Articles Related to Real estate

Sept. 1, 2014

"I have learned so much from your newsletter, and now I have a question.

"I read that Panama is an offshore investment haven and that I could live in this country tax free, but I am confused. If I relocate to Panama and run a local business or an Internet business, does that mean I pay no Panama taxes or no income taxes at all, including in the United States?"

-- Doug H., United States

Yes, you could live in Panama tax-free, even as a U.S. citizen (that is to say, paying no income tax either in Panama or in the United States). However, some work and preparation are required. You have to set yourself up properly.

If you're retired, you won't pay taxes on retirement income you bring into Panama or on any dividends or interest income earned outside the country. You would still pay taxes in the United States on the dividends and interest income, and, depending on the source of the retirement income, you'd pay the same tax to the IRS as you would if you lived in the States (although, if you live in a state that taxes retirement income, you'd avoid that tax by moving to Panama).

To live completely income tax free in Panama as a U.S. citizen, you must have a business generating earned income for you as an individual and that income must be derived from outside Panama. Panama taxes residents on income earned in the country only, so your non-Panama business would pay no taxes in Panama, and assuming it is a business where you can legitimately claim that you are earning your income outside the country, your individual income wouldn't be taxed there. Typically, this means a consulting or an Internet-based business.

If you start an active business in Panama, with sales in Panama to Panama residents, then that income would be taxable in Panama, as would any related personal compensation you receive.

In either case, your salary up to the annual Foreign Earned Income Exclusion limit (US$99,200 for 2014) can be excluded for U.S. income tax purposes. The key is that it be truly earned income.

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Another friend may learn this lesson soon. He's planted thousands of coconut trees in Panama because coconuts have become a hot commodity for both their oil and their water. He made the investment in the plantings, though, before he had pinned down a sales outlet, and now he's scrambling to find a buyer. Probably he'll be able to sell his crops locally, but the local price won't get him the profits he projected based on international market values.

I'm in the process of planting timber and fruit trees on 10 acres I own in Belize. My first question to the agriculture guy who's going to manage the work was, What can we sell easily locally? I know that the volume of production from the mixed trees I plant on my relatively small piece of land won't be enough to sell for export. Therefore, I want to grow things that the locals need and buy.

The guy I'm working with recommended a couple of hardwood trees that few outside Belize have heard of but that are sought-after for local home building and wood working. It will be 15 to 25 years before these trees are ready for harvest, though, so I've got to bet that current demand won't shift over the next couple of decades. If it does, the trees still will have value as hardwoods, but the returns will be less than we're projecting now.

For the fruit trees, again I'm going with what can be easily sold locally—avocados, bread fruit, bananas, and a few others.

Once you're sure you have an outlet for where to sell your produce, then, unless you're interested in doing the farming yourself, you need an "operator," as one colleague with many agricultural undertakings calls the guys who do the work on the ground. Finding an operator can be easy enough in countries with an agricultural base. When this is the case, you'll find many companies in the business of running farms for people. Your challenge will be to identify one who has experience with your planned crop who you can also trust.

My 10 acres in Belize won't throw off the same annual yields as a focused farm, but that's not the point with this land. This is more a personal experiment than a serious investment, and we intend to build a house here, too. Still, I'd say that planting trees is a good idea under any circumstances.

As a friend who shares this perspective likes to say, if you need the income in 10 or 15 years, you'll be happy you planted the trees...and if you don't ever need the income, you'll be happy you planted the trees.

Meanwhile, I'm researching pecans.

Lief Simon

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But you will see a few familiar U.S. icons here, such as Walmart, Sam's Club, Costco, and Home Depot. You can actually find anything you'll need in the shops downtown, but the U.S. stores will bring that familiar level of convenience that's hard to find outside the United States.

Xalapa has a number of lush parks and squares (normally called a zócalo in Mexico), each of which has a distinct personality. I stayed just down the street from Parque Juárez, which pretty much exemplifies what I like about zócalos. It was a busy social hub on Saturday night, with an almost carnival-like atmosphere, while Sunday brings a pleasant crowd of people strolling and relaxing in the traditional Mexican Sunday-style, people-watching and buying snacks from the street vendors' carts. This hillside zócalo has a unique lookout, affording a breathtaking view of the surrounding hills and city.

I was looking at my old field notes from 1998 and 2000 and saw where I'd written that "traffic downtown is not bad for a city of this size." This is no longer the case; traffic is heavy downtown and moves at a crawl. If I had a home in Xalapa, I'd either walk or use the inexpensive taxis and public transit, at least in the downtown areas.

The property market in Xalapa starts at less than US$50,000—so deep into bargain territory that you'd be hard-pressed to find such low prices in a Third World backwater, let alone a classy city like Xalapa.

The average cost per square meter in Xalapa is just US$791. To put that into perspective, I'd consider anything less than US$1,300 per square meter to be a serious bargain. However I don't see any market force here that would cause prices to appreciate quickly, so this is not a place to buy and flip for a quick profit.

You won't find a better value. Here are a few examples of what's on the market today. Properties are priced in Mexican pesos, so the U.S. dollar values I give below will change with current exchange rates.
  • A three-bedroom, single-bath apartment in Jardines de Xalapa has just come on the market. It has 72 square meters (775 square feet) of living area and a garage space. The asking price is US$37,800 (500,000 pesos).
  • I like this one in Zona Centro because it's convenient and walkable. It's a ground-floor apartment with lots of light and ventilation and a large, nicely planted, 60-square-meter courtyard. In the 111 square meters (1,195 square feet) of floor space there are two bedrooms, two-and-a-half baths, a family room, and laundry area. The asking price is US$109,500 (1.45 million pesos).
  • Also in Zona Centro, four blocks from Parque Juárez, there's a small two-story house on the market, with 90 square meters (970 square feet) of living space including, two bedrooms, and one-and-a-half baths. It's in a great location close to banks, restaurants, shopping, and one of the city's best zócalos. The asking price is US$113,300 (1.5 million pesos).
  • We also found a two-story, restored colonial for sale with 272 square meters (2,930 square feet) of living area including four bedrooms, three-and-a-half baths, a study, laundry area, and parking for one vehicle. The kitchen and baths are new, as are the Spanish tile. The asking price is US$173,700 (2.3 million pesos).
  • This one's a grand old classic colonial, just two blocks from Parque Juárez in Centro in about as good a location as you can find in the city. It's a 404-square-meter (4,350 square feet) house that would make a great boutique hotel, B&B, or just a large, traditional Mexican courtyard home. It currently has six bedrooms, with room for more, and it's in excellent condition. There is a spacious reception and great room area and an adjacent room that has space for a bar and restaurant, if you were opening a business. Tropical gardens fill the interior courtyard and servants' quarters are located in the rear of the property. The asking price is US$415,400 (5.5 million pesos).
  • In the Las Animas neighborhood, this contemporary one is probably the best value we saw. It's a large home with three bedrooms (one with dressing room and Jacuzzi), two-and-a-half baths, a terrace, and a two-car garage. It's got 240 square meters (2,580 square feet) of living space on two stories and also includes a maid's suite. Located in an exclusive, upscale community, the asking price is US$151,000 (2 million pesos). To save you the math, that comes out to just US$629 per square meter at today's exchange rates. In most markets I'm familiar with, that would be a super bargain at twice the price.
  • Finally, just out of town to the south, I have to mention the most unique home I've probably ever seen. It's called Las Hojas (The Leaves), and all of the windows are formed into the shape of various leaves. The leaf theme continues inside, where these openings are carved into interior partitions, the fireplace, etc. Thirty-inch-diameter tree trunks hold up twin lofts which serve as the bedrooms. The living areas, bedroom lofts, dining room, and kitchen all open up to the large, environmentally enclosed center courtyard. It's a multilevel home of 170 square meters (1,830 square feet), bordering an ecological preserve. The asking price is US$147,200 (1.95 million pesos).

To get to Xalapa, you can fly into the El Lencero Airport (JAL). It's about 15 minutes from town, although the only airline there is Aeromar, which you'd pick up in Mexico City. Alternatively, you could go to the Veracruz airport (VER) for better connections, if you're willing to drive around one-and-a-half hours to get into Xalapa from Veracruz.

In general, the Xalapa area is a great place to live and be a part of a thriving, energetic community with all the cultural and artistic amenities you could want. You'll find a great symphony, theater, and plenty of excellent restaurants...along with good and convenient shopping.

Prices will not rise quickly, but for a super lifestyle at an amazing price in old, non-gringo Mexico, Xalapa will be hard to beat.

Lee Harrison

Editor's Note: This article ran earlier this week in our Overseas Property Alert edited by Lee Harrison. This once-a-week free e-letter service comes straight from Lee's laptop to yours as he's on the road scouting real estate markets of opportunity. Sign up to receive Lee's weekly dispatch here now. Again, it's free.

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In fact, our chef is our new neighbor. He and his partner also have invested at Maya Spring Estates. They've already begun tilling their 3-acre parcel, preparing the earth for planting. James is a Cordon Bleu-trained chef with decades of experience, his partner a world-class baker. The pair has made their way to this spot in Belize to open a boutique restaurant. They'll prepare meals using ingredients grown on the property, one set menu each day.

Last night Chef James' menu was cheeseburgers prepared over an open fire. Delicious.

Another neighbor has begun construction of his guesthouse on his 5-acre parcel. This will be followed by gardens and then, later, the main house.

Lief and I also plan to build a guesthouse and a farmhouse on our plot at Maya Spring. First, though, we're interested in getting some trees growing. The Maya Spring community barbecue last night was a chance for us to formulate a plan with resident horticulturist Con (the one with the flat tire).

We have 9 acres to work with. About 1.5 acres will be given over to the farmhouse, guesthouse, and kitchen gardens. The remainder of the land we want to treat as a mini-plantation. Our idea is to plant timber intercropped with specialty plants prized by florists. Lief and Con considered different Belizean hardwoods—mahogany, cabbage wood, cedar, rosewood—and Con suggested two varieties of palms whose fronds are in great demand and saleable for relatively large sums even locally in Belize.

"Let's start by planting 100 neem trees along the far perimeter," Lief suggested. "That'll create a wall for privacy and also help control pests."

"No problem," Con replied.

"Can you get 100 neem trees?" I asked.

"No, I don't think so," Con admitted. "People here, they grow a few trees and sell them. You don't find anyone with large stocks of inventory. But I can work with a grower to produce 100 neem trees and everything else you guys want."

"What about the harvests?" I continued. "We want to keep this experiment as simple and low-key as possible. We're working with a small piece of land. We won't be growing enough to make exporting the harvests worthwhile. Would we be able to sell the timber we're thinking of producing in Belize?"

"Definitely," Con said. "The timber and also the palms. I've been working with a hotel out on Ambergris, for example, that wants hundreds of the specialty palm fronds I'm suggesting you plant per month, but they can't source them."

Lief and I know next-to-nothing about farming. But we have an interest, based mostly on a natural curiosity and an affinity for growing things. We're not doom-and-gloomers, but we do also like the idea of learning how to be more self-sufficient. Our 9 acres at Maya Spring Estates is our first focused effort at this. We feel lucky to have connected with Con, the friend of a friend, who shares our passion for planting and backs it up with experience, know-how, and local connections.

"Make it so!" Lief proclaimed to Con with uncharacteristic enthusiasm after we three had agreed a plan. Maybe he'd had one too many One Barrel rums.

The Cayo sky was fully dark by now. Above us a bright moon and a blanket of stars...in the distance, beyond the hills, the lights of nearby San Ignacio.

"Time to head out," I said to Lief and Jack.

"Couldn't I stay here?" Jack asked. "I could sleep in one of these hammocks. Just cover me with bug spray and come back for me in the morning..."

Kathleen Peddicord

P.S. Whether you're after a place by the beach...or in the interior Cayo region (with its Mayan ruins, caves, rivers, waterfalls, and rain forest)...
you'll find many options in this safe, welcoming, English-speaking haven. Registration for our Live and Invest in Belize Conference opens soon. To get on the Hot List—for VIP perks and to be notified of the best discounts—go here now.

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Property in the part of the UK of interest to my parents is much higher than this part of France, so the percentage of the budget for the French property has to be lower than the UK one. That got me thinking... What can you buy today in the Other South of France for around US$100,000 (currently 74,500 euros)?

Surprisingly, it isn't just a chicken coop. In this area, there's a wide range of property, from a luxury, six-bed modern villa for 600,000 euros to a two-bed, "ripe for renovation" village stone-house for 30,000 euros, and plenty in-between.

To narrow the search, I've added certain criteria to the US$100,000 budget:
  • Refurbished or requiring only cosmetic improvements
  • Good natural light
  • Two bedrooms, one bathroom, one extra water closet
  • Local shops, a market, or a cafe in walking distance
  • Garage or storage area
  • A terrace or patio
The last point, some outside living space did lift the price slightly but to no more than 78,000 euros. Here's what I've found in my visits and conversations with local agents Carroux Immobilier and Agence GTI...

In the village of Cebazan, where there's a baker, post office, bus line, and school (not directly important to my parents but it means the village is alive and kicking), a two-bedroom, 54-square-meter house with a garage is on the market in move-in condition. It has a living room with a fireplace, fitted kitchen corner, a shower room with a large shower, a separate bath, and a toilet, and another room that could be used as a snug with a toilet and a sink. The garage (29 square meters) is separate but just 3 meters away and has an upstairs room that would be perfect for storage of my parents' own things if they chose to rent it out. The upside is the 65,000-euro price-tag (agency commission included). The downside is there's no outside living space and only a local bread shop (though a minimarket is at the planning stages). You can see it here (ref M 3018).

In the small village of Aigues Vives, near the Cathar town of Minerve, I found a cute two-bed, single story 56-square-meter house with a 70-square-meter walled garden. The living room and kitchen open onto a terrace overlooking a courtyard. The property is completely renovated and very neat and tidy. It's on the market for 76,000 euros. Its downside is one bathroom only.

The center of the bustling and popular market town of Saint Chinian is the location for a newly renovated 60-square-meter apartment. It has a sunny, upper-floor terrace and two sunny bedrooms, but only one bathroom and a small kitchen. It's on the market for 77,000 euros.

A second property in Saint Chinian, a three-floor, 94-square-meter townhouse includes all the criteria: It has a pretty kitchen opening onto a private terrace with a barbecue. There's a water cabinet on the ground floor, two large bedrooms, and a bathroom. The kitchen has new wooden flooring and a fireplace. Flooring in the rest of the property is the original decorative or red tiles known as tomettes. It's on the market for 82,000 euros which includes the agent's commission and could be negotiable down to budget. Take a look here (ref M 2937).

And finally, I've included a stone house with a large sunny terrace for 99,000 euros. Although over budget, the price includes good-looking furniture and appliances, so all my parent's furniture could go back to the UK (or all yours could stay home), making this three-bedroom 90-square-meter house in Cebazan ready to live in.

Despite the growing popularity of this part of France, there really are, still, a lot of low-budget properties to choose from that would make part-time living accessible to many budding expats. And, if you're able to increase your budget to around US$150,000, you'll find more properties with more outdoor space, which gives you, the owner, more chance to enjoy al fresco living and makes the property more tempting to potential vacation renters.

Now, it just remains to be seen if this year's offering of Langedocian water tempts the horse to drink...

Lucy Culpepper

Editor's Note: As Lucy finds in the Languedoc, France can be much more affordable than you might imagine. Even Paris has options for the budget-conscious retiree. We'll tell you more about how to make the lifestyle of your dreams come true in France (or one of our other top retirement destinations) at the Retire Overseas Conference, Aug. 29–31, in Nashville, Tennessee. Continue reading: 

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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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