Does Foreign Ownership Benefit U.S. Developers?
If you go to talks and conferences about property and business ownership you will probably hear most US developers and investors talking about diversifying their portfolios domestically without taking the time to consider foreign markets. Many times, they will not even realize that there are many benefits to investing overseas which may be difficult to find in domestic markets. Whether you are looking to fuel economic growth on a global scale, want the tax benefits or are interested in varying your life experience, investing in foreign companies and real estate can be a good way to go.
One of the best benefits of foreign ownership is that economies grow at different paces in each country. This means that if you invest in property as a country hits a period of economic growth, you will get a better return than if you buy property in a nation where the economy is slowing down. Many investors will look at the forecasts of a coming US recession and decide that the growing Bahrain economy, for example, is a better place to develop real estate. This can help you avoid waiting for the domestic markets to change in your favor when you have money to invest now.
Investing in the economic growth of another country can help fuel your business holdings and the economy in the US as well. This is mostly seen by large corporations who have holding companies in various nations, because the innovative science, technology and techniques developed in one country can be more easily shared in another. Private real estate owners can see this type of benefit on a smaller scale by learning about different building methods, innovative materials and even
When you think of diversifying your portfolio, you may have the idea that it means making sure you have some stocks, real estate and research investments to avoid losing everything if one area fails. Diversification is the process of not putting all your nest eggs in one investment basket, but you can also not put them all in one country’s basket either. Trade deals, tariffs and tax laws can mean that the same type of investment will be a loss in one nation and a gain in another. Diversification of governments is another way a foreign real estate purchase can benefit you, especially in times of economic or political instability. When the economy of one country falters, you will still have income generating holdings in another country to help you make ends meet.
Real estate investments in developing companies often show higher returns than those in developed countries because the markets are steadily growing to their peak instead of slowing down. Established real estate markets, for example, are often cyclical, meaning that they go through frequent periods of highs followed by lows. This can mean that you are stuck with a property currently valued lower than the purchase price until the market goes up again. With growing markets, the gain is steadier, and the property appreciates much more quickly.
There are many tax benefits to investing offshore including the fact that you do not have to report foreign real estate to the IRS unless you sell or rent the property. This means that buying a house or owner-occupied commercial building in another country can be a good place to park an investment. If you want to purchase property to lease instead of live or work in, then you can move your IRA to a cooperative overseas custodian and use your funds to buy foreign real estate and only be taxed on the rental income going to you instead of further building the IRA. There are several other ways that foreign investments can legally lower your US tax burden and your accountant can help you choose the right ones for your individual needs.
There are many times when your assets may be subject to seizure by either a government, corporation or private individual suing you for damages. When this happens, your overseas real estate is largely protected from forfeiture because those filing lawsuits against you would have to go to those jurisdictions for a ruling. This is dependent on the validity of the claim, the laws in the country where the real estate is located and the willingness of the party to pursue the suit in those jurisdictions. Many entities, even those with a valid claim against you, are reluctant to file in foreign jurisdictions, making your assets even safer.
Investments made in other countries are subject to that nation’s confidentiality laws. This means that your shares in foreign companies or your real estate holdings may be kept confidential from your competition. This can give you an advantage in building up your holdings at a pace that is comfortable for you instead of trying to strategically outmaneuver others. When most people think about confidential investments, they think about hiding assets in ways which could be considered illegal or unethical, but confidentiality just means that there are fewer people who know about your finances and investments.
Owning real estate, particularly a primary or secondary residence, in other countries can diversify your life experiences as well as your portfolio. These holdings give you the opportunity to interact with the laws and people in different countries and experience a variety of cultures. In some cases, a strategic investment on your part can lead to lifelong friendships and community building that you would have otherwise missed out on. Some countries will extend residency permits or the ability to apply for permanent residency or citizenship with real estate investments, making it significantly easier to visit or move to those places. You can even use these investments as money saving residencies for vacations or business trips as you will be able to live in a home you own instead of renting hotel rooms.
Diversifying your portfolio and live experiences can mean more than just branching out into different domestic markets. You can buy real estate in foreign countries for residency or development, buy shares in overseas or global companies and much more. This can offer you tax and confidentiality benefits as well as higher returns and unique life experiences. Buying foreign real estate can also help you fuel and benefit from a growing economy while your holdings appreciate.