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First, the tips: 1. Position yourself to profit from the Baby Boomer’s invasion of Panama. We’ve been encouraging Americans to retire overseas for two-and-a- half decades. All of a sudden…the idea is catching on in a big way. The Baby Boomer generation is moving closer and closer to retirement age…and they’re more open than any generation that has preceded them to the idea of retiring beyond U.S. borders. Indeed, most Americans aged 41 to 59 say they’ll move when they retire, according to the 2005 Del Webb Baby Boomer Survey. And many will move farther south than Florida. In 1980 when Costa Rica introduced its famed pensionado program, U.S. retirees swarmed the place...and property prices soared. If you had bought a beachfront lot back then, today that same slice of coast could be worth 10 times what you paid for it…or more. Panama is positioning itself as the world’s next great retirement haven. (Indeed, we’ve honored it with that title four years running in our Annual Global Retirement Index, published every September in these pages.) The best place to position yourself to profit from the coming invasion of U.S. retirees is the country’s First-World metropolis of Panama City. For example, you might be tempted by a three-bedroom, two-bathroom townhouse located 10 minutes from downtown Panama City. Fully renovated and air-conditioned, this apartment was listed for just $55,000. Or, you could live in a luxury city center condo with Oceans views for $150,000. For more information on all that Panama City has to offer, contact our Local Office there at: Panama@Internationalliving.com. 2. Tourists and investors are returning to Croatia. Croatia is the next Spain (which for decades has been the number-one beach destination among European tourists), though they don’t want to be the next Costa del Sol. The government has put restrictions and regulations in place to protect against overdeveloping (critically, before it starts). But Croatia has more going for it than Spain (at least the coast of Spain). It has the potential to attract a wider variety of visitors and repeat visitors. Before the conflict, a half-million British tourists visited Croatia each year. In the nine years since the conflict ended, that number has edged its way back up (but today stands at only a quarter what it was in this country’s tourism heyday). Now tourists are returning to Dubrovnik and the Dalmatian Riviera in force. The thing to note here is that these tourists are not coming because of a low-fares air route which may close at any time (as has happened in some remote parts of Europe). Croatia is a popular destination among Italians, who come by car from the north and by ferry across the Adriatic. Germans, Austrians, Czechs, Hungarians, and Slovenians have easy access by car. Brits can take one of the direct flights from Gatwick and charter flights depart destinations throughout Europe...but the new wave of tourism is not dependent on these air routes. The potential in this re-emerging market is great in both the short- and long-term for gains in property value, because it’s under-priced today. Parts of this country, I believe, could enjoy a doubling and tripling of property values in the coming three to five years. Croatia should be at the top of your list, as a smart spot to buy an investment property, and as a world-class locale to shop for a bargain coastal getaway. I think the northern end of the coast will develop with lower-end tourism; the more high-end developments, resorts, and services will develop to the south. You can make money in both markets, but the rental potential in Dubrovnik (in the south) is huge. The draw of Dubrovnik is its history and architecture. This will make it a year-round destination, rather than just a summer vacation spot (which is what most of the rest of Croatia amounts to). Iva Zaja of Croatian Sun is the contact I recommend for the Croatian real estate market; tel. (385)203-12228; e-mail: info@croatiansun.com. Now, the wisdom: 1. Like-kind exchange it to defer capital gains tax at home. For U.S. citizens, Uncle Sam has his hand out no matter where your income or capital gain is derived. However, you can defer capital gains tax on foreign property through Section 1031 of the Internal Revenue Code. It’s simple to take advantage of, can be used on several properties at once—even among family members—and is an excellent estate planning tool...but timing is critical, and the IRS are immovable when if comes to granting extensions. We recommend Janice Houff, of First American Exchange Company; tel. toll free (800)600-2245 (ext. 153); e-mail: jhouff@firstam.com. Maybe avoid capital gains tax abroad altogether. Not every country in the world levies a capital gains tax on profits from the sale of a piece of real estate. Be careful when investigating this expense, though, as some countries may not impose a “capital gains” tax per se. Instead, they may tax capital gains as ordinary income. The growing list of countries that truly don’t tax capital gains on real estate (albeit in some cases with certain restrictions) includes: Argentina, Croatia, France, New Zealand, Poland, Portugal, Spain, Thailand, and the United Kingdom. 2. Talk to Tuey. Title insurance ensures that a) your new property will indeed belong to you, and b) you are protected against future claims on the property. It generally costs 0.5% of the purchase price or a minimum fee ($1,000 in Mexico, $750 elsewhere). You can purchase title insurance after property is in your name, but it’s best to contact a title insurance company before you buy your home or land. We recommend Tuey Murdock at First American Title Insurance; tel. (954)839-2900 (ext. 188); e-mail: tmurdock@firstam.com. 3. Use your 401(k) or IRA to fund your investment overseas. You can buy foreign real estate through your retirement account—whether you currently have an IRA, SEP, Keogh, 401(k), 403(b), 457, or Roth. You can combine IRAs if you don’t have enough value to purchase the real estate you want, on your own—the process takes 45 days. If you expect significant capital growth, a Roth IRA is a better option (because no capital gains tax is levied). 4. Avoid long-term
rentals in countries where tenants’ rights are sacred. Stay away from long-term
rentals in Paris, for example. French law favors the rights of long-term
tenants over landlords. Short-term rentals to tourists are typically a
better investment, in Paris and elsewhere. Other cities with good short-term
rental markets include Buenos Aires, Argentina; Bucharest, Romania; and
Panama City, Panama. Lief Simon, editor of www.GlobalRealEstateInvestor.com
(a specialized publication that helps members find littleknown, highly
lucrative international property investments), has never lost money on
a real estate investment he’s made anywhere in the world.
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