I get a number of questions each week about how and where to invest in international real estate. In many cases, the investor has limited funds available to make such an investment, so simply buying a few condos on the world’s beaches is not an option.
High-producing international investments with low required-investment levels are at a premium.
And the highest-producing, most reliable investments we’ve found over the past five years have been in the agricultural area. Understandably, these are far-and-away the most popular investments with our readers.
This particular offer is for an avocado plantation project. It’s forecasted to pay 16.2% per year, and the minimum investment level is US$45,000.
I’ve met with the developers, and these guys are solid, long-term agricultural pros… They’re very conservative when it comes to water, with lots of redundancy in their water sources… and they’re dead serious when it comes to the integrity of their organic certification, which is the ticket to a premium income.
In-house guru Lief Simon is a long-term agro investor and has brought millions of dollars of these popular investments to the table through continual scouting and due diligence.
I’ll let Lief take it from here…
Another agricultural project has sold out.
I’m speaking of the My Fair Lady mango plantation in Panama, which I recommended to you in November 2015. It’s now sold out.
This is the second mango plantation this developer has sold out in two years and the fourth fruit plantation they’ve sold out in that same time.
Last summer, the group offered a lime plantation of 200 hectares that sold out within two months. (One hectare is 2.47 acres.)
In March of this year, they launched a guava plantation at my Global Property Summit in Panama City. All 100 hectares were sold within one week.
Attendees at that conference turned out to be the only investors able to access the opportunity. It sold so fast that I didn’t have a chance to get our paid subscribers in on the deal.
That’s why this alert today is so critical. I’m writing now to alert you to this opportunity before it’s released to the entire family of Live and Invest Overseas publications.
Just Released: The New Organic Hass Avocado Plantation
The organic development group behind all four of the now sold-out investment offerings is ready to launch their next plantation. It will be an avocado plantation in Panama.
Like their other plantations, this avocado plantation will be certified organic, making the fruit both more valuable and more sellable.
The fruit to be planted is the best-selling and most demanded avocado variety in the world… the Hass avocado.
The developers have worked with their expert agricultural team in Panama as well as one of the biggest growers of Hass avocados in the world to identify a Hass avocado ideally suited for a plantation in Panama. They are calling it the “Panama Hass.” The fruit has all the qualities of a Hass avocado… and the tree has been acclimated to Panama’s climate.
Avocado trees need more altitude and cooler temperatures than mango trees, for example, for optimum growth and production. The developers spent many months scouting land options before identifying an optimum parcel. The higher altitude of this land means that the intercropping options are different from those of the previous plantations and include coffee as one option. The developers intend to intercrop with coffee as well as plantains and other agricultural products to provide added value for plantation owners.
Editor’s Note: Intercropping is the practice of placing plants of a different species between the rows of the primary crop. Intercrops can provide benefits such as pest control in addition to adding extra income to the bottom line.
The structure of the opportunity is the same as it has been for the mango, lime, and guava offers:
- Investors own the land, and hold title in their own names.
- The farm management company plants then manages the trees (and intercropping) for the investor.
- Revenue is split after an annual crop care fee of US$6,500 per hectare. The plantation owner (you, the investor) gets 70%, the management company 30%.
Invest US$45,000 For A 16.2% Return
Here’s how the cash flows over the years:
- You earn nothing during the first four years, except for a projected partial crop in year four.
- In year five (the first full year of production) a US$45,000 investment earns US$11,000.
- Thereafter, the return increases 1.5% to 3% each year in the projections based on expected increases in the market price for the harvests.
- Using the projections above, the internal rate of return (IRR) over 30 years works out to 16.2%. (The avocado trees can live to 60 years, but to remain conservative, these projections are based on a 30-year lifespan.)
The projections for return are conservative, using a sales price of 65 cents per pound.
Remember, the avocados from your plantation will be organic. The retail price for organic Hass avocados in the United States so far for 2016 has ranged between US$1.26 and US$1.44. While you won’t be getting retail prices (your produce will be sold wholesale), you can see the conservative nature of the projections considering your first avocados won’t be going to market for four years.
The demand for avocados in general and for Hass avocados in particular is expanding at a strong rate. Meantime, global demand for all organic produce is also growing rapidly. I see this as a right-thing, right-time investment that is tapping into important markets with significant upside potential.
Here’s How I Sized Up The Risks For This Investment
Of course, no investment comes without risk, but in this case, most of those risks have been mitigated.
Development risk is low. This company has a well-proven track record. This group is implementing organic fruit plantations in Panama like the pros they are.
Their mango plantations have been installed with the exception of the most recent and final hectares of the plantation recently sold out. The mango trees are growing, and the intercropping is well under way. Road, fencing, irrigation, and other infrastructure are in place.
While they’ll have to do it all again on the avocado land, they’ve proven what they can do.
Sales risk is low for the harvested produce, as well. The management company has worked hard over the last several years to cultivate relationships with buyers in the United States and Europe. The two main organic produce wholesalers in the United States (one on the West Coast, the other on the East Coast) visit the current plantations at least once a year to keep up with progress. They’ve made it clear that they want to buy everything this group is producing.
These buyers have specifically said that they need more organic avocados.
Weather risk in Panama is low as the country has no real natural disasters. It’s outside the hurricane belt. No tornados come through it. Some mild earthquakes can be felt in Panama, but they don’t bother the trees.
One potential risk with any agricultural undertaking is drought. While Panama gets plenty of rain most of the time, changing global weather patterns make it prudent to have an alternative source of water rather than relying on rainfall.
That’s why the group behind these offerings only buys land with year-round rivers either running through or adjacent. In addition, they build reservoirs to store water just in case. Drought risk is minimal, unlike in California where the Hass avocados first were grown and are still produced.
Pest risk is another general agricultural concern. The developers are planting neem trees around the plantation to help reduce insects coming into the property. Proper maintenance work also helps to keep pests down. The best strategy, though, is not killing off all the animals that eat the pests… another benefit of an organic operation.
Country risk is another consideration when investing overseas. Panama is a stable, prosperous, growing nation. It has no standing army, and the Panama Canal produces an inordinate amount of cash flow per inhabitant, allowing the government to invest continually in infrastructure and other improvements.
Currency risk is moot in Panama as this country uses the dollar. While that takes away an advantage that some investors may be looking for in the form of currency diversification, it also eliminates the risk of your returns being eroded by currency losses.
One other benefit to Panama is its approach to taxation. Panama offers many tax incentives, including one that allows agricultural businesses to operate tax-free until revenues break US$300,000 annually.
This means that your personal plantation is tax-free in Panama unless you buy more than a dozen hectares (which would mean annual revenues to you of more than US$300,000). In this case, you could simply title the land in more than one entity.
Regular readers know how I feel about agriculture as an investment class. You want it in your portfolio. It offers one of the best risk-adjusted returns possible today. In the case of this avocado plantation opportunity, it also means a hard asset. You own the land.
Additionally, this is a chance to create a legacy revenue stream for your children and grandchildren. While the IRR projections are calculated over 30 years, avocado trees have a productive lifespan of 60+ years. These trees could generate cash flow for generations of your heirs.
You have a brief window in which to act. Remember, the guava offer was closed out in one week.
Founder and Editorial Director, Global Property Advisor
Ignore Walter from Panama who criticized your writing. Let him and his 8-year-old Panamanian students subscribe to Conde Nast Traveler where he can find what he is looking for!
Please just continue to keep it real for those of us that love your style and really enjoy all that you share.
What’s the situation with high-rise condos along the Ecuadorian central coast (near Manta) after the quake? They seemed like good deals before, but what’s the risk today?
The entire Ecuadorian coast has sustained damage, from Esmeraldas down to Salinas and Guayaquil. I would not consider buying in any high-rise unless it’s been inspected and approved by a qualified structural engineer.
I’d also inspect single homes for damage, although defects here will be easier to spot than defects in a high-rise.
I met you several years ago in Phoenix at a Live and Invest seminar. My situation is somewhat a-typical in that I do not have a large nest egg in retirement accounts and do not have enough work history to qualify for Social Security.
The bulk of my “retirement nest egg” is in rental properties, which generate about 66% of my current income. The rest is in non-qualified bond/stock investments. I also have a U.S. LLC that holds the remainder of the sales proceeds from an agro-property I sold a year ago.
From my limited research, it looks as though I would have to be very cautious in taking up residence in a foreign jurisdiction that might be intent on taxing people’s world-wide income. Do you have any suggestions?
The short answer is no… I would not avoid a good retirement location based on a tax on worldwide income. I’ve got a few reasons for this based on my experience so far:
- In most cases, any income tax paid to a foreign country can be taken as a tax credit against your U.S. income tax. Since this is a credit, you do not need to itemize to take it.
- Countries have words in the tax code that imply a tax on foreign income but don’t ever attempt to collect it.
- Other countries have tax treaties with the States designed to prevent double-taxation.
- Most countries are specific about what kind of “worldwide income” they want to tax, and it’s seldom every form of income. Some exclude passive income (such as Mike’s, above)… some only tax investment income.
In addition, many countries exclude pension and retirement income from their tax regime.
I’d pick the country that meets all your other criteria and then get in touch with a tax professional in that country. The bottom line is that even in the “worldwide taxation” countries, you may not pay any additional tax anyway.
Have a question? You can write to Lee here.