Why I chose to invest in Nicaraguan teak for my Plan B

Yep, we are doing a story time today! We’ve heard from lots of readers wanting to hear about people actually going out and doing the things we talk about over at Escape Artist. So, let’s discuss the wonderful world of teak investing and why my husband and I decided to go for it.

Once upon a time in 2020…

When things went haywire in 2020, my husband and I were pretty keen to learn about living and investing outside of Canada, given how things were going here. I mean, Canada’s been heading in a direction we don’t like for awhile, but it definitely got bad enough to force our hand during the pandemic.

In our search for solutions in what felt like a hopeless situation, we discovered the wonderful world of offshore strategies. We learned that we could actually live and invest other places and that we did not have to spend out whole lives here in the land of authoritarian politicians and carbon taxes. Like, what????

Growing up, all you hear about is how this is the best place in the world so you never really consider leaving which, in hindsight, is clearly all by design. In fact, I’d say, in my experience, that most people seriously have no concept that you can actually choose to live somewhere else. Even now, when we tell people about what we are doing with our offshore plans, they cannot wrap their heads around it. The Canadian propaganda runs deep and most truly believe this is as good as it gets. If you are reading this, you probably understand what I mean.

Anyway, as I learned about living and investing offshore, I really liked the idea of investing in teak. After being burned by a couple of different traditional Canadian investments that were supposed to be “safe”, my husband and I decided that we needed to start thinking outside of the box with our investments. He grew up on a farm so he’s comfortable with and excited by the idea of agroforestry investments. I thought it was a great-looking investment with amazing long-term returns. We both loved the fact that it was not located in Canada and could be used for residency in either Panama or Nicaragua.

Now, due to the twists and turns of the pandemic years and the fact that we were still just starting to learn about all this, we didn’t invest in teak at that time. Buy me a beachfront glass of wine if we ever run into each other in person and I will tell you all about the craziness that ensued for us during that time period! On second thought, make that two glasses of wine. I’ll need it.

But, eventually things settled down a bit for us, as they usually do, and I am excited to say that we are finally investing in some Nicaraguan teak both for its fabulous investment value and as a path to Nicaraguan residency. I’ll break down the reasons why we chose to finally take the plunge below.

Teak as an investment

Stable investment with long-term demand

One of the things we really loved about the teak investment was its stability. Trees continue to grow during wars, recessions and all other manners of societal ups and downs. It’s a tangible hard asset with real value; in fact, teak has been grown and harvested for over 350 years so we have a lot of data that shows its consistent value over time.

Not only that, but the rate at which teak is being harvested outpaces the rate it is being planted by a factor of about 8-10x! Additionally, demand for wood tends to keep pace with world population growth which continues to trend upwards and now sits around 8 billion.

What does that mean for us, as investors? Well, if you know anything about supply vs demand, you’ll know that means ongoing demand and great returns for investors well into the future.

Why is teak so valuable?

Teak is desired across the world because of its many unique properties. Here are the main ones:

• Extremely hard and durable
• Contains natural oils
• Resistant to fire
• Withstands rot and mildew
• Insect resistant

These properties ensure teak is constantly in high-demand and holds its value extremely well. In fact, it has been shown to grow in value at a rate of about 5.5% per year consistently over time. Whereas stock markets go up and down and sideways, teak is always marching up.

Environmentally-friendly

You have likely heard about the deforestation of the Amazon rainforest, but it is all over the world that the deforestation is happening. In fact, half of the world’s tropical forests have been illegally logged and each minute 85 acres are destroyed. Pretty staggering numbers.

So, one of the coolest things about investing in teak is that you are actually helping with the reforestation effort. As investors, this is a great way to give back while getting great returns. We can protect natural resources and steward them forward to future generations by helping to replace forests that have been illegally logged or turned into pasture for livestock. Warm and fuzzies, incoming!

Diversification

One of the things I’ve learned the hard way in the past few years is the importance of diversification, both in terms of asset class and location. We’ve seen governments the world over adopt some pretty questionable policies and they are continuing to ramp things up now, resulting in volatile financial conditions and an uncertain investment environment.

Since we now have to seriously consider the potential of governments seizing our assets and/or trashing our currency via bad policy, it is more important than ever to diversify your portfolio and move some of your wealth overseas. At least if your home country goes off the rails, you won’t have all your eggs in that basket.

Great returns

There’s so much talk about passive investing and cash flow these days. But, sometimes I think opportunities get overlooked because the promise of the payout is so far down the road, even if the returns are amazing.

Teak runs on a 25-year growing cycle so, yes, you will have to wait to see your returns. But something Mike Cobb, CEO of ECI Development, said in a recent webinar really stuck with me. He said an investment in teak still cash-flows, it’s just on a 25-year cash flow cycle. And he also really drove home the point that the supply/demand imbalance heavily favors those who get ahead of that imbalance and invest sooner than later.

Because the returns, when they come, are exceptional. With ECI’s teak parcels the expected rate of return is 11x your original investment over 25 years. You can even build a portfolio with teak parcels that are different ages so they mature at different times – this is called “laddering”. Imagine getting one baby teak parcel that was just planted and one teenage parcel that is 15 years old. You’d have big returns coming in every 10-15 years, rather than waiting the full 25 every time. So, just as with any other investment, you can implement strategies to manage your returns to fit your desired outcome/lifestyle.

The other thing to remember when we are talking about returns is inflation. Inflation can destroy the value of your investments if you aren’t careful, so it makes sense to park some of your wealth in tangible assets that are known to hold their value over time.

Generational wealth

Who knows what things will look like down the road but we definitely have some concerns about what things will be like for our kids. Perhaps every generation feels this way. And, honestly, whether you live in a time of great turmoil or a time of great peace, it is always smart to build generational wealth for your family. Either way, you’ll be happy you did!

We look at our current teak investment (and hopefully many future ones!) as insurance. We don’t know if the pensions we’ve paid into our whole lives will even be there for us when we retire. So, we figure it’s smart to set up our own plans completely independently so no matter what happens, we will be okay. And, even more importantly, so that our kids will be okay.

The land can be passed on to our kids, their kids, etc to build generational wealth for all of us. The empowering feeling we get from setting ourselves up for success independent of whatever craziness is going on at the moment, is so incredibly freeing. We are taking our destiny into our own hands and damn, it feels good!

Teak as a path to residency in Panama and Nicaragua

The teak investment options we were considering were in Panama and Nicaragua. In 2021, we were making plans to head to Panama to get our Friendly Nations Visa (this was just before the requirements changed) but the travel situation was so difficult at the time we didn’t end up going. Otherwise, we likely would have chosen to invest in teak in Panama. I think that will still happen down the road, but it just didn’t work out at the time.

Nicaragua, I’m in love

And, perhaps, that’s how things were meant to happen because we’ve always been super drawn to Nicaragua anyways. I mean that in both a mystical sense, where we intrinsically feel a need to go there we can’t really explain, and in a logical sense, based purely on facts.

We loved Nicaragua’s approach of personal responsibility and freedom during the pandemic, having observed it longingly from up in Canada. We always saw ourselves in a warmer climate by the ocean, where fresh food is abundant and people are friendly. The territorial tax system and low investment required to qualify for residency also made Nicaragua extremely attractive to us; perfect for our Plan B. (By the way, I wrote a whole article about getting Nicaraguan residency, so definitely go check it out if you haven’t already!)

The fact that our entire family can qualify for residency via an investment in teak is incredible to me. Not only do you get an amazing long-term investment, but a second residency as well! I often talk about how important getting a Plan B is to our family, so being able to do this for both ourselves and our kids is an incredible feeling. And, it’s just another way of insuring all our futures by giving ourselves options.

Teak investment? Good.

Nicaraguan residency? Good.

Getting both together? GREAT!!!

You should look into this!

I’ve taken a lot of time to look into this over the years but I honestly would have done this much sooner if our situation had allowed for it. We’ve always loved the idea of the teak investment and Nicaraguan residency and it’s wonderful to finally have things come full circle and make this all happen. There is a level of relief that is hard to describe. And I feel proud that we took action, when most people didn’t think we’d actually follow through.

We still have to go through the whole residency process, which I’m sure will be full of its own twists and turns, but we are getting started and that is what counts.

Whether you are interested in teak as purely an investment or as part of your path to residency in Nicaragua or Panama, I highly recommend you look into it. You will diversify your portfolio with a stable, high-value asset while creating generational wealth for your family AND helping the environment. Sounds kind of perfect, right?

Check out our Teak Resource Guide for more information about investing in teak and how it can benefit you and your family.

Want another tip? Subscribe to Escape Artist Insiders magazine and, not only do you get tons of amazing information about building your Plan B, but you also get $200 OFF each teak parcel.

See you next week!

Lisa is an aspiring expat from Canada who is working to put together her Plan B with a young family in tow. She is excited to pair her lifelong love of writing with her passion for offshore strategies and outside-the box investments in her weekly articles for Escape Artist readers. Follow this “rebel with a cause” as she walks the path less traveled and shares her experiences along the way.

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