International Real Estate Investing

The Best Places to Look

 

So how does one go about identifying places to build your “dirt bank”? I’ve done some research on various countries based on the variables I identified, and compiled it in the table below. I selected the countries based on their overall fit with my variables, as well as the existence of robust and open property markets that are known to appeal to foreigners.

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Except for Malta, they’re all in the Western Hemisphere. The reason for that is largely by default: Europe is too tax-heavy, Asia is generally unfriendly to foreign property ownership, and Africa, with some possible exceptions such as South Africa and Kenya, isn’t stable enough.

The tables don’t include an estimate of each country’s property value appreciation prospects, since these vary widely by region and type of property, and are unpredictable for many countries. Nevertheless, you’ll notice one thing most of these countries have in common: They’re small — several are islands — so land is in relatively short supply. That generally means values will go up.

Loophole the IRS Wants to Keep Secret

What if you don’t want to hold foreign real estate in your name? What if you prefer the privacy, security and protection of a corporation?

Under some circumstances, even if you purchase foreign real estate via a corporation, trust or other structure, you might not need to report your interest in it on IRS Form 8938. That’s because Form 8938 applies to those with “significant” assets outside of the United States. You don’t need to file Form 8938 if:

• You are resident in the United States, are a married couple filing a joint tax return, and your reportable foreign financial assets on the last day of the year do not exceed $100,000, and are not more $150,000 on any day of the year; or if you are single or married filing separate, and your reportable foreign financial assets on the last day of the year do not exceed $50,000, and are less than or equal to $75,000 on any day of the year.

• You are resident abroad, are a married couple filing a joint tax return, and your reportable foreign financial assets on the last day of the year are not more than $400,000, and do not exceed $600,000 on any day of the year; or if you are single or married filing separate, and your reportable foreign financial assets on the last day of the year do not exceed $200,000, and are not more than $300,000 on any day of the year.

Being “resident” abroad is based on a combination of factors, but essentially it means that your home, business and income are all in non-U.S. locations, so if you maintain a home or business in the U.S., but live largely abroad, you’ll need to act as if you were a U.S. resident, because legally that's what you are.

The upshot is that you might be able to hold non-reportable foreign property worth up to $100,000 in a single corporation trust, or other vehicle if you are a U.S. resident, and up to $400,000 if you’re resident abroad. That means you could possibly even participate in a property syndicate, as I explained when discussing Uruguay.

But beware that Form 8938 kicks in based on the value of all your foreign financial interest taken together — so if you have other offshore financial interests, the threshold for the value of your interest in a property-holding vehicle will be correspondingly lower.

As I’ve stressed, building a “dirt bank” isn’t the same thing as buying property to live in overseas. Nor is it the same as investing for profit. The goal is to protect a portion of your wealth by converting it into a form that you’re not obliged to tell the government about.

As the risks of government wealth confiscation grow, hedging investments like this are becoming more and more important. Don’t just say to yourself, “That would be a nice thing to do. Maybe someday…”

Consider doing it now before it’s too late.

Happy Investing!

Today's blog courtesy of  Ted Bauman
Editor, The Bauman Letter and Plan B Club