Pretoria, South Africa – As I wrap up my month-long visit to my second home here at the southern end of the great African continent, my thoughts have turned to goings-on in the United States — endless political dysfunction, arrogant cops in open revolt against elected authorities, and riots in the streets.
As I often tell subscribers to my Plan B Club — a group I established to help and advise people on how to move overseas — spending time abroad is one of the best ways to gain perspective on one’s “home.” That’s why I own foreign real estate, and why I’ve spent a good chunk of my time working on my lovely seaside cottage south of Cape Town — a property I snapped up 20 years ago for about $15,000. (It’s now worth over ten times that.)
But this property, for me, is more than just a place I can go to re-charge and re-collect.
The knowledge that I own a second home outside the U.S. is also a source of great comfort to me and my family. That’s a feeling you can share with me … and 2015 is the year to do it.
Why You Should Invest in Foreign Real Estate this Year
With the U.S. government out of control at all levels — from the Oval Office down to New York beat cops — it’s important to hold some assets the government can’t get its hands on. I can think of three good reasons why 2015 should be the year you consider investing in foreign real estate:
- Foreign real estate — also known as a “dirt bank” — is one of the safest and most reliable forms of wealth preservation out there. Lots of things can happen to stocks, bonds, currencies, and commodities, but land and housing are always in demand.
- You don’t have to report foreign property owned in your own name (i.e. not via an LLC or other vehicle) under the Foreign Account Tax Compliance Act (FATCA). That makes it last in line for the wealth confiscators.
- Foreign real estate is the ultimate escape plan — a place to go if the time comes.
My South African property checks all three boxes, and I’m happy as a clam.
I ended up owning South African property for unique reasons that wouldn’t apply to everyone. Chances are if I were starting out today, I’d look to own foreign real estate in the South American nation of Uruguay. Excellent residential property in Montevideo, the seaside capital city, can be had for as little as $100,000, where residential rental yields are from 6 to 8%. And Uruguay is one of the most immigrant-friendly countries on earth, with strict financial and personal privacy laws.
Purchasing property in Uruguay is simple and cheap. The transaction would cost you about $8,000 per $100,000 in property purchased. You’d pay property tax of 0.25% per annum. If you sell the property, capital gains tax would be 12% under current law).
So, for a hypothetical $100,000 residential investment in Uruguay, assuming a 15-year ownership with 5% per annum increase in property values (which is quite conservative), your profits would look something like this:
Protection in More Ways Than One
Given extensive (and frankly, invasive) reporting requirements to the IRS and the U.S. Treasury Department, it is critical to own financial assets that aren’t reportable — and therefore, not factored into your net worth.
If you open a financial account overseas and have more than $10,000 in it at any time during the year, you have to report it on your annual income tax IRS Form 1040, as well as a little horror-show called Form 8938. Same goes for your interest in any foreign investment fund, corporation, LLC, trust, or other entity.
Armed with this information, the government money-grabbers will know how much you’ve got and where to go when the time comes to rob you, no matter where your money is around the globe.
But because foreign real estate isn’t a “specified foreign financial asset” under U.S. tax law, you don’t have to report it at all.
Like gold or gems in a vault in Montreal, artwork in a Swiss duty-free warehouse, or stamps in a safe deposit box in Guernsey, foreign land could be your own little — and perfectly legal — secret. It’s a way to park your wealth in a place and form that can’t be touched by the government under current U.S. law.
Simply, it’s a no-brainer.
With all that’s going on in the U.S. today, make 2015 the year you go beyond resolutions … to action. Owning foreign real estate in a place like South Africa is one of the simplest and safest ways of securing your future and your wealth.
Offshore and Asset Protection Editor