Feb. 7, 2010
Casco Viejo, Panama
ALSO: Oh, No, Not This Question Again!...Four Good Reasons Not To Buy In A Foreign Country...Risking The ROP Discount In Panama...How To Rent While Finding Your Fit...
PLUS: Lief Simon On: How Not To Pay Taxes As An International Property Investor...
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When you take advantage of this invitation to subscribe today, I'll send you, with my compliments, our brand-new guide to my picks for the world's top retirement havens for 2010. This just-prepared edition of this special report introduces you to the six best options for living well for less.
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Dear
Overseas Opportunity Letter Reader,
We had a scare this week with a young friend here in Panama City. An expat like us, our friend hails from Cuba. She's been in Panama as a university student for about a year.
And Wednesday night, she began feeling sick. By Thursday morning, she couldn't stand the pain any longer and went to the nearest hospital emergency room to see a doctor. The physician diagnosed her quickly. She had appendicitis. Her appendix needed to come out. Straightaway.
Trouble was, our friend doesn't have health insurance. The hospital nearest her apartment was a private one, and they wanted payment for the surgery before they'd perform it. If she couldn't produce payment, they explained, they'd transport her to the public hospital across town, where she'd be treated at no cost but where she'd have to wait her turn, along with all the other uninsured patients.
Our friend called us early Thursday to explain her situation. She had some money of her own, she said, but not enough. We ran over to the hospital, covered the balance, and our young friend was off to surgery. She's back home now, recovering nicely.
All's well that ends well, but the experience has reminded me of these all-important health-care and health-insurance issues.
Our young friend has a good option here in Panama (that, yes, I wish I'd thought to mention to her sooner). She could arrange local health coverage for as little as US$40 or US$50 per month. She's a healthy 20-something non-smoker. She'll have no trouble getting a local policy at a super-affordable rate, and, because she's full-time in Panama, this is all the coverage she needs right now.
What if, though, you divide your time between two countries (part-time in Mexico, for example, and part-time in the States)? What if you travel continuously and spend time in three or four countries each year? What if you're older than my friend? Older than the cut-off age for a local policy?
You have three options for health insurance in a new country. You could buy a local policy (typically very cheap). You could buy an annual travel insurance policy (that could cover you wherever you roam). You could invest in an international policy through an agency like Bupa. This could cover you anywhere, including in the United States, meaning you could give up your U.S. insurance (or Medicare).
Or you could go with no insurance, paying your medical costs as you go. The thought of this might give you night terrors, but, in fact, some places in the world, the cost of medical care is so low that it can make sense not to insure against it.
We've prepared a report that walks you through your choices and that details the particulars of health care options in the world's top 18 overseas havens.
You can read more here.
Kathleen Peddicord
P.S. For reference, the total cost of our friend's appendicitis scare (ER time, lab tests, surgery, anesthesiologist, overnight in the hospital, prescribed medications, etc.) was about US$4,000. I understand that the total cost of this kind of experience in the States could be anywhere from US$20,000 to US$40,000, depending on the State where you happen to fall ill and the hospital where you go to seek care.
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P.S.
What else this week?
- Last month's premier issue of The Panama Letter introduced subscribers up-close-and-personal to the town of Las Tablas on this country's Azuero coast. This month, we turn our attention to the capital and show you, again, firsthand, what it'd be like to call El Cangrejo home. This is the neighborhood where Panama Letter Editor Rebecca Tyre lived during her first two years in this country and the one she still recommends as her favorite Panama City address.
From the beach to the heart of the big city and, as well, from one of the most affordable spots to live in all Panama to a more costly cosmopolitan alternative...reminding me of that all-important question:
How much does it cost to live in Panama City?
How long is a piece of string?
Last issue, Rebecca provided you with a detailed budget for living in Las Tablas totaling about US$1,200 per month, including rent, full-time help around the house, and regular dining out. One reason the cost of a comfortable and active life in this part of Panama is so affordable is that rents are cheap. As Rebecca reported last month, you can rent a house by the beach in Las Tablas for as little as US$200 to US$400 per month. That's hard to beat anywhere in the world.
And impossible to match in Panama City...
- "You can break rights of possession property in Panama into three broad categories that I know of," writes resident global real estate investing expert Lief Simon.
"First is land that a Panamanian has been occupying and working but that belongs to the government. Perhaps the government encouraged him to move out into the countryside to work the land years ago, and the farmer has earned rights over time in return for his labor and the fact that he's been living on the land. However, in nearly every case like this one, you'll find that, even though it is within his rights to do so, the farmer has never bothered to title the land. This requires an investment--a government fee, which is generally nominal, plus an attorney's fee, which is maybe not so nominal. Bottom line, these guys just don't have the money to formalize their rights to the land they're working. Plus, they don't see any reason to go to the trouble.
"The next category of ROP is titled land that has been occupied for some time by someone other than the rightful owner. In some cases, the squatter may erect a structure or make improvements, resulting in what amounts to rights of adverse possession. The land has a rightful owner who holds title, meaning its ownership cannot be transferred other than by that owner. This is the case typically in Bocas del Toro, where, decades ago, the banana (or other fruit) companies held title to the land. When the banana trade fell off, they abandoned their property. Others moved in, building houses, putting up fences. Now these squatters hold rights of possession. Still, though, the titled owners exist, even if they remain at large.
"The last category of ROP is the one affected by the new regulations related to the former maritime zone that you mention. The maritime zone (that is, the federal zone at the ocean's edge) was changed last year from 200 meters to 22 meters (10 meters of public right of way, or servidumbre, plus 12 meters of maritime zone). The 178 meters between the old line and the new line can now be titled. Before the law revision, no one knew which government agency had the authority to title the land, so, even though the land was title-able, it wasn't possible to have a title processed. This has changed now.
"Note that this former maritime zone land is title-able to the owner of the land immediately behind it. Often you'll find that this owner hasn't titled his adjacent land either; he simply holds rights of possession for that property, as well. Now this owner must have his entire parcel titled, including the 178 meters of former maritime zone.
"To say that this can get complicated is a polite-company way to describe what you might have to go through to walk away from a deal with clean title to formerly ROP land. Is it worth it?
"Never in case #2. I say steer clear of any land held by adverse possession. No exceptions.
"Otherwise, if you proceed carefully and protect yourself, buying ROP can be a way to get a smokin' deal on prime real estate"...
PLUS: From resident global real estate investing expert Lief Simon...
Experienced real estate investors in the United States know about the IRS loophole for deferring capital gains taxes. It's called the
"
like-kind exchange." It's available for other things, too, but used most often for real estate. Rules and restrictions apply, but the bottom line is that, using the like-kind exchange, you can take the proceeds from the sale of one investment property and roll them over into the purchase of another, thereby deferring the capital gains tax hit.
You can continue this roll over, reinvesting, reinvesting, and reinvesting until you die. At that point, your heirs get a stepped-up basis, and estate taxes are the only hit you take.
The U.S. investor can use the like-kind exchange rules for non-U.S. real estate, as well as for property within the States. You can't exchange U.S. for foreign or vice-versa, but you can exchange foreign for foreign. That is, after you've sold your first international property investment, you can continue to roll over your capital gains into other non-U.S. property buys indefinitely.
The question, though, is whether or not you should do that. Tax and real estate experts recommending that the U.S. investor automatically like-kind exchange his international real estate proceeds aren't taking into account tax obligations in the offshore jurisdiction. The truth is, a like-kind exchange is not always the smart tax move.
