In addition to all the young people needing places to live, half of the current housing stock in the country needs to be replaced or at least renovated. Many of the structures are simply not suitable for living...at least not according to current-day living standards. People in the old buildings need new and better ones...further fueling the construction boom that continues to expand. As my real estate contact put it, "There just isn't enough inventory, even with all the building that's going on." With its young population, Turkey is a country of the future. The economy is growing and diversified between Europe and Asia. And it's easier than it's ever been for foreigners to invest here now, especially in real estate. "It used to be, even just a few years ago, that it could take something like 28 months for a foreigner to buy a piece of property in this country," explained my real estate contact. "Now it can be done in 10 days." Some restrictions still exist on foreign property ownership (a foreigner can't own more than 30 hectares of land, for example), but these don't affect the average investor. Where to buy? I'd focus on Istanbul rather than the vacation properties along the coast that many foreigners have been buying. Vacation markets supported by mostly foreign buyers are less liquid than a local market like Istanbul. When you decided to sell your asset in this city, you'd have many different potential buyers to appeal to. Bottom line, despite excellent appreciation over the last four years, you haven't missed the boat on Turkish real estate. Expect decent appreciation for at least the next several years or more and solid, even double-digit rental returns. Lief Simon Editor's Note: Today's essay from Lief is republished from his twice-weekly Offshore Living Letter. If you aren't already receiving this straight-shooting dispatch direct from Lief's laptop to yours, get yourself on the list here.
Since making this cemetery plot investment two years ago, I've seen a growing trend of packaged real estate offers from around the world, mostly the UK. The Brits seem creative when it comes to packaging investment opportunities for the individual investor, perhaps because the UK imposes fewer restrictions on this kind of thing than does the United States. From agriculture funds to direct investments in fruit plantations and dairies, for example, where you own the land and the cows, opportunity is expanding for the small investor looking to diversify globally. Not too many years ago, if you wanted to invest in agriculture, you had to plop down a US$500,000 to US$1 million on a piece of land and then find a manager to run the farm for you. You can still do that today if you're interested and have the cash, but for those of us with less than a million-dollar-per-buy budget, it's easier all the time to find good opportunities beyond the paper products pushed by Wall Street. Lief Simon P.S. Since I first learned about cemetery investments in the UK, many new similar opportunities have popped up. I've been told that some of these copycat developers don't really know what they are doing. Be sure to do your due diligence if you come across one of these more recent opportunities.
The Malaysian government maintains that housing should be, first and foremost, for Malaysians. As the economy has grown, Malaysians have been able to spend more money on housing. Accordingly, the minimum purchase price requirements that apply to foreign real estate investors have been set purposely higher than most Malaysians can afford. This restricts foreign buyers to the luxury housing market. The minimum purchase price for foreign property transactions has increased several times over the past decade. As recently as 2009, a foreigner could buy any real estate in Malaysia for as little as RM250,000 (about US$73,600 at that time). This minimum purchase price doubled in 2010 and again in 2014. In early 2014, the government changed the existing housing laws. For the first time, MM2H visa holders could take advantage of a reduced minimum purchase price for real estate in some Malaysian localities. Although a minimum price of RM1 million (about US$310,100) has been established, some states and municipalities offer incentives to foreign permanent residents. As of March 2014, MM2H visa holders can purchase property in the state of Perak, which includes the city of Ipoh, for just RM350,000 (US$108,530)—a significant reduction from the RM1 million required for non-MM2H holders. Meanwhile, the minimum purchase price of property in the state of Sarawak, including the city of Kuching, is now RM300,000 (US$93,026). Effective this February, the state of Penang, including the internationally famous food and heritage city of George Town, allows permanent residents to purchase property for RM500,000 (US$155,044), in addition to paying a state levy of 3%. On the island of Penang, those without the MM2H status are limited to purchasing property with a minimum value of RM1 million for a condominium, or RM2 million (US$620,174) for landed property, in addition to the state levy of 3%. Foreigners with permanent residency can purchase a condominium in Melaka for RM500,000, but the minimum purchase price for landed property is set at RM1 million. Reports differ, but the official government MM2H website states that the minimum purchase price for property in Kuala Lumpur is currently RM1 million regardless of residency status. Until this year, the lack of capital gains taxes had made real estate attractive to investors. Foreigners from Singapore, East Asia, and elsewhere have purchased property with the intention of flipping it for profit a few months or years later. The change in the Real Property Gains Tax (RPGT) is the most significant law affecting the purchase and sale of real estate by foreigners. The RPGT was enacted in January 2014 to dampen what the government believed was foreign over-speculation in the real estate market. This new capital gains tax assesses foreigners a 30% tax on any property that is sold within the first three years of purchase for permanent residents—or sold within five years for nonresidents. Permanent residents are assessed a 20% RPGT if the property is held for less than four years and a 15% RPGT if the property is sold within five years. If the property is held for more than five years, nonresidents will be assessed a RPGT of 5% on selling. No RPGT is assessed for permanent residents who sell their property five years after the date of purchase. There is a one-time-only exemption on the RPGT if the individual sells a residential property and no RPGT assessed if the property is transferred from one family member to another. Although the state of Johor Bahru requires that foreigners purchase property at the normal minimum price of RM1 million whether they have permanent residency or not, there is no minimum price requirement in Johor Bahru's township of Medini. Medini is located in Nusajaya, which is part of the Iskandar Malaysia Special Economic Zone that encompasses the majority of Johor Bahru's metropolitan area. Iskandar is Malaysia's largest single urban development project to date. Key features of the Medini project include several low-density residential developments with amenities that include golf courses, a health and wellness village, swimming pools and Jacuzzis, 24-hour security, access to several international schools and universities, prime shopping areas, and an easy commute to Singapore. Foreign real estate investors are also exempt from the RPGT when buying property in the Medini development. This is currently the only place in Malaysia that does not assess the RPGT, so purchasing a home here can be an attractive short-term investment. The average residential value for property in the state of Johor has increased more than 45% over the past five years, compared to an average of just 30% in the rest of Malaysia. Foreigners must pay a state levy of 2% or RM20,000 (US$6,224), whichever is higher, when purchasing property anywhere in the state of Johor. This is the first time that MM2H visa holders have a real advantage over nonresident foreigners in the real estate market. Although the RPGT applies to all foreigners buying real estate (other than in Medini), the lowered minimum purchase requirements offer MM2H holders an incentive to buy, rather than rent, their home. The additional incentive of eligibility for 80% mortgage financing is another advantage for permanent residents. Complete information about the benefits and requirements for the MM2H visa can be found on the official website. Wendy Justice
The first 85 hectares will be planted with 16-month-old saplings, meaning these trees will begin producing mangos sooner than the younger six-month-old saplings that the original financial projections were based on. As a result, the first investors will not have to wait until year four for cash flow, as had been projected, but will see some cash in year three. Getting a first crop nearly a year sooner than expected could increase the projected 20-year annualized return on investment from 16.52% to 20.21%. Unfortunately, those first 85 hectares are sold already. In fact more than 150 hectares have been sold at this point. Still, a 16.52% IRR sounds great, right? The question, though, of course, is: Why mangos? Mangos are the most eaten tree fruit in the world. In Panama, the processing plants can't get enough mangos locally so they have to import much of the supply they need from Brazil (where currency fluctuations between the dollar and the real have kept one plant from buying any mangos from Brazil this year), Ecuador (which is influenced by El Niño), or elsewhere. In fact, 80% of the mangos processed in Panama are from outside the country, which is more complicated and more expensive than a local supply would be. Bottom line, the processing plants in Panama would love to be able to buy more mangos locally. Meantime, while mangos are well known and highly consumed in the tropics, they are gaining notoriety in the United States and Europe, and many U.S. and European grocery chains are looking for suppliers. The projections for the return from this plantation have been based on selling harvests locally; however, there is a real possibility of increasing revenues (and returns to investors) by shipping fruit north, and this is an avenue the developer is rigorously exploring. In fact, one of the largest U.S. dried fruit distributors toured the operations a few weeks ago. Panama's is a perfect climate for growing mangos, and the country's central geographic location, at the hub of the Americas, provides many long-term options for selling the fruit. Mango processing plants are based here for those reasons, among others. Del Monte, for example, processes mango fruit into juice in Panama, boxes it up, and ships the boxes regionally. All of this is to say that demand is not a concern. Even if the developers get 1,000 hectares planted and producing in the next couple of years, their harvests won't make a dent in the current demand...and the current demand is growing. In addition, revenue from farming, including fruit orchards such as these, isn't taxable in Panama if the revenue is less than US$300,000 per year per farm. So unless you are buying more than a dozen hectares, you should be able to take your returns tax-free in Panama for some time until or unless mango prices increase to the point where you surpass that revenue limit. That wouldn't be the worst problem to have...and if that did happen, you could break your holdings into separate farms if you wanted to further avoid any Panama tax on revenues. The management company that will oversee the planting and care of the trees has four generations of experience in farming in Panama. The head guy, Alan, knows his stuff. In fact, he already has a 350-hectare plantation under management. He planted those trees about 10 years ago. Even with all of his experience, Alan has been conservative with the projections for this undertaking. They are based on the lowest production numbers and price per pound for mangos that could reasonably be used without obviously undercutting. So, while the returns look good, they definitely aren't inflated. Still, what if something goes wrong? The variety of mangos being planted for this project is a hearty breed called Lady Victoria. A Lady Victoria mango has the pulp of an Alphonso but a thicker skin to help protect against pests. The trees themselves have deep roots that seek out water underground to help them survive during droughts. Drought isn't generally a worry in Panama, but Alan is installing irrigation systems (which he's managing with his cool drone plane) so he can control the water intake of the trees during the dry season and manage the harvest timing nevertheless. Mango trees live for 60 to 80 years. This means that owning them can give you and your heirs a lifetime of cash flow from a sustainable investment. A 1-hectare plot in this Panama plantation is priced at US$38,500. However, I have negotiated a reduced price with the developer of US$33,500 for Live and Invest Overseas readers only...at least until they get the first 100 hectares planted. This price includes all planting costs, irrigation infrastructure, and care of the trees until they start producing, at which point you'll begin to pay an annual crop care fee. If you invest in time to get in on the more mature saplings currently being planted, you could look for cash flow to begin in year three. With this investment, you take title to the land and own the trees. Alan and his team simply manage the trees for you and take a percentage of your gross revenue for harvesting and selling the produce for you. If you'd like to diversify your real estate holdings to include a mango plantation (something I recommend and that I am doing personally), you can get in touch here for more information here. Lief Simon
What I Really Think About Life In Panama City Dec. 22, 2013 Panama City, Panama Dear Live and Invest Overseas Reader, Georgia M. wrote from the United States this week to say: "Kathleen, I see you are planning to move back to Paris. Being totally honest and understanding that all experiences are positive, how would you contrast Paris and Panama City and what are your reasons for moving back to Paris?" First, before I respond to these questions, an update: The offer we made a couple of weeks ago on a small apartment in Montmartre has been accepted. Lief is working with our notaire to finalize details of the purchase of this new Paris pied-a-terre (it's but 35 square meters in size, so toe-a-terre might be more appropriate) that will serve as our Live and Invest Overseas Euro-base starting in the New Year. We won't, though, be moving back to Paris, at least not full-time. Starting in 2014, we'll divide our time between Paris and Panama City, our current base. Why? Because Paris is my favorite city in the world. It's pretty and romantic. I like pretty and romantic, and Panama City is neither of those things. On the other hand, I also like contrast and the unexpected. Life in central, historic Paris is what you expect it to be--pleasant. Nothing about life in Panama City is predictable. Both those realities appeal to me, and my ideal lifestyle is one that embraces both the charming and the challenging. Thinking more practically, how would I compare Panama City to Paris? The cost of living can be more similar than you might imagine. This is because Panama City is not the super-cheap destination it used to be and also because life in Paris can be more affordable than you expect. Your cost of living in both of these cities is hugely variable. You could rent an apartment in Panama City for US$1,000 (this is the minimum monthly rent I'd budget for comfortable digs in a neighborhood where you'd want to be based)...or you could rent an apartment in Panama City for US$5,000 per month (in Punta Pacifica or front-line avenida Balboa). You could rent an apartment in central Paris for 1,000 euro per month (again, this would be a minimum monthly rent) or for 5,000 euro per month, depending mostly on where in the city you choose to settle. A couple could spend US$200 per month on food in Panama City (shopping at local markets and eating only locally produced items)...or US$1,000 per month (shopping at the U.S.-style Riba Smith grocery store for brand-name food items). A couple could spend 400 euro on groceries per week or 1,000 euro per month, depending, again, on where and how you shop. Utilities will cost you more in Panama City than in Paris if you run your air conditioning around the clock (as we do). Transportation, too, can be more affordable in Paris, where you can get most anywhere you'd want to go using your own two feet or a monthly Navigo (metro/bus) pass. A cable/internet package will cost you 40 euro per month in Paris or US$50 in Panama City. You'll spend about US$50 per month on a cell phone in Panama...and about 50 euro per month on a cell phone in Paris. Your entertainment budget in either city could be the equivalent of US$100...or many times that. Help around the house is a bargain in Panama City compared with Paris. In Paris you'll pay 20 euro or more per hour for household help, while you can hire a full-time maid in Panama City for US$200 to US$300 per month. In other words, in Panama, you could walk away from household chores forever. What about Paris versus Panama City beyond the cost of living? Paris is a city for walking; in Panama City, you take your life in your hands every time you set off as a pedestrian. Both are cities of apartment-dwellers. In central Paris, the apartments can be 200- or 300-years-old. In central Panama City, they're typically two or three years old. Paris is a city built on a river. Panama is a city built on a bay that opens to the Pacific Ocean at the entrance to the Panama Canal. Both bodies of water define and help to brand the cities they're attached to. Service is taken seriously in Paris. You should expect good service everywhere. Good service, when you encounter it, is a surprise in Panama, as are (I know I'm going to take heat for this remark) good manners. On the other hand... Few places in the world are as dramatically alive as is Panama City right now. It's being reinvented in real time, and witnessing this transition as an insider is an opportunity that Lief and I appreciate and savor. Keeping things in perspective, I think that, years down the road, we'll remember this time on the ground in this emerging world boomtown very fondly. The other thing we appreciate about living in Panama City is that it means we live and run our business tax-free. That trumps a lot of the day-to-day downsides. We could not have built the business we've built in Paris, and, frankly, I don't know of anywhere else in the world where we could replicate the team we've assembled here in Panama City. We're in Panama for the long haul...and happily so. But we're looking forward to regular chances, starting next year, to enjoy the best of both the Old World and the New. Kathleen Peddicord
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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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