How To Retire Overseas--Steps 3 Through 12

July 1, 2008

Paris, France

PLUS:

n  Where Have All The Tourists Gone--And Other Reasons To Visit Chiang Mai, Thailand, This Summer...

n  Rent, Don't Buy...No MLS, Now What?...Wait Out The Panic...

n  Zen And The Art Of Motorcycle Maintenance In Ecuador...

n  Golf Paradise?...

n  Wait And Watch...The Time To Buy In Ireland Will Come Around Again...

n  Where Could You Rent For $500 A Month Or Less?...

n  "Oh, Yes...And Gasoline Is 11 Cents A Gallon Here..."

n  Why You Shouldn't Invest In A Condo In Thailand...

AND:

n  The Best Investment You Could Make With $100,000 Right Now...

-----A Wine Adventure in the "Next Napa"-----

Great wines, great times, great adventures...all the fun of a vintner's lifestyle without the work (and with the added incentive of an 18% annual yield)...

Details here. 

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Dear Overseas Opportunity Letter Reader,

To get from where you are today to the richer, fuller life you're imagining in the beautiful, safe, and dramatically more affordable overseas haven of sunshine and sea breezes you've been day-dreaming about for too long, first: Know yourself.

That is, consider, honestly, what's important to you. Detail your priorities, your agendas, and your lists of Things I Don't Want To Put Up With and Things I Can't Live Without.

Then: Take out a map and consider the geographic possibilities. Right now, 15 countries in particular make sense for the would-be retiree, expatriate, and adventurer. For details, see last week's issue.

Step #3: Buy a Plane Ticket

After you've narrowed your list of possible havens to two or three or four, visit each one. No amount of Internet research (alas, not even careful reading of these dispatches) can substitute for traveling around the country yourself. A place can make sense on paper but appeal not at all in person. Often, you'll know within 24 hours of arriving in a new country if it's a possible match...or not. It will feel right...or it won't.

Step #4: Research Residency Options

They're different for every country. A local attorney can detail them for you. The critical thing is to understand them before you get too far into your relocation plans.

Most user-friendly in this regard are Panama (which offers 15 choices for how to become a legal resident of that country, including its famed pensionado program and its reforestation program, which gives you a hard-asset investment along with your visa) and Belize (where you can become a QRP resident if you're older than 45 and can show a regular income of at least $2,000 a month from outside the country).

Step #5: Meet With Every Local Real Estate Agent You Can Find

In addition to a local attorney, while you're in each country on your Dream Havens list, meet with as many players in the local property game as you can.

No real estate market anywhere is as efficient as that in the United States. No other country offers a nationwide Multiple Listing Service. And in no other country do real estate agents cooperate the way they do in the States. Here are a couple of ground rules to remember as you venture into foreign property markets:

n  First, because there's no MLS, each agent can show you only what's on his books. To get a more complete idea of what's available in your price range in any given market, you've got to review the books of every agent in town. This is true not only in emerging markets south of the Rio Grande... but everywhere. When we moved to Ireland a decade ago, we didn't know what to think when the first agent we visited in Waterford told us he had two houses among his listings that might suit us. Our search parameters weren't overly restrictive. How could he have but two houses to fit them?

He had two...and each of the other six agents in town also had two or three on their books. Yes, some of these were the same houses but not because the listings were shared. It was because the owners in a few cases had listed their properties with more than one agency...sometimes at different prices!

n  Second, outside the States, the real estate agent you're speaking with doesn't work for you...and he doesn't really work for the seller either. He works for the commission, which he wants to be as big as possible. In some markets, this leads to what's called "net pricing," whereby the agent will promise the seller a fixed amount for his property. The agent then sells for whatever he can sell for...and pockets the difference. Maybe he walks away with a reasonable commission...or maybe he makes 20%, 30%, or more on the deal. You, as the buyer, will never know.

Step #6: Rent, Don't Buy

When you execute Step #5, you're meeting with local agents to get the lay of the land...to find out what's available at what price, etc. You're not, though, preparing to buy. You're not ready to make that commitment yet. First, you need to take your chosen haven for a test spin.

Once you've narrowed your list of Dream Havens to one...and you're thinking you've found your ideal match...plan to spend six months at least living in the place (preferably through the least-agreeable season--the rainy season, the hurricane season, the tourist season). During that time, rent. Maybe your Dream Haven won't turn out to be all you imagined it to be. Or maybe you'll find that the country suits you fine...but the neighborhood where you settled for your trial living experience doesn't.

If you haven't invested in the purchase of a home, no problem.

In both Ireland a decade ago and then, four years ago, when we began spending time in Paris, we rented for nearly a year before buying...and we were glad we did. In Ireland, we thought at first that we wanted to be in Waterford city center. We rented a small house on the river within walking distance of our daughter's school. Ideal...on paper. In fact, we found quickly that Waterford city living wasn't for us and began looking for a place in the country. When our lease in town ran out, we were ready to take up more permanent residence in the old Georgian farmhouse we'd found 20 minutes outside the city with fields of sheep and cows and low stone walls all around. Lahardan House, as the place was known, was our comfortable and cozy Irish country home for more than six years.

In Paris, we'd always thought we wanted to settle in the 5th arrondissement, right in the heart of the city. A few months in a rental apartment across from Notre Dame cured us of that mis-idea. We realized that, in fact, we wanted something a little quieter and more out of the way of the tourist throngs in season. We found and purchased an early 18th-century apartment on a narrow street in the 7th that few tourists ever find. We're tucked away from the beaten path yet only one block back from the river and five minutes' walk from the Louvre.

(In some cases, you may want not only to rent first but to rent, period. See below...)

Step #7: Get Good Tax Advice

Don't organize your life according to tax code...but don't ignore it either. Once you've settled on two or three Dream Havens, research the tax implications, given your country of citizenship and other personal circumstances, before you make your final determination and certainly before you make a move. If you're an American, you need two tax advisors, one in the States (where you never lose your obligation to Uncle Sam) and one in the country where you're considering establishing residency.

Again, do this work before you have an address in your chosen haven. Certain opportunities for mitigating your tax burden can be taken off the table once you make the move.

Step #8: Set Up a Virtual Office

When I began writing about the idea of living and retiring abroad more than 23 years ago, the would-be expat had his work cut out for him when it came to paying bills, receiving his mail, managing his investments, and staying in touch with the folks back home. Today, these things are ever-easier.

Here's what you need:

n  An e-mail address (Ah ha! You've already got this.)

n  Online banking access (You probably already have this, too.)

n  An online brokerage account to manage your investment portfolios (Again, I bet you're covered.)

n  VOIP (So you can phone home free via your laptop or PC.)

n  A mail-forwarding service (We've used the UPS Store. If you're moving to Latin America, choose a service out of Miami.)

n  A U.S. address (This makes dealing with credit card companies and shopping online and through catalogs extraordinarily easier than it would be otherwise. You can arrange a U.S. address through your mail-forwarding service.)

n  A driver's license (If possible, renew your license just before leaving your home country. You'll want it for renting cars and as a secondary form of ID abroad.)

n  An international cell phone...or a cell phone that allows you to swap local SIM cards.

n  A laptop (This isn't absolutely necessary. You probably could get by using PCs in Internet cafés, etc. But the more self-sufficiently mobile you are, the better.)

Step #9: Figure Out What To Do With All Your Stuff

Perpetual traveler friends of ours have downsized completely. They travel the world continuously with but a few suitcases and a couple of laptops. They worry not about shipping furniture or storing heirlooms.

I admire their freedom, but I can't bring myself to follow their lead. We shipped a container load of antiques and household goods from Baltimore, Maryland, to Waterford, Ireland, 10 years ago. We shipped another container load of more antiques from Waterford to Paris four summers ago. I'm in the process now of shipping yet more old tables and chairs from Waterford to Panama City for our home there (once we build it).

Meantime, we're keeping our apartment in Paris as a kind of home base. Stored here in plastic tubs are family photo albums and our children's christening outfits...Jack's first grade report card and Kaitlin's high school art portfolio... my grandmother's recipe files and the bedspread my mother embroidered for Lief and me when we were married.

I can't let these things go. So, as we move around the world, we have to factor in storage and shipping. Unless you're ready to part with all your worldly possessions, you will, too.

Again, international shipping and storage are far more easily accomplished today than they were, even, say, a decade ago when we shipped our first trans-Atlantic container. Go to www.intlmovers.com. Type in the details of what you'd like to have shipped from where to where, then sit back and wait for estimates from international shipping firms interested in the gig. This online brokerage service is how I found the company that's arranging for delivery of the furniture we bought in Ireland for our new home in Panama, and I heartily recommend it.

Step #10: Shop Health Insurance Carriers

If you're an American, Medicare won't follow you outside the States (although your Social Security will). Local health insurance can be your best bet. That's how we intend to arrange coverage in Panama.

Global options include MEDEX, BUPA, and HTH Worldwide.

Step #11: Show Up

Woody Allen once said that this is 80% of life.

Do your research, make your plans...then take the leap. Over the years, I've met people who've been thinking about living or retiring overseas for years. They can tell you how to get a visa, where to open a bank account, how much to budget for rent, and the per-square-meter price of buying a home in a dozen different countries.

Still, they're deliberating...weighing the options...not quite sure the time is right...

To everyone who's been long planning for a new life overseas...and, especially, to you, dear reader, I say now: Just do it.

Pack your bags and go for it.

What's the worst thing that could happen? See Step #12...

Step #12: Prepare For Panic

What were you thinking? You must have taken leave of your senses. Paradise? This place is no paradise. This place is a nightmare.

Take my word for it. No matter how much due diligence you've done...no matter how ready you are for the move...at some point, probably during your first year abroad, you'll wonder what in the world ever possessed you to think this leaving home thing was a good idea.

My best advice is to wait out the panic. It will pass.

In Ireland, we questioned the sense of what we'd done starting mid-February of our first year in the country. By April, when the sun finally came out, we realized Ireland really wasn't so bad. Irish winters on the other hand... Every year thereafter we planned to spend January and February in sunnier climes.

In Paris, we wondered about our sanity from the start, during our first few months, the four of us crammed into a 55-square-meter one-bedroom apartment. Kaitlin and Jack slept on cots in a tiny mezzanine. I stored clothes in the china hutch. Lief and I shared a single Internet connection at the single desk in the corner of the single bedroom.

One-hundred-and-twelve meters isn't a lot of space, but it's more than two times 55 square meters. In fact, our hiatus to super-cramped quarters made the transition from Ireland to Paris more palatable. Instead of going from 500 square meters and five bedrooms on 7 acres in the country to 112 square meters and three bedrooms in central Paris...we went from 500 square meters to 55 square meters to 112 square meters.

By the time we settled in to our little place on rue de Verneuil, it didn't seem so little...

Kathleen Peddicord

P.S. No matter how big or comfortable your Paris apartment, it's impossible to stay inside it these days. This city is at her best this time of year. The warm sun shines long into the evening, and Parisians, both long-term and transient, dine to its glow at the open-air cafés, soak it up on the banks of the Seine, and laze beneath it in the parks. How to leave this place in summer? Somehow we'll find a way. These are our last few days for a while in the world's most beautiful city...

----- Finance Your Paris Pied-a-Terre -----

With help from France Home Finance, one of the most creative lending brokers in the country.

DETAILS

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FROM THE MAILBAG:

"Where could I retire to a golfer's paradise outside the U.S.?
-- L. Bouchy, United States

Nicaragua has a couple of courses, including one under construction at Gran Pacifica that should be open for play by the end of this year and one on the Pacific coast at Iguanas.

Panama has several courses in and near the city. Costa Rica has many and may be the most interesting Central American option for the serious golfer.

The coast of Spain is considered a golfer's paradise. Maybe. The trouble is, in many other regards, it's one of the most over-hyped and disappointing stretches of coastline in the world. On the other hand, prices have been falling in this part of the world and now might be a good time to think about a golf getaway on the Spanish costa if the idea appeals to you.

The Dominican Republic boasts a number of courses, at least a few in each of the key regions on the island. Argentina has many courses near Buenos Aires plus one or two in each key area throughout the country.

Then, of course, there's Ireland, without question the world's premier golfing haven. I'd say now may not the time to buy a golf home in this country, though. The Celtic Tiger is history, and Irish investors are lately turning several sickly shades of green. Wait and watch. In a few years, it could be time again to buy Ireland. More below...

"What is the best thing to do? To buy or to rent?"

-- F. Groesbeeck, United States

Rent...at least at first. See Step #6 above.

Interested to know where you could rent cheap (that is, for $500 per month or less)? See below...

And where you should rent, period? That is, where investing in a home of your own may never make sense? Again, dear reader, read on...

"I am an avid motorcyclist and would be interested in knowing about Ecuador from that angle--road conditions, biker safety, etc."

-- Frank, United States

Correspondent in Ecuador Mike Sager responds:

"Grab your riding gear and come on down. I could use a riding buddy.

"I've been living in Ecuador for three years and love it. I am retired, but I help people like you find a place to call home down here.

"I have been riding all my life, and Ecuador offers lots of good riding opportunities. The roads go from great to dirt to potholes. It's all part of the adventure."

For more: Ecuador@LiveandInvestOverseas.com

"I was surprised to see your note last week on cigars in Esteli. I have been buying cigars in that town for years. I drive through Esteli about six times a year to stock up. I have mixed feelings on your article. If word gets out, I'm afraid the Esteli prices will rise. Right now, it's possible to get good cigars cheap and with no gringo surcharge."

-- Ernie, United States

ALSO RIGHT NOW:

The Panama City short-term rental market is returning double-digit annual net yields right now and will continue to do so for the next couple of years. It's not too late for you to get in...and you can do so putting as little as $100,000 at risk...

If you've got $100,000 to invest in real estate right now, here's what to do with it: Buy a short-term rental apartment in Panama City.

The short-term rental market in this city is frothing and will continue to do so for two more years at least, until sufficient additional inventory comes online to house all the expats, retirees, investors, engineers, architects, businessmen, bankers, etc., descending on Panama's capital city in ever-greater numbers. Our rental unit in Bayfront will net us better than 15% this year. Unheard of.

Here's the point: It's not too late for you to get in on this action...though the longer you delay, the briefer your window for extraordinary returns. Within two or three years, as I said, this rental market will settle to more typical levels. This is a market with legs, and a rental investment here will bring good returns long term. But if you act quickly, you could enjoy a couple of years of you-may-never-see-this-again returns.

I've been suggesting to Lief that we think about buying an additional rental or two ourselves in this city. However, we don't want to put too much capital into any one unit, and so we've hesitated, wondering if it were possible today to buy an apartment in a rentable neighborhood for as little as, say, $100,000.

"By all means, yes," friend and Panama City property expert Giulia Gonzalez has assured me. "There are resales in the city in good rental neighborhoods on the market in that price range right now. In El Dorado, Betania, and San Francisco, you can find 75- to 85-square-meter apartments that would make great investments.

"Typically, in this price range, you're buying in an older building with no property tax exemption remaining, but there are also some pre-construction opportunities that fall into the budget you're suggesting. These are aimed primarily at the Panamanian market and make great rental investments.

"Right now, for example, I know of an 81-square-meter two-bedroom apartment in San Francisco for $100,000...a 100-square-meter two-bedroom in La Alameda (close to El Dorado) for $115,000...and an 87-square-meter two-bedroom in San Francisco for $115,000.

"This last is in an 11-year-old building, meaning the buyer would enjoy nine years of property tax exemption. Plus, it is being sold furnished.

"I could give you more examples. Nice units in good rental zones are available and continue to come on the market. The thing is that you've got to act quickly. They can sell in three to five days at the price point you're talking about."

Giulia's third example got my attention. In Panama, it's relatively easy for a foreigner to arrange local financing for up to 80% loan to value. In this case, therefore, you could borrow $92,000...meaning you'd need $23,000 for the down payment.

Your mortgage repayment would be $700 per month. On top of this, you'd have a condo fee ($80 per month in this case). The tenant would be responsible for utilities.

The place would rent (probably easiest on the local market) for as much as $1,000 per month, meaning you'd net $200+ per month after covering the mortgage and the building fees if you rent yourself (that is, not through a management company). That's a cash-on-cash yield of nearly 1% per month...or 12% per year.

Reach Giulia here: Panamarentals@LiveandInvestOverseas.com

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Much of Venezuela's long sandy coast is wonderfully undeveloped...

and cheap.

"I still don't get it," writes Venezuela correspondent Don Ellers (Venezuela@LiveandInvestOverseas.com), "why this country continues to be completely overlooked. Sure, Chavez. He's a nut. But he's not reason to ignore what I believe to be one of the most interesting emerging markets in the region. Certainly, this country boasts some of the best beaches in all the Caribbean, most of them still wonderfully undeveloped. Much of this country's long sandy coast is free of hotel zones, shopping malls, and fast-food restaurants.

"It's also free of hurricanes.

"Venezuela is home to Angel Falls, the tallest waterfall in the world, a long stretch of the Amazon, and the mighty Orinoco. The Gran Sabana is the Venezuelan equivalent of the Argentine pampas. There is great skiing in the mountains and world-class fishing in the rivers, canals, and Caribbean.

"Add to all this the low cost of living, especially with the parallel- (that is, black-) market exchange, and the low cost of real estate. Your dollars still go very far in this country...certainly further than any place else in the Caribbean. The infrastructure is improving.

"Oh, yes...and gasoline is 11 cents a gallon for 97 octane."

Thailand is one of the world's most affordable places to spend time. It's not, though, a place to think about investing in a condo, reports correspondent Paul Terhorst.

"The problem with buying a condo in Thailand is that your resale market will be Chinese, either Thai Chinese, who control the country's wealth, or overseas Chinese, who are pouring money into this country."

Correspondent Paul Terhorst is in Thailand for three months. I asked him to check in on the country's foreign real estate market. He continues:

"The Chinese treat condos like we treat cars. They believe they go down in value over time. You buy at 100, and you expect to sell at 80 in two years, at 60 in five years, and so on.

"According to Chinese beliefs, only land has permanent value. This is probably why a foreigner can't buy land in this country directly; he must own it through a corporation with a Thai partner.

"There have been ways around the restrictions, but the government is tightening up on these loopholes. Beginning last year, a provision has been enforced that says the Thai corporate partners must be active and must put up their share or at least a substantial portion of the purchase capital. In other words, this route can still work but with more risk, delays, and problems than before.

"Another problem: Ghosts. The condo market sank in Phuket after the tsunami because, it was believed, ghosts of the dead were hanging around. The market has begun to recover with largely non-Chinese investment.

"Friends in the country told me a story. Their mother bought a brand-new condo about 15 years ago for 2 million baht, about, at the time, US$40,000.

"She sold this condo last year for 1.5 million baht, also about US$40,000. She got out what she'd paid in but only because the currency exchange had gone in her favor.

"This isn't what Western investors want to hear, and, hearing it, they may decide to ignore the facts and push ahead to realize their dreams of a home of their own in Thailand.

"I say, by all means, push ahead to realize your dreams of a new life in Thailand. Even buy a condo to live in if you prefer it to paying rent long term. But don't buy a condo in this country as an investment. A land investment, via a local developer, for example, can make sense. But this is one market where you not only want to rent first...but where you may also want to rent, period."

The Irish market is moving through a long-overdue correction, with falling property prices and near out-of-control inflation.