. However, many don't realize they can do an exchange with foreign property.

The catch is that you can't exchange a U.S. property for a foreign one under the 1031 rules. It has to be U.S. for U.S. or foreign for foreign. In other words, you must make your first foreign real estate investment...
and then think about like-kind exchanging it for another when you're ready to execute your exit strategy.


Cuenca, Ecuador, Is A Top Budget Retirement Choice

New Video Reveals Why Cuenca Is
Still A Top Retire Overseas Choice

June 12, 2014, Cuenca, Ecuador: Cuenca, Ecuador, remains one of the best places to retire well in Latin America on a budget.

Dear Live and Invest Overseas Reader,

Many retirement destinations are promoted on the basis that they're "just like the United States"...that living there you'd be in familiar surroundings. That's not the case with Cuenca, Ecuador. Walking these cobblestoned streets past the historic Spanish architecture and the old colonial churches, you know that you're not in Kansas anymore.

If you're looking for the world's best place to retire on a budget, Cuenca should be at the top of your list. You'd be hard pressed to find a more appealing place in the Americas to live better for less. However, that's not to say that Cuenca is for everyone. Retired here, you wouldn't forget that you were living in a different and a developing-world country. For some this could be a plus, for others a minus.

A friend who has lived in Cuenca for years tells me that he still stops frequently when out shopping or running errands to look around at his surroundings and marvel at the reality of his reinvented life. For him, the thrill of being in this old Spanish capital hasn't worn off.


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Kathleen Peddicord

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.

Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.

Read more here.


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