Articles Related to Global property investing

I could not have written this global property adventure memoir without the help of my husband, Lief Simon. Lief has been my number cruncher, tax advisor, currency converter, spreadsheet guru, and partner for every overseas real estate investment I've made throughout my career.

With one exception--the accidental developer experience I found myself involved with a few years before I met Lief, on the south Pacific coast of Nicaragua. For that adventure, I have Bill Bonner and Mark Ford to thank, and I do.

In the pages of this new book, I also share stories of the overseas real estate adventures of friends with personal experience living, buying, and selling in the countries I feature, especially Paul Terhorst, who gives brilliant insights into why Argentina is the lovable basket case it is, and Lee Harrison, Lucy Culpepper, Ann Kuffner, Wendy Justice, and Coley Hudgins.

The book will hit bookstores and be available for purchase online starting in April. Meantime, you can order a pre-release copy of "How To Buy Real Estate Overseas" on Amazon now for just US$15.48 (that's 38% off the release price).

Over the coming weeks, in advance of the book's appearance in bookstores across America and online wherever e-books are sold, I'll share excerpts...to tease and tempt you (I hope) into wasting no time ordering your copy!

More soon.

Kathleen PeddicordContinue Reading:

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This is January in Panama.

We left the country mid-December for our holiday travels and couldn't wait to decamp. December is the end of the rainy season in this country. Don't believe anyone who tells you the rains end by Dec. 1. They don't. Through December, skies are cloudy and grey and rain can fall in deluges. December in Panama City is hot, humid, and wet.

But, then, ah...January. Thanks to all that rain, this country is bursting with color this month. This is the time to be in Panama, to appreciate all she has to offer. The rains are over, the humidity is down, and the great outdoors and beautiful beaches beckon.

We're glad to be back and ready to dig in. Alas, we won't have much time for fun at the beach. Too much work to be done.

Live and Invest Overseas enjoyed a year of tremendous growth in 2012, welcoming more than 100,000 new readers. We recognize that this is a function of the times we're living in. Options are more important right now than they have ever been, and, here at Live and Invest Overseas, we're all about options. In 2013, we intend to deliver both more options and opportunities, and, as important, the support you need to act on them.

Specifically, here's what's planned for this New Year:

January

Live and Invest in Belize Conference (Jan. 30-Feb. 1)--Not surprisingly, this event is sold out. Belize offers some of your best options for a new life and an investment in the Caribbean...plus our favorite place on earth to live the self-sustaining life (in the country's Cayo District). Belize is also one of the easiest places for an American to open a bank account right now.

February

Live and Invest in Ecuador Conference (Feb. 13-15)--This event is on its way to selling out. As of this writing a handful of places remain available in the room. Ecuador is our pick for the best place to live well even on a very modest retirement budget. Latin America Correspondent Lee Harrison, one-time resident of Ecuador himself, will be center-stage for this important conference to show attendees how to get the biggest return possible from whatever retirement budget they have to work with in this beautiful, welcoming country.

March

"How To Buy Real Estate Overseas--A Guide For Investors And Retirees" available in bookstores near you. Last year, I spent six months compiling and recording my experiences and recommendations, successes and, yes, failures, buying and selling real estate in more than 20 countries over the past 20 years. The resulting book is being produced by Wiley & Sons now and will be available in bookstores across the United States (and on Amazon, too) starting in March.

April

Retire Overseas Conference in San Antonio, Texas--This is the event you want to attend if you're considering the idea of living or retiring overseas but don't yet know where you want to go. Over the three days of this conference, the only U.S. event we'll hold this year, we'll showcase the world's top 20 retire overseas options, with the help of foreign retirees and expats with firsthand experience living in each one.

June

Live and Invest in Panama Conference--Panama remains the world's top retirement haven and the best place in the world today to start and run an Internet business. The entire Live and Invest Overseas team pitches in for our Panama events, to make sure you come away armed with everything you need to realize whatever dreams you have of a new life in this remarkable little country.

July

Live and Invest in Europe Conference in Dublin, Ireland--Depending how you look at things, Europe is a basket-case right now...or a land of opportunity. We prefer to focus on the latter and have planned our first Europe event in five years. We're basing this conference in Dublin, but we'll be showcasing opportunities not only in Ireland but also in France, Spain, Italy, Croatia, and beyond.

August

Asia tour--Lief and I will travel to Kuala Lumpur, Malaysia, then from there to Singapore and Thailand, reporting from the road. Asia offers tremendous opportunity right now for the retiree on a budget. As Intrepid Correspondent Paul Terhorst, with decades of experience in this part of the world, puts it, "All of Asia is more affordable right now than the most affordable choices in Latin America."

In addition, as it becomes harder and harder for Americans to open a bank account overseas, Singapore banks continue to welcome foreign, including American clients. We think it's worth making the trip to speak with them in person.

September

Global Property Investing Summit in Panama City, Panama--An investment in foreign real estate is the smartest thing you could do with your money right now and an important part of any plan for taking control of your own life and your family's future. We've persuaded Lief Simon, therefore, to host a special event this year focused on where and how to buy property overseas. Details as soon as they're finalized.

In addition, this year we'll also host another conference in Medellin, Colombia, and, if we can pull the program together in time, an event on the Caribbean coast of Mexico.

Options and opportunity. We're all over it.

Kathleen Peddicord

P.S. One more very important thing on our calendar this year:

Construction of the first houses at Los Islotes.

Lief and I have been chomping at the bit for more than three years, putting all the pieces in place behind the scenes to begin the work toward realizing the vision we hold for the community we intend to create on the Pacific coast of Panama's Azuero Peninsula. Lief is at the property today inspecting the work of Project Manager Gary Moseley, who spent the month of December preparing the way (rains notwithstanding!) for the infrastructure required to begin construction of the first three houses, one for our own use and two for other lot owners.

I'm meeting with project architect Ricardo Arosemena this week to review his plans for these first structures. After that meeting, I should be able to set a date for the groundbreaking.

To say that we're excited about all this is an understatement. As I said, we've been working quietly, patiently, with Panamanian review and planning boards, crossing every "t" and dotting every "i," for three years. At last, the fun is about to begin.

P.S. What else this week?

  • Fiscal cliffs and tax hikes...lost home equity and the rising cost of health care...in the face of it all, how are you ever going to be able to afford to retire?

You've got the answer to that question in front of you right now.

Economies collapse and then recover...values--of real estate, of stocks--fall and then rise again...financial meltdowns come and go...

When the living becomes intolerably difficult in one place...move to another! I'm not being flippant. I'm giving you the secret to realizing the retirement of your dreams.

The first move is the hardest, I understand. You need options, and you need help. We're here to deliver both. Let's start with this: The situation is far less desperate than you may fear. You do not have to resign yourself to reducing your standard of living during this important phase of your life. You do not have to plan for two or three decades of scraping by and making do.

But you've already figured this out, I think. By signing on as a reader of these dispatches you've opened your mind to the possibilities. You've allowed yourself to begin to think outside the box and beyond your own borders. As you read this, because you're reading this, you are launching a new phase of your life...maybe the best one yet.

Where will your explorations and considerations lead you? You'll have to figure that out for yourself, but, in these virtual dispatches each day, we'll introduce you to the top possibilities worldwide...and then we'll lead you, step by step, your hand in ours, from wherever you are now to where you'd like to be.

As we stand today on the eve of a new year, where should you be focusing your thinking and your search? I made recommendations yesterday for some of the world's top options for 2013, including Panama, France, Belize, Ecuador, and Thailand...and I'll share more top picks for this New Year later on this week.

I realize, though, and I want to make sure you realize, too, that you aren't going to retire to Panama or Belize, to France or Thailand...and not to any other country either. You're going to retire to a neighborhood or a community, a region or a seaside town in whichever country you identify as your personal Shangri-la. Once you get serious about re-launching your life overseas, you realize that you've got to thin slice your options. You can't think about retiring to "Ecuador" anymore than you could think about retiring to the "United States."

What would that mean, to retire to the United States? What would the weather, the cost of living, the cultural distractions, or the scene outside your bedroom window be in the US of A? No way to answer that question, right? You could determine what the weather would be like in Scottsdale, Arizona...the cost of groceries for a couple of retirees in San Diego, California...or the view from your poolside patio in Naples, Florida...but you couldn't possibly answer those questions for the United States as a whole. Anymore than you could determine those particulars for any other country as a whole.

That's why our editorial mandate for 2013 is all about thin-slicing. With this in mind, some introductions are in order.

I've been moving around the world with the focused agenda of identifying its best opportunities for living better and retiring well for coming up on three decades (yikes). I know a little not only about this beat, but also about this world of ours in this context. But I know some places better than others, and, I understand, I can't know everywhere well. That's where my far-flung, ever-on-the-move, and ever-expanding network of correspondents comes in. With the help of these savvy souls, this New Year, we're going to bring you more boots-on-the-ground, real-world, real-time, firsthand, and very thin-sliced glimpses of the world's top live, retire, and invest overseas havens.

If you've been reading for anytime, you probably know these folks already. Still, New Year's Eve is a time for reviewing and regrouping, so I'd like to take this chance to present...

  • Lief Simon writes:

The world didn't end last month despite all the End Of The World hullabaloo in the Yucatan and Belize. The Mayan calendar simply ended. They ran out of stone. The Gregorian calendar ended yesterday, and we had more parties, but the world didn't end overnight either, despite the Fiscal Cliff, FATCA, tax hikes, and autonomous vehicles being allowed on the roads in California (for testing purposes only so far).

January 2013 is here. Time to throw away the paper calendars for 2012 and put up new ones for the New Year.

What if you didn't get your offshore life organized before the end of 2012? It's not the end of the world for you either...

  • Paul Terhorst writes:

When is the right time for you to retire and move abroad?

Right now.

Okay, I don't know you personally, but I know some things about you.

You've likely traveled overseas, and you've got good reasons for thinking you'd like to relocate beyond your own borders. You've likely even already created a short list of places where you think you might want to spend time.

So what are you waiting for? I figure you should go for it, sooner rather than later. Why? Because odds are, your retirement will work out fine...

  • Lee Harrison writes:

There's almost never any debate, when the subject comes up, over which is the finest colonial city in Colombia. Nine out of ten people will tell you it's Cartagena...and with good reason. But in my travels around the country, I've come across some small but quite-vocal pockets of disagreement on this point. And the dissenters make a good case...

PLUS--From resident global real estate investing expert Lief Simon:

I write today from Chicago, Illinois, the U.S. city where I got my start as a global property investor about 20 years ago. I took my family on a little tour yesterday to show them the first real estate investment I ever made, a three-flat building I bought (with only US$5,000 cash) in an up-and-coming neighborhood just a couple of miles from Navy Pier. I lived in the ground-level apartment and rented out the other two for two years, then flipped the building. It was a crazy successful first-ever investment. I was able to sell the building for 80% more than I'd paid for it!

The U.S. real estate market is at a dramatically different point today, however, than it was two decades ago. Pundits say that property markets across this country are at the bottoms of their falls. They've been paying closer attention than I have, but I'd agree. Right now seems like the time for an investor to be scouting in this part of the world.

I'll follow that recommendation with another: If you're not a seasoned real estate investor with experience across a number of different markets, don't jump in just because everyone else is. Take time to get your bearings.

Don't think you need to move quick to get in at the absolute bottom. The chances of that are small no matter how fast you move, because an absolute bottom doesn't stick around very long. When a real estate market starts to turn, it generally turns quickly. Within a few months you can begin to see an increase in prices, but that doesn't mean that you've missed the boat.

When I bought in Argentina after their financial crisis of 2001, I missed the absolute bottom of the market (which was around July 2002). In fact, I didn't make my first research trip until October 2002. I bought my first apartment in Buenos Aires in February 2003. It was a new market for me at the time, and I wanted to move carefully.

Prices fell rapidly in B.A. from January 2002 to July 2002, but the upswing was a gentler slope. I probably paid 10% to 15% more in February 2003 than I would have in July 2002, but I was still able to buy at a huge discount to December 2001 prices. Over the next five years, the values of all three apartments I bought shortly after the bottom doubled.

In the United States, you have many different localized markets affected by different aspects of the economy. Miami, Phoenix (where I grew up), and Las Vegas were terribly overbuilt, and I'd say prices in these cities will fall further. Areas affected by high foreclosure rates still have inventory to unload, which will slow any price rises. Mid-sized cities that didn't see such run-ups in values, though, have already leveled out, and I'd say this is where we're going to begin to see some appreciation.

And, if you're an investor with cash or great credit, this is where I'd recommend you shop for investment property assuming (and this would be my overall caveat) you want to hold U.S. assets long-term. As in most all markets right now, I'd focus on rentals with the potential to generate a decent yield.

People have to live somewhere. An investor-friend told me recently about a U.S. foreclosure he'd bought from the bank, a house still occupied by the seller...who is now a tenant paying the new investor-owner a rent high enough to generate an acceptable yield. Plus the seller-tenant has an option to buy the house back in two years.

This isn't uncommon. Many properties are available with renters in place. This would be an obvious choice for an investment purchase. Short of this, you want to shop for a rental with strong fundamentals--near to schools, shopping, and where people work. This is how I shopped in Chicago 20 years ago when my eventual purchase was a three-flat building. I lived in one of the three apartments and rented out the other two for enough to enjoy a strong yield during the two-and-a-half years I owned the building before reselling it for 85% more than I'd paid. (Those days are over, but it's a nice memory.)

Before you head out to your local real estate agent to look for an investment property, do your own due diligence on the areas where you are considering investing. And, again, unless you've got experience across a number of markets, I strongly recommend you start out close to home. Don't let a tip from an agent or a friend send you off too far afield. If you live in Chicago, shop in Chicago...not Phoenix over the Internet. When starting out, buy what you know.

My biggest investment mistake was made on the recommendation of someone I was working with at the time who convinced me to buy in a market I didn't know before I'd taken time to get to know it. Had I done even a little independent due diligence, I never would have bought what I bought...and it wasn't long before the mistake was evident. This buy became the biggest loss of my property investing career...and one of the most important lessons learned.

No matter where you're considering investing, in the United States or abroad, I recommend that you visit the location yourself if you don't know it well already, walk around, ask around, talk to agents and attorneys, waiters and taxi drivers. It can be a big mistake, as my experience shows, just to show up and buy whatever someone shows you...or, worse, to buy from a distance over the Internet.

Get your real estate investing legs under you in your home town if you can (as I did in Chicago years ago). Then making the step to investing in real estate overseas should be much smoother.

 


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We sat down with Mr. O'Shea and gave him the rundown on the kind of house we were looking for. Georgian. Stone. At least three bedrooms and three baths. With a bit of land for a garden. Mr. O'Shea seemed to take our criteria under advisement and suggested a time later in the week when one of his agents could take us out to view available properties. That first day out, we saw not one house that matched the description we'd given to Mr. O'Shea in his office. Instead, his agent took us to see four new-built "bungalows" in "estates," as the Irish refer to suburban housing subdivisions, just outside the city. I refused to get out of the car to walk through the fourth place. It looked just like the three we'd already seen and that I'd already explained weren't at all what we were interested in.

This was our introduction to shopping for property in a real estate market without a Multiple Listing Service. No MLS means that agents can't show you everything available that fits your parameters, because they don't have access to everything available. They have access only to their proprietary listings. If they don't have what you ask for, they show you something else. Anything else. Whatever they have.

Thanks to our ignorance of how foreign property markets operate, it took us seven months to find the house that we eventually bought in Waterford. By the time we'd identified the 200-year-old stone country house that we agreed we wanted to buy, the Celtic Tiger market had meantime continued appreciating before our eyes. We considered reconsidering the purchase altogether. Could it possibly make sense to buy into what surely must have been a market top? On the other hand, we were in Ireland for several years at least, and I wanted a place to make our own. So we proceeded to buy.

That purchase was the start of a now nearly 15-year-long career investing in property overseas and, despite our initial misgivings, became our first success story. We resold Lahardan House six years later for more than twice what we'd invested in the property, including the purchase costs, the renovation, and the furnishings, and took our leave of the Celtic Tiger market just before it did, finally, peak and then turn. Today, Ireland's property market is in ruins. Meantime, we walked away with euro profits that we invested in an asset we continue to hold today, an apartment in Paris, that is, again, worth more than twice what we have invested in it and that, for the past four years, has generated an annual yield from rental income of 5%.

Our first experience, in Ireland, frankly, was more luck than genius, but it taught us many of the fundamental lessons we value most today.

In fact, though, while Lief and I began our overseas real estate investing careers unassumingly together in Waterford, Lief had made his first property investment before I knew him, in the States. A few years before we met, Lief had taken a US$5,000 gift and turned it into US$150,000 profit through a real estate deal in Ravenswood. Ravenswood is a north-side Chicago neighborhood of middle-class office workers and first-generation Latino immigrants, a very up-and-coming working-class kind of place at the time. Here, after months of searching and negotiating to put together a deal that allowed him to make the buy with but US$5,000 cash, Lief had invested in a building configured as three two-bedroom flats. He lived in one of the apartments and rented out the other two. The rents generated a good income from the start and for more than two years to follow. After that time (just 24 months later), Lief sold the property and walked away with $150,000 after expenses. Not a bad return on US$5,000. It was that US$150,000 that made it possible for us to purchase Lahardan House in Ireland. And it was the profits from Lahardan House that later made possible our purchase in Paris...and so on.

Lief is a bona-fide start-from-next-to-nothing overseas property investor success story. And he's not the only one I know, not the only guy (or gal) I know who has made a lot of money while having a lot of fun investing in real estate across the globe.

Here's the point: In the current global financial climate, overseas real estate is both the smartest and the sexiest way to invest your money. It's a key strategy for diversification at a time when diversification is not a sound investment approach but critical to survival. The very good news is that you can get started investing in real estate overseas with even a very modest capital budget. Lief began his career with US$5,000. The objective is much more than making money. Yes, you can make money this way, over time, perhaps a great deal of money. But you'll be accomplishing far more than racking up profits. At a time when it can seem like the world is spinning out of control, you'll be putting yourself firmly in the driver's seat of your and your family's financial future. You'll be positioned for profits in the immediate term (in the form of rental yields), in the mid-term (in the form of capital appreciation), and over the very long haul, building a legacy of wealth that can be enjoyed not only by you but also by your heirs.

And, all the while, purchase by purchase, you'll be reinventing your life.

Kathleen Peddicord

P.S. What else this week?

  • Clear turquoise waters lapping gently against soft white sand. Palm trees rustling in the warm breeze. Yellow and orange fishing boats bobbing on the horizon. Birdsong and island tunes all around...

Ambergris Caye, Belize, is unadulterated, unpretentious Caribbean...the sea, sand, and sunshine of the Caymans or the Virgin Islands without the price tag.

San Pedro town, a former fishing village, is the center of activity and home to a growing expatriate community of North Americans and Europeans catered to now by dozens of restaurants, shops, art galleries, and community organizations. You could settle in here quickly and easily, as the language (like everywhere in Belize) is English.

The real estate market, for both buying and renting, is developed, meaning you have many options at all price points. You can buy a condo for as little as US$100,000 or invest up to US$1 million or more, and you can rent for as little as US$600 to US$700 per month.

Life on Ambergris is relaxed and friendly, carefree and sunny. Adopt this island as your home, and you'd enjoy most all services and comforts you're used to, and you'd never want for like-minded company.

That's one face of Belize. Back on the mainland, life is very different.

Mainland Belize can be broken down into four zones: Belize City; the northern coast around Corozal; the southern coast around Placencia; and the interior Cayo.

Forget Belize City. This isn't a place you'd want to live. The city has a reputation for being poor, dirty, and unsafe for a reason. It is poor, dirty, and unsafe. In Belize City last week for our Live and Invest in Belize Conference, I found it wholly unchanged from all my preceding visits. Seeing it for the first time, especially certain neighborhoods south of the river, the first word to come to your mind might be: appalling.

But Belize City is not representative of Belize...

  • Mick Fleming is a larger-than-life character, a Brit who, more than 30 years ago, with US$600 in his pocket, made his way to Belize City, where he met a guy in a bar who owned a piece of land in the jungle he was interested in selling. Mick bought, thinking he'd try his luck as a farmer. The farming was tough going, but, in time, Mick identified another opportunity. Travelers were beginning to find their way to this remote region. They'd happen upon Mick and ask if he had a place where they could spend the night.

Mick built a few thatched-roof cabins...then a few more...then a dining room and a bar...

I met Mick nearly a quarter-century ago, when his Chaa Creek Lodge was a humble (electricity- and hot water-free) but beautiful oasis in the rain forest. I returned as often as I could for years, but, when I traveled out to see Mick most recently, I realized it'd been maybe 13 or 14 years since my last visit.

In the intervening years, Chaa Creek has grown up. Today it's 25 luxury villas, a spa, a swimming pool, and five-star service in the still thatched-roof dining room.

"The world has changed since we saw each other last," Mick said our first evening together. "We watch the news here each evening. We know what's going on out there. It's not that we've got our heads stuck in the sand. It's that we choose a different reality..."

  • Friend Peter Zipper, President of Caye Bank in Belize, describes the people he meets on Ambergris Caye, the Caribbean island that lies just offshore from this country's mainland coast, like this:

"Walk down the street on Ambergris," Peter says, "and you hear the music of the Boomers all around—the Beatles, the Rolling Stones, Janis Joplin...

"These folks, the Baby Boomers, they had a great time in the 1960s...listening to their music, growing their hair long, and getting stoned all the time...

"Then they became the most boring people on the planet. They made a lot of money...by ignoring everything but hard work.

"Now they're looking to reclaim their lives. They're finding their way, in retirement, in bigger and bigger numbers, to places like Belize...where they're listening to their music again, growing their hair long again, and getting stoned all the time again..."

  • "Ipoh is a popular retirement haven among Malaysians, who claim that its fresh air, clean water, and relaxing lifestyle not only improve their quality of life but also promote longevity and health," writes Asia Correspondent Wendy Justice in this month's issue of my Overseas Retirement Letter, in the final stages of production as you read this.

"And it should be every bit as popular among foreign retirees, as well.

"Known as 'The City Built on Tin,' 'The City of Millionaires,' and 'The City of Bougainvillea,' Ipoh offers many advantages for Westerners interested in relocation to this part of the world. The health care is First World, the infrastructure modern, the visa program flexible, and there's ample opportunity to mingle with friendly, English-speaking locals..."

Also This Week...from Resident Global Real Estate Investing Expert Lief Simon:

Greece's credit rating with Moody's is already in "junk" territory, and, earlier this week, Spain was downgraded to just above junk quality. Things are getting interesting in Europe.

A few weeks ago, I recommended that, given the current and trending status of the euro versus the U.S. dollar, as well as the disastrous local economic states of affairs, you begin looking in this part of the world for real estate investment opportunities. I reiterate that recommendation today.

One friend has made plans to go shopping for a vacation home in Greece in August. Another is considering picking up a place in Barcelona.

One problem with these two countries, as you know, is the local banking industries. It's not going to be easy, if it's possible at all, for my friends to get local financing as a hedge against the further fall of the euro, as I've suggested previously.

On the flip side, with local financing drying up, you can expect these beaten-up property markets to take yet further hits...meaning that cash buyers are going to become extremely attractive to sellers. Come in with cash, and you should be able to negotiate discounts big enough to more than compensate for the fact that you're not able to borrow locally.

The important thing to take away from all this right now is that it's time to "get into the market," as I call it, if either of these countries is a place where you're interested in planting a real estate flag. Identify the area that suits you and start gathering data. With some basic background information on specific local markets, you'll be prepared to act when a great deal presents itself.

In both Spain and Greece, you'll find attractive and well-located properties for as little as €50,000 right now. As the crises in these countries play out, property prices may fall further, but you'll need to be in the market to gauge this. Don't sit back thinking you'll wait until the market has bottomed before you start shopping.

That's what happened to me in Argentina following that country's currency crisis at the end of 2001. I didn't get to Buenos Aires until October 2002. The market bottomed out in July 2002. I still found very attractive opportunities, but the best deals, the true fire-sales, had already passed.

The crises in Spain and Greece have been longer drawn out than that in Argentina, so it's tougher to say when (and some would say if) these property markets will turn around. Regardless, €50,000 amounts to about US$63,000 right now. It's hard to argue with a two-bedroom apartment in a good location that could serve as both a vacation getaway and a rental investment for US$63,000.

Good locations for a rental investment are to be found all along the coast of Spain. In Greece focus on the island vacation destinations. You're not going to find a villa on the ocean for €50,000. The market hasn't gone that crazy. But you will find good choices in that price range in villages both coastal and inland.

In the bigger, higher-profile markets, you'll need a bigger budget. In Barcelona, for example, one of my favorite destinations in Spain, you'll need, say, €120,000. Current per-square-meter average in this city right now is in the range of €3,000, which is down at least 25% to 35% from the highs I remember before 2008.

To be clear, I don't see Spain or Greece as pure real estate investment plays. Prices are low and likely will drop further, meaning this is a good time to be shopping, but prices won't be shooting back up anytime soon, so you're not buying with the expectation of quick appreciation. You'll get some rental income if you buy in the right (tourist) areas...enough to cover your carrying costs and maybe to generate a decent yield.

These markets are bargain-priced flag-planting plays right now.

Editor's Note: Lief's essay this week is republished from his Offshore Living Letter. Lief's Offshore Living Letter comes out twice-weekly (Mondays and Thursdays) and addresses the benefits of and current opportunities for diversifying your portfolio, your business, your assets, and your life.

If you aren't yet on the list to receive Lief's Offshore Living Letter (it's free), you can sign yourself up here now.

 

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Start by determining whether you meet the requirements for Form 8938 overall. This means understanding the rules and making some calculations.

First is the fixed number threshold. For those residing in the United States, that number is US$50,000 of Foreign Financial Assets (FFA) on the last day of the tax year or US$75,000 of Foreign Financial Assets at any point during the tax year. Those figures are for people filing single, including married people filing separately. The figures double for people filing jointly.

If you don't reside in the United States, then the numbers jump to US$200,000 of FFA on the last day of the tax year or US$300,000 at any point during the year. Again, the figures double for people filing jointly.

While the minimum threshold for filing is higher than that for the FBAR form for reporting foreign bank accounts, foreign bank accounts are included in the definition of an FFA. Therefore, even if you don't qualify for the FBAR because you have, say, one bank account overseas with only US$8,000 in it (the threshold for reporting, remember, is an account with US$10,000 or more), you would be required to report that bank account on Form 8938 if you meet the requirements for the new form overall.

FFAs also include stock certificates that you hold directly for foreign corporations even if the corporation doesn't qualify as a U.S.-controlled foreign corporation (USCFC). This could be stocks of a Canadian junior mining stock you purchased directly from the company that now sit in a drawer in your home office. This example is critical as it's not uncommon to have invested in stocks in this manner and forgotten about the certificates sitting in a file drawer somewhere. A friend whose mother died recently found old certificates for a foreign stock that his mom had bought years before and hidden in her bedroom. No one else knew they existed.

The catchall part of the definition for an FFA is "Any financial instrument or contract that has an issuer or counterparty that is not a U.S. person." This definition would include, for example, an offshore life insurance policy that has a cash value. It would not include physical assets held in your own name...such as real estate and metals if you hold the physical metal rather than a certificate.

Debate continues about whether physical metal held by a third party qualifies as an FFA. If you have a contract with a third party to store the metal, it could be considered to fall under the catchall definition. However, physical gold is clearly not a financial instrument, so most experts agree that physical metals need not be reported on Form 8938.

Real estate is much more black and white. It is not reportable...as long as you hold the property in your individual name. If you hold it in an entity, then the shares of the entity qualify as an FFA and do need to be reported. The real estate then would be disclosed on the forms for the entity.

While the above explanations are as clear as I can make them, they probably only bring up more questions. With so much uncertainty as to what should be included on Form 8938 and so much worry (thanks to IRS fear-mongering tactics) over the consequences of not reporting something that is deemed reportable, some taxpayers are opting simply to report any and all assets they hold outside the United States. That may seem like overkill...and repulsive if you retain any expectations of privacy in the United States.

I'd agree...except that I've already given up on any delusion that anything resembling personal privacy remains possible in the current climate in the States. Further, I believe it will be only a short time before that will be the requirement anyway--to report any and all offshore assets, in anticipation of the imposition of a wealth tax.

With the U.S. government drowning in debt, many believe a wealth tax similar to the ones in France, Colombia, and elsewhere (including, at one time, in the state of Florida) is just around the corner. I count myself among them.

Meanwhile, remember: Failure to include even one required disclosure on Form 8938 can result in a fine of as much as US$10,000 to US$50,000.

Lief Simon

Editor's Note: Today's essay from Lief is republished from yesterday's edition of his Offshore Living Letter. If you're not already reading Lief's twice-weekly dispatches on why and how to diversify your investments, your assets, your business, and your life offshore, given the current global climate, you should be. Sign yourself up here now.Continuing Reading:

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Lending terms in Panama aren't the same as you're likely used to. You won't get a 30-year, fixed-rate mortgage, for example. The longest term you're likely to find is 25 years, and the interest rate will vary in some way.

The longest fixed term you'll find is five years.

That said, a variable rate doesn't necessarily vary. There are no guarantees, and you certainly can't predict whether or in which direction your rate might adjust, but I can tell you that, while the interest rate for our current mortgage (for a rental investment property we own) in Panama is variable, it hasn't changed once in the five years we've had the loan.

In addition, mortgages in Panama come with a small catch. As part of the lending process, you'll be required to get a local life insurance policy that would pay off the loan if something were to happen to you. The life insurance is an extra expense. But the real issue is the potential limit on the term of the loan you'll be eligible for, as you can get a mortgage only for as many years as you can get a life insurance policy.

This isn't unique to Panama. Mortgage life insurance is a typical requirement in most countries, but the limitation created by the ability to get life insurance can catch older buyers from North America off-guard.

In Panama, the typical life insurance company will cover you only until age 75. Therefore, you can get a mortgage only to age 75. So a 65-year-old buyer would be able to arrange no longer than a 10-year term from a bank.

I was told a few years ago about someone who was able to get a life insurance company to cover him in Panama until age 80, meaning this buyer got an added five years on his mortgage term. In general, though, life insurance companies will cover you only until age 70 or 75.

Another factor in Panama that can limit the amount of the mortgage a bank will give you is the limit that many banks now set on the per-square-meter value they will lend on.

For example, if you're buying a house or an apartment in Panama City, Global Bank will limit your loan to no more than US$1,300 per square meter. That is the amount on which they will base their 80% loan-to-value calculation.

If you want to buy a house for US$1,400 a meter, the best you'll be able to manage is a loan of US$1,040 per meter (80% of US$1,300). You'll have to put down US$360 per meter, or almost 26% of the purchase price to secure your "80%" loan.

The good news is that you can apply for pre-approval from a Panama bank before you start making property offers. This way, you'll know for sure what you can afford to spend.

In the past, an alternative was to take a second mortgage out on a piece of property you owned in the States. This was a popular and common strategy during the boom, when U.S. banks would lend to anyone with a pulse. Today, it's not a realistic option in most cases.

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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.

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