This is a mammoth undertaking, the complete fruits of which will be featured in a special issue of our Overseas Retirement Letter. We'll share parts of this important study in these daily dispatches, as well. Watch this space.
Second development from last week's editorial sessions: Our picks for your best choices in 2013, depending what you're looking to do. Here are some of the highlights:
In addition, we've scheduled three big events for 2013: a general getting-started Retire Overseas event in the United States that will cover the world's best options across regions; a Live and Invest in Europe event in Dublin, Ireland; and a Live and Invest in Asia event in Kuala Lumpur, Malaysia.
P.S. What else this week?
Everyone is talking about the new asset class. Farmland isn't a new asset class. It's the world's oldest asset class. However, it has become very attractive in the past several years and is going to become more attractive over the coming decade as the world's population continues to expand. We're looking at a total world population of more than 9 billion people by the middle of this century. This is translating to a global race for farmland, with some countries imposing restrictions on foreign ownership of productive land.
The old real estate investment adage recommends buying beachfront because they're not making anymore of it. There's a limited supply of farmland, too, and a fast-growing demand. Farmland, therefore, is and will continue to be the world's best possible store of value. Looking at a world map, three places are interesting in this context: Africa, Eastern Europe, and South America. Among the three regions, South America is the most competitive; Africa and Eastern Europe are more volatile, with more corruption, lack of clear rules, and restrictions on foreign ownership. In South America, Uruguay, in particular, stands out; about 95% of the land in this country is farmable. Until the start of this century, most of Uruguay's land was used for cattle. When farmers began to recognize the implications of the coming global population crisis, they switched from cows to soybeans. Because Uruguayans haven't farmed their land for 200 years, it's virgin. There's been no soil degradation as in more recognized global breadbaskets...
Those were the recommendations from a friend, a Frenchman whose opinion I respect, when I asked for his investment advice.
"Centuries-old bijou real estate in a brand-name city like Paris...and productive agricultural land on which to grow corn, soybeans, wheat, alfalfa, fruit trees, grape vines, or timber," Frank replied without hesitation. "Because the world is always going to need those things. The demand is only going to increase, no matter what."
Productive land is the ultimate hard asset. Unlike a lot in a development community or a plot in the middle of a commercial district, productive land always retains the potential for yield. By definition, productive land is land where you could produce something of marketable value. When whatever you plant or herd reaches maturity, you harvest and sell. Productive land also provides diversification and can be part of a legacy wealth plan.
This can be about farming, but I'm not suggesting you pick up a hoe. You have good options for taking advantage of this classic diversification strategy without ever getting your hands dirty. Specifically, I recommend three productive land investments that you can participate in without having to learn much of anything about how to grow and harvest crops: timber (specifically teak), coconuts, and farmland.
Historically, timber has enjoyed the best risk/reward ratio of any investment sector. Depending on whose chart of historical returns you consult, timber as an asset category has produced an annualized ROI in the range of 12% to 15% per year every year since they started keeping records of investment risk versus return. A friend calls timber "a long-held secret of the world's wealthiest people." It's a low-volatility hedge against inflation and an asset class that operates independent of the stock market...
Coconuts are ubiquitous in Brazil and so is the water they produce. On any beach along this country's long coast, you can find coconut vendors hacking off the tops of coconuts, sticking a straw into each open nut, and selling the portable, natural thirst-quencher to hot and sticky passers-by. In the United States and Europe, coconut water is mass-produced, packaged in bottles and cans by big drink companies including Coca-Cola and Pepsi (the respective brands are Zico and O.N.E.), and sold on grocery store shelves. Their coconut water products are not marketed aggressively in the United States by either Coke or Pepsi, because neither group can get enough supply. They sell all that they are able to produce even without making any serious investment in promotion...
You should continue doing what you've been doing, as long as what you've been doing has been organizing and diversifying your life overseas. If you haven't started down this road yet, I'd say that you should get started today with a sense of urgency. You must diversify, both your investments and your life. It's a necessity of the world we're living in, regardless who's sitting in the White House.
Undertake this agenda understanding that whatever actions you take to take control of your life, your finances, and your family's future will be vilified by many as unpatriotic and un-American. This is a great irony for me. Have these self-appointed patriots read any U.S. history? Have they ever watched "How The West Was Won"? America is a great country because, historically, Americans have always taken care of themselves. The un-American course of action would be to do nothing to protect yourself, to allow events beyond your control to overtake you. A real American never allows himself to play the victim...
PLUS: From resident global real estate investing expert Lief Simon:
Kathleen's blog this week for U.S. News and World Report detailed five apartments in Europe on offer right now for less than US$100,000. Indeed, you can find many good options at affordable prices in Europe, which generally surprises people.
Of course, if your only goal for retirement is a cheap place to live, you could find options anywhere, including in the United States. Houses for less than US$50,000 can be found in every state (no, I didn't personally check for all 50, but I believe this is a fair statement). The question is whether or not you would want to live where those houses are located. I'd say that a quaint apartment in a small coastal town in Europe is a more interesting retirement option than a house in the middle of nowhere or in the crime center of some non-descript city (the most likely places to find super-cheap housing in the States).
Further, in addition to purchase price, you have to consider holding costs when making comparisons. One big factor is property taxes. In Europe, generally speaking, property taxes are much lower as a percentage of property value than they are in the United States.
In Paris, property owners pay two taxes (one is a property tax, the other is an occupancy tax). For my apartment in this city, the total of the two is about .2% of the property value. I pay no property tax for my house in Croatia...not because it's worthless, but because Croatia doesn't charge property tax. Ireland doesn't charge property tax either, at the moment, for residential property. The country is expected to implement one by 2014, but the rate will be low as a percentage of value.
The cost in Europe comes when you make the purchase. Most countries charge a transfer fee from 1% up to 12%. You could consider this an upfront property tax if that makes it easier to bear. Amortize it over the time you expect to own the property, and you'll likely still find the cost works out less than paying the comparable number of years of U.S. property tax.
You're not going to find really inexpensive property in Europe's marquee cities (Paris, Barcelona, Rome, etc.), but this part of the world has a long history and long coastlines. Take out a map and look for small towns near bigger base cities. In these kinds of places you can buy super-cheap and be near enough to a brand-name city to enjoy all it has to offer on a regular basis.
Istria is one of my favorite choices in Europe. The history, the architecture, and the countryside all are enchanting. This region of Croatia has many historic towns, inland and along the coast. I'd say the most interesting is Porec, with its walled old town. For a bigger town, Pula is really the only option, and here you'd find it difficult to find a house for sale for US$100,000 or less. Not so in Porec. The downside for Croatia is that full-time retirement living is difficult, as the country doesn't offer an easy residency visa option.
On the Black Sea coast, consider the region around Constanta. Winters here can be a bit colder than on the Mediterranean, but summer temperatures are perfect unless you're looking for really hot. This region of Romania offers good new construction at really low prices (well under US$100,000), making it a good choice if living in a building built before the United States was a country bothers you.
If neither of these options makes sense to you, again, take out a map. You'll be surprised how many interesting options for an affordable retirement you can find in the Old World.
Kathleen Peddicord'sNew Book
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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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