One financial advice that tends to be neglected by many is that of where to have one’s investments. We are pushed to think that the only important thing is to select the most profitable business areas, those that are thought to permanently generate revenue.
If we think about it, there is an element of truth in that approach to investment. It’s evident no smart investor would just divert all of their capital into an exclusive business sector, or even a single bank account for that matter. Diversification is fundamental in risk-avoiding strategies, that’s more than clear. Because if you assess this principle, that of considering the consequences of political instability within you’re the country where your investment lies, what it’s better than to diversify in terms of minimizing potential risks?
However, when talking about diversification, how much time do we spend thinking about international investment rather than multiplying the business sectors we are in a given country? The answer, based on statistics, is not so much.
There are many possible explanations for that mistake, one of the most common being that investing internationally was thought to be an extremely complicated process that only big magnates could perform. However, globalization has widened the opportunities for many, regardless of their amount of capital or business sector.
When looking for them carefully enough, investment opportunities overseas are huge. Some are even unmissable if one has the capital at hand and is ready to use it.
So, once we’ve determined international investments are the key to a great diversification strategy, where should you start? Well, international real estate might just be the single greatest area to introduce oneself.
THE UPSIDES OF INTERNATIONAL REAL ESTATE INVESTMENT
As you might have realized by now, diversification is just unnegotiable when seeking to fortify one’s capital. Therefore, giving said capital more than one home is always going to be a smart decision.
On top of giving an extra layer of protection to your money and properties, real estate provides investors with many interesting benefits that shouldn’t remain untold. For example, you’ll be able to earn higher returns on some of your inversions while improving your current tax strategy. That is without letting aside that in some countries, making real estate investments will give you a permanent residence permit in the country or even second citizenship benefits.
Let’s dive further into these benefits:
BETTER RETURN ON INVESTMENTS
There’s a disclosure that should be made when talking about investing in international real estate. In most industrialized countries, the profits on these kinds of investments aren’t great. At least not as great as in other less-developed nations. That’s the case of Italy, a country in which a 2% return rate is something to be grateful for.
On the other hand, clients of Centurion Capital investing in Paraguay are looking at return rates of over 10% through rental yields, while yearly value appreciation can reach up to 15% of the original cost of the property. These percentages are just unthinkable for properties in Milan or even other European cities like Paris or Madrid.
A simple explanation can be given, that of already consolidated markets not growing at the same pace as other emerging ones. That’s why Paraguay, Montenegro, or Georgia will always be more appealing for investors, as their margin of improvement is considerably bigger than those of industrialized economies
PROTECTING YOUR ASSETS THROUGH INTERNATIONAL PROPERTIES
There are few methods of asset protection more effective than that of owning property abroad. Of course, no doubts should be on the table: not a single one of the greatest businessmen in the world is known for having all of their capital concentrated in a single country. Why should low-profile investors do the opposite when having the chance to follow their path?
Having international property will allow your capital to be safe regardless of the internal situation of your country. Forget about the possibility of political chaos, fiscal disaster, or even war-like circumstances. By owning international real estate, you are guarding your money against all the jeopardy.
Let’s assume you already have had properties in the United States and Switzerland during the awful 2008 economic crisis. There is a great chance your capital in the US was utterly blown away by the finance disaster, while your assets in Swiss banks and companies remained virtually the same. What’s not to love about that kind of prevention?
On top of protecting your current investment, making an entrance into international real estate will play a fundamental role in what we call governmental insurance, especially when facing all kinds of political or economic turmoil.
Let’s say a given country is about to experience currency devaluation, whether because there is an imbalance in its balance tradeoff or because the new political party in power makes a set of structural changes. In that case, deploying governmental insurance strategies through international investment can make that problem disappear, because, unlike regular insurance mechanisms, rental yields and value appreciation will aid you at escaping negative externalities.
IMPROVING YOUR TAX STRATEGY THROUGH INTERNATIONAL REAL ESTATE
As we have addressed before, purchasing international real estate can also be just the ideal response to strengthening your current tax strategy, as both new citizenship and residential options along with brand new sources of income appear on the table.
Tax-payers from France or Italy, for example, once they have purchased a property and succeed in having their residence permits, automatically lower their tax responsibilities due to its fiscal incorporation to a low-tax environment.
To set another example, let’s assume you are a French citizen but a taxpayer of Paraguay whilst having income coming from a set of real estate assets in Thailand. Now, you still have to comply with your tax responsibilities in Paraguay, but only with the income generated inside the country. This is because Paraguay is one of the few countries in the world that has a “territorial tax” system, meaning you will only have to pay taxes for income produced in Paraguay. Therefore, any income produced abroad is not taxed, which translates into your Thailand-generated income being tax-free.
As you can see now, introducing yourself in this kind of ownership will automatically improve your tax strategy, as regardless of the country in which you are currently paying taxes, and of course, with proper expert guidance, you will be able to reduce those burdens.
DIVERSIFY YOUR LIFE AND YOUR ASSETS IN A GLIMPSE
One of the greatest silver linings of acquiring international real estate is related to the possibility of actually experiencing life in the country you choose.
Diversifying your assets will almost automatically help in the diversification of your current living standards, as you could literally travel the world based on the investment decisions you are about to make.
On top of it, getting this kind of asset will set the path towards gaining second citizenship or a new residence permit with great benefits within the country you picked.
This is often the case when you spend a particular period of time in it, or if you decide to invest in large quantities in a particular business sector.
For that reason, we can say that not only your life will be improved in terms of the possibilities to experience a wide array of things around the world, but also it will provide for you a sort of an “escape hatch” in case your current country undergoes through all kinds of political turmoil.
It goes without saying that if you are the type of investor that likes to travel the world, investing in real estate is an obvious move. You can forget about paying hotel after hotel and actually live in a place you can call home.
And if you have the opportunity, you can even create different “home bases” around the globe, giving you the chance to go even further in the path of full diversification of your capital.
MAKING THE BEST DECISION POSSIBLE: WHICH COUNTRY IS BEST FOR YOU?
Of course, sharing the language and culture of the country you are thinking of investing in can make a great case, as just some clicks on a couple of trusted websites, or contacting a proper real estate agent, can make the work.
However, if you are looking to potentiate your tax strategy in even broader ways, you will need a different approach. If, for example, you consider countries like Vietnam or Georgia, things can become more difficult as culture and language are not of your knowledge.
To avoid feeling absolutely lost in a given country, the most important thing is to create an on-the-ground basis related to both your expectations, the field of investment, and law-like professionals.
We believe that for you to exploit the potential of the country you are about to introduce yourself in, it’s of fundamental importance to gain access to data along with creating trustable bonds with people there.
It goes without saying that you also need a good local lawyer, one that can protect you for the drafting of contracts, the opening of the local bank account, and advise you on the best tax structure for your investment.
Therefore, we highly recommend for you do a literal journey to the country of your choice to create these networks by yourself. This is, of course, in the case you lack a very competent local trusted man who does everything for you. For example, there are many Family Offices that do this for their HNWI customers.
Never purchasing online is also great advice, as there is a wide array of thieves out there. There are countries where is virtually impossible to gather contrasted data, or in some cases, most of the databases are outdated.
You also have to consider whether you are aiming at residency or citizenship benefits, as countries like Paraguay or Montenegro can offer great real estate deals without having remarkable living standards. In that case, you could be looking forward to some European country, which forces you to consider investing in countries that offer Golden Visa programs, such as Portugal or Malta.
If your primary objective is to get a second citizenship, then countries like Dominica or Saint Kitts are the answer. This type of country will offer both relatively good living standards and short times in terms of successfully undergoing its citizenship by investment programs.
You should never underestimate the great possibility that thanks to particular Investor Programs, you could have second citizenship and passport benefits for you and your family within a few months.
And these are usually “free tax” citizenships in countries that will not tax any of your income, while your local real estate rents won’t be taxed either. This is an incredible advantage since most countries in the world tax real estate investment and their rents in a high way.
We have addressed all major points regarding a vital strategy to protect one’s assets: that of international diversification of our capital.
You are about to activate what is known as the cosmopolitan mindset, a way of thinking and investing that seeks high ROI through capital diversification while deploying governmental insurance strategies.
However, at Centurion Capitalist we know there are many rocks unturned for you to take an exhaustively-informed decision. Reach out and our team of financial experts will guide you through what we believe is the single smartest call you could be making this year.
Warning: The content of this article does not constitute legal or tax advice. It is provided for general informational purposes only and not for the purpose of offering any warranty or guarantee. As laws change frequently, personalized professional advice is absolutely necessary.
Article written by: Fabrice Barra is a cosmopolitan entrepreneur, lawyer, fiduciary and author, one of the world’s leading experts on offshore strategies, corporate haven, international investments and global mindset lifestyles. He is the personal trusted advisor of well-known entrepreneurs, UHNWI, Forbes Global 2000 companies, professional sportsmen, aristocrats, celebrities, investors, people with a net wealth of 7- to 8- or more figures, and he has access to a network of influential people around the world.