Plus: Options For Financing Abroad
I missed out on the Great Recession. In fact, since I moved abroad in 2001, those recession years actually produced my highest income.
My home in Punta del Este, Uruguay, jumped in value during the U.S. housing crash, as did our beach house in Brazil. My Brazilian reais jumped almost 39% against the U.S. dollar, and my Uruguayan peso-denominated CDs paid over 9%, while the pesos themselves also gained in value.
Meanwhile, during the depths of the recession, I bought a foreclosure condo in Arizona.
I don’t mean to give the impression that Brazil and Uruguay are better bets for investment than the United States. I don’t know if that’s true… or how long it will remain true if it is.
In fact, when the Brazilian market flattened unexpectedly a couple of years ago, that cheap condo in Arizona jumped almost 73% in value. So in this case, the Scottsdale market outperformed both Brazil and Uruguay.
I like to sound brilliant as much as the next guy. But, in all honesty, I’ll have to reluctantly admit that my good fortune was not a result of any special talent on my part.
In fact, I didn’t accurately predict any of those economic swings.
The reason I came though the recession as I did was because I was internationally diversified.
Benefits Of Being Internationally Diversified
I could write a 50-page paper on the benefits of international diversification. But here are a few down-to-earth examples that I’ve taken advantage of personally.
Residency: Owning property often qualifies you for residency (I’ve obtained residency in three foreign countries). Having a foreign residency means there’s another place you can call home, if you ever choose to. This provides a great feeling of security.
Banking: Residency also opens the door to the country’s banking and financial services network. This allows you to keep some of your funds securely outside your home country and may also give you the chance to diversify outside your home currency.
Retirement fund security: I know that my retirement funds in the United States can be the target of lawsuits and creditors. This won’t happen if you’re in a company-sponsored plan. But those IRA funds are at risk. Today, half of my retirement funds are invested abroad. They’re in properties, foreign banks, and foreign investments in a number of countries. So, while my IRAs in the United States could be attacked, I’ll always have a backup nest egg abroad to live on.
Insulation from lawsuits: Lawsuits are a huge problem in the United States, where we have 5% of the world’s population and 90% of its lawsuits. As with my retirement funds, having property and assets abroad insulates at least part of your life savings from American lawsuits.
Investment opportunities: Two-year CDs in my bank in Uruguay pay 9%. In Colombia, my savings account generally pays between 4% and 6%. So my savings are not only in another country, but they’re earning a rate of interest that I can’t get back home.
Why Real Estate Does The “Diversity” Job So Well
Among the significant number of tools employed to achieve offshore diversity and asset protection, real estate is my favorite. Here’s why:
You don’t have to report it to the IRS. While my foreign bank accounts must be reported to the Treasury Department, there’s no reporting requirement for real estate. This means it can be more private than most any other vehicle.
It produces significant income. Real estate is one vehicle that can actually produce income. My rental apartment in Medellín produces enough to live on in Medellín. Aside from income, the property usually appreciates in value.
It has its own intrinsic value. Unlike paper money, stocks, or electronic funds, your property has its own intrinsic value. So, as we like to say, the value can’t go to zero.
It gives you a brand-new life experience. Diversifying your life experience is not a financial issue, it really enhances the quality of your life. Having a home overseas—even part time—is like getting an entire second life experience in a single lifespan.
Granted, precious metals—physically held by you—are also nonreportable to the IRS, and they also have intrinsic value. But you can’t live on a gold coin, and you can’t rent it out to produce an income.
I don’t believe that real estate should be your only diversity or asset protection tool. But it’s easy to see why it’s my favorite.
My favorite asset protection tool: our beach house in Brazil
Efficiency And Good Planning
Today I’m fairly diversified. I’d give myself a “C+”. Maybe not what it could be, but a whole lot better than having all my eggs in one basket.
But it took 10 years to reach this level of diversity.
I’d have been much better off if I’d had a plan to begin with. I’d have been quicker about it, and more importantly, I could have accessed some of the world’s moneymaking opportunities sooner.
How To Get Started Today
If I had it to do over again, I’d invest three days in Lief Simon’s Global Asset Protection and Wealth Summit.
Why? Because Lief will have the world’s top experts on offshore diversification in attendance.
You’ll meet bankers, offshore strategy experts, real estate professionals, developers, and experts in the world of offshore metals acquisition and storage. Not to mention tax, currency, foreign residency, and asset protection experts.
The only reason I’d attend is because these guys are not academics, and this is not simply a training exercise. It’s action-oriented.
So you can actually come away with an offshore bank account… or you can start down the path to residency… or you can invest in real estate… or buy rare and strategic metals with your own private offshore storage.
In other words, you can actually get something done.
But, most importantly, you can come away with a plan, a plan tailored to your own personal needs and preferences, a plan that will let you wade into these waters at your own pace and expand in accordance with your own timetable.
The Global Asset Protection and Wealth Summit is money well spent.
To learn more about the agenda for the event—along with what it costs and all applicable discounts—follow this link to see the specifics for the Global Asset Protection and Wealth Summit.
Or, to see the complete backstory on why offshore diversification and asset protection are of such interest today, follow this link to get the whole story.
Editor, Overseas Property Alert
Your property alerts are really informative, and I do appreciate them. I just read your piece on having a good property manager. I own a rental unit in Medellín and was curious to know which property manager you use for your unit?
Thanks for your help.
My property manager in Medellín is The Apartment Medellín, founded by Andrew Campion and now merged with First American Realty Medellín. They’ve got the best Web presence, a fleet-wide occupancy of over 75%, and their own inventory. Unlike some of their competitors who aggregate others’ listings.
Hi Lee and company,
I’ve been reviewing your website and like the information so far. I’ve had an interest in Santa Marta, Colombia, for some time. I’m keen on a two-bedroom condo or apartment that I can turn into a rental property (I’d live in one room but rent out the other on Airbnb, etc.).
But I’m curious about some different ways to buy. For example, when I was in Panama, quite a few people would get into rent-to-own situations. Considering that I don’t have tons of capital at the moment (working on it), I’m wondering if that’s an option in Colombia?
Any advice you can give me here is appreciated.
Thanks for your time!
Santa Marta has long been my favorite place on Colombia’s Caribbean coast. (Read my previous article on it here.) The properties are reasonably priced, and you don’t have the tourist annoyances that you find in parts of Cartagena. In fact, Taganga seems like the perfect hideaway for a writer like Jeannie and her Airbnb clients.
The current exchange rate has Colombian properties priced at an amazing discount.
But financing is an issue, as it is anywhere abroad. I have not personally run into any rent-to-own situations in Latin America, but I have seen a few alternatives.
A normal mortgage is almost impossible, even if you have significant assets in your home country. Among many issues, the most fundamental is the fact that lenders want to see income that they can verify… usually from the country where the property is located.
Another alternative is to take a second mortgage on a property back home and use that for a cash purchase in Colombia.
Also, developers will sometimes offer financing on their new construction. Some of the best, low-money-down financing packages I’ve seen have been from developers. Here’s one I wrote about last year in Tulum, Mexico.
Finally, sellers sometimes finance the deal. I’ve seen quite a few sellers in Medellín who are willing to finance, although it’s normally for a relatively short term, say, two years or so.
Have a question? You can write to Lee here.