International Real Estate
International Real Estate is what make the difference between a loser diversification plan and a winner diversification plan. Diversificate in real estate in USA or Europe is not convenient at all, this because these two big continents are living a devaluation of their currency and of their assets and also a socialization of the loss in the Stock Market , ROI in these two continents is the same and rose between a 0,1 to 1% .
ROI in Latin America rose between a poor 3,5% to a great 30% annually, numbers that make the difference when you decide where invest your money and take the right profit and a constant cash flow. But exchange rates matters when is time to buy and pay for your home.
Exchange Rates Will Affect More Than Just The Purchase Price
When buying a property in a foreign currency, the local currency’s exchange rate will affect the sales price in dollar terms.
For example, a house costing 100,000 euros may have cost you US$133,000 at an exchange rate of US$1.33 to the euro back in 2013... and only US$110,000 at US$1.10 per euro (today’s rate). That’s a dramatic difference.
But there’s more to your overall currency exposure than this. Here are three things to consider when assessing your overall currency risk.
1. What Currency Is Being Used For The Property Transaction?
When properties trade in the local currency, the most obvious effect of exchange rates is the cost of your property in dollars. A strong dollar will buy more of the local currency, so you’ll need fewer dollars to come up with the purchase price.
When it’s time to sell, a weak dollar is your friend, because the price you get (in the local currency) will buy more dollars back home.
But not all properties in foreign countries trade in the local currency. Sometimes they trade in dollars.
Of course, this is true in countries that use the U.S. dollar like Ecuador, El Salvador, Panama, British Virgin Islands, or Turks and Caicos. But it’s also true for countries that have their own currency, yet still trade real estate in U.S. dollars. You’ll find this practice in Uruguay, Peru, Nicaragua, Costa Rica, and sometimes Mexico... although there are many others.
If your foreign property transaction is in dollars, then the exchange rate will have no direct effect on the purchase or sales price.
2. Do You Plan To Live Or Spend Significant Time In-Country?
If you live in the country where your property is located, you’ll find that the exchange rate has the opposite effect on your cost of living as it does on the property value.
So, while a strong dollar will lower your eventual resale profit in dollar terms, it will also lower your cost of living, since your dollars are buying more of the local currency. Depending on how much time you spend in the country, your lowered cost of living could completely offset any depreciation in resale price caused by a strengthening dollar.
Of course, if you’re renting, a strong dollar will lower your rental cost in a non-dollar country.
The thing to remember here is that a strong dollar lowers your local expenses; a weak dollar raises them.
3. Are You Managing The Property As A Rental?
Like the local cost of living, your operating expenses for managing a rental will go down as the dollar strengthens. Your utilities, homeowner association fees, and taxes will all cost less in dollar terms.
If you rent your property in dollars, then your rental income will buy more of the local currency. So, a strengthening dollar gives you a "raise," helping with your local expenses. A weakening dollar gives you a pay cut... even though it’s raising the dollar value of your property at resale time.
A Local Bank Account Can Provide A Partial Hedge
No sane person will move to another country just to hedge a foreign currency transaction. But simply having a local bank account can do some of that hedging for you. You can store the local currency in your bank and use it to pay local expenses... and then you can exchange it for dollars when you feel the rates are in your favor.
A Few Simple Axioms To Remember
When considering currency, here are a few basic things to keep in mind:
You can avoid all currency risk by purchasing property and living in a dollar-based market (Panama and Ecuador are a top option).
A strong dollar is always good when buying in a foreign currency (this is especially true for Colombia, and Mexico right now)... and a weak dollar is always good when you’re selling.
If you live or spend time in the country where your property is located, the exchange rate has the opposite effect on your cost of living as it does on the property’s value.
If you’re operating a rental (in dollars) in the country where your property is located, your overall risk (or reward) to the property’s value is partially offset by your increased rental returns in local currency.
A local bank account can provide you a reserve to use for hedging.
While it’s helpful to understand the ups and downs of currency fluctuation, don’t get bogged down in trying to beat the system.
A good deal is a good deal. Wait too long and the property you want could be gone. Or, if property prices go up, any savings you may have made on the exchange rate are mitigated.
Bottom line, there is no final whistle to wait for. You are both player and referee. You have to manage your own actions… and know when to call time out.For this reason we are here for you to find the best property on the market , close the deal and give you the keys of your property managing any legal aspect of the transaction.
Buying a property with or without an offshore company ?
That is the most frequently asked question by clients at our office. The short answer is, no, you don't need to form an offshore structure to take title to property you buy overseas. You could simply take title to real estate you buy in another country in your own name, and, if you're planning to buy just a single piece of property overseas, that's the easiest and probably the best strategy.
The main benefit to owning property overseas in a structure can be to mitigate probate and, in some cases, to avoid transfer taxes when you sell. If these aren't priority agendas for you, save yourself the administration hassle and expense and take title to your overseas property in your own name.
Setting up a structure comes at a cost and so does maintaining it. You want to weigh the benefits against the costs before proceeding. If you're starting an active business offshore, then you definitely want a corporate entity. If you're doing long-term estate planning, then you likely want an offshore trust and/or LLC to hold your investments. If you're planning on diversifying into many different investments offshore, then forming a single entity to own those investments could make sense.
How choose a good property manager ?
A good property manager can bring you a high occupancy, provide reliable bill-paying, screen your tenants, manage any maintenance, and deliver money to your bank account... while you sit back and wait for the funds to show up in your bank account.
In managing your overseas rental, a number of roles come into play...
A rental agent is responsible for keeping your property occupied. They'll handle the marketing, find you a renter, do any required screening or qualification, supervise check-in and check-out, and verify that nothing's missing when the tenant leaves.
A property manager takes care of running the property. This typically includes things like paying the utility bills, paying the taxes, and performing any required maintenance.
Many property management companies offer both services. And when they do, ideally, they'll have a separate fee structure for each service. This will be a real advantage in cases where you find the renter yourself (and only want property management), or when you can easily take care of the property yourself (you're living nearby) and only need someone to find and manage renters.
Here, we will use "property manager" in its generic form, to cover both rental and property management services.
What To Look For In A Good Property Manager
At a minimum, your property manager should offer:
Statements: Make sure they provide monthly statements, showing the income and expenses for your property.
Records: The property manager should have receipts available for any maintenance performed, items replaced, or bills and taxes paid.
Payment processing: Review the property manager's methods of payment—both how he processes payments from the tenant, as well as how he gets the money back to you. Be aware of any fees charged, or any unfavorable games being played with the exchange rates (if you're not renting in dollars).
Assistance: Make sure the property manager is easily available and responsive in case your tenant has a problem or emergency, and that the tenant has his contact information.
It's also important to check your potential agency has a good web presence with high Google rankings.
The following items are valuable services offered by most property managers. Some may be more or less important to you, depending on your personal situation, but this is a good starting checklist:
Meet and greet: If you care about repeat business, make sure your property manager meets your tenants and shows them into the property—and that they have a backup system for out-of-hour arrivals.
Bill paying and taxes: For most property owners, it's easiest to have utilities, phone, and cable bills direct-debited from their bank accounts, with electronic statement delivery. But if you'd prefer not to direct-debit (or don't have a local bank account), then your property manager should do this, and save the statements for you.
Maintenance items: Property managers should do a periodic check for any maintenance items that need attention... and they should have qualified personnel to fix anything that requires it. Brief inspections should be performed between tenants, and occasionally while long-term tenants are in residence.
Cleaning: Unless you have your own maid for the property, the best place to get cleaning services is from your property manager—both while your tenant is in residence, and between tenants. Many property managers have a staff of trusted maids, who not only clean, but also serve as another pair of "eyes and ears" looking after your property.
Selecting A Good Property Manager
Go with a recommended manager, when possible. If you know other owners who have rentals in the same area, seek out their advice. Find out who's happy with their property manager, and who's not.
Then perform a Google search to see which rental agencies come up first since it's likely that this is the way your prospective tenants will start their own search. If you're targeting the English-speaking and expat markets in Cuenca, Ecuador, for example, try searching "furnished apartment Cuenca Ecuador" and you'll get the top English sites. If you're targeting the local or Spanish-speaking markets, try "departamentos amoblados Cuenca Ecuador" to get the top Spanish rental sites.
High Google rankings for property managers should place them high on your own list, too.
It will also be worth your while to sit down with any candidates for a talk, prior to signing on with anyone. They can describe their services and answer questions about the market... but you'll also come away knowing if this is someone you want to work with.
If you are not sure of which type of service require or you are confused about with which type of Property Manager work, we will provide our specialized Property Manager Service in Panama, Ecuador , Mexico and Colombia at a very great price . Just contact us.
Why buy home in Latin America ?
A robust U.S. dollar, markets in crisis around the world, an aging middle class, and more , all collide to make this the absolute best time in history to invest in property outside the United States.
Fortunes can be had in real estate because of one amazing weapon…
Right now, in specific places all over the world, real wealth is being made... and new, exciting lifestyles are being born at the same time...Regular middle-class folks are now earning everything from comfortable retirement incomes to legacy-level fortunes.
One of the biggest stories in real estate right now is in Latin America's growing middle class.
According to the World Bank, Latin America's middle class has hit a historic high. In the past decade, the middle class grew 50%, and now represents 30% of the population.
That's an additional 50 million people looking for quality homes...
This housing shortage is one of the biggest demand-vs-supply stories going on right now...
Panama, in particular, is experiencing break-neck growth. This is one of the fastest growing economies in the world thanks to the Panama Canal and a booming financial sector.
The rapid expansion of Panama's middle class is causing the lower end of the local real estate market to burst at the seams. It can be hard to understand, but for these folks it's not about moving up the social ladder into a "nicer" home...
These people are moving out of what could be considered cinderblock shanties into something safer and more modern, with real floors and glass windows.
At the moment, Panama has a remarkable housing deficit of 150,000 low-and middle-income homes.
To prevent a crisis, the Panamanian government has launched a US$1 billion investment in housing to address the shortage.
Part of this plan includes zero-to-low-interest loans for middle-income buyers.
Also remember that when buying home outside USA and especially in Latin America , you are buying right now at leverage .
Your strong U.S. dollar is leverage—especially in markets of opportunity, and specifically within Latin America
Investing in a crisis market gives you leverage—you’ll get amazing deals by taking advantage of artificially low property values…
Using money inside an IRA to purchase foreign property gives you tax leverage—it may be possible to grow your own real estate empire tax-free.
Using a line of credit to purchase foreign property gives you leverage—you can invest at near-zero interest rates instead of the significantly higher rates charged by banks in most foreign countries.
Top 9 reasons to buy an Overseas Real Estate
Reason #1: Like real estate anywhere, real estate overseas is a hard asset, and, in the current investment climate, hard assets are the most sensible investment class, the best choice for storing value…
Reason #2: As with real estate anywhere, you’re buying with the hope of capital appreciation, but you can also be buying for cash flow, right now an important investment agenda…
Reason #3: Real estate overseas provides portfolio diversification—diversification of currency, diversification of market, and diversification of asset type (rental, raw land, condo-hotel, etc.)…
Reason #4: Real estate overseas provides the opportunity for you to position yourself to profit from both expanding and crisis markets…
Reason #5: Real estate overseas can double as a retirement plan—today’s investment can be tomorrow’s retirement residence…
Reason #6: Real estate overseas can double as a holiday home, an investment that you and your family are able to use and enjoy from the day you make it…
Reason #7: Real estate overseas can be part of a legacy of wealth that you leave to your heirs…
Reason #8: Real estate overseas is safe and private, one of but two remaining asset types that an American need not report to the IRS every year…
Reason #9: A real estate investment overseas can bring tax advantages, including deductions you can take on your U.S. tax return…
Reviewing this list of reasons to buy real estate overseas, you notice that, big picture, it breaks itself down into two categories…
Category 1: investment… category 2: lifestyle.
Different agendas that, for the best results, should be considered in unison.
Another thing to notice about this list of reasons to put your time and money into the acquisition of real estate overseas is that, fundamentally, it’s all about diversification.
This is the real advantage of this strategy—diversification of your portfolio and your assets, but diversification, too, of your life, your retirement, and your legacy.
We are living at a time that presents the opportunity to take the investor’s profit agenda, combine it with the live-better-for-less agenda of the retiree, and transfer it overseas. An opportunity to use overseas real estate as both an investment vehicle and a strategy for a new and better life, both immediately and longer term in retirement.
Overseas real estate amounts to the surest strategy for creating and preserving legacy wealth while simultaneously reinventing your life and rescuing your retirement. Thanks to global market events, many options exist right now for where to buy to make money while also making a new life, and, thanks to our Age of the Internet, it is possible today to seize these opportunities easily and cost-effectively to build a new life while staying in real-time touch with family, friends, business concerns, and investment portfolios from the old one.
The best case is when you are able to find a piece of real estate in a place where you want to spend time, short term on vacation and long term in retirement, that also holds out the potential for an investment return, in the form of capital appreciation, rental return, or both.
This perfect storm of objectives should be your ultimate goal. A holiday home on the beach of the Dominican Republic can become little more than a headache and a carrying cost if you ultimately decide you can’t abide life in the tropics.