An economic upswing that began in 2013 has North American baby boomers searching for buried treasure. It comes in the form of an inventory of affordable properties in several tropical regions that are suitable for both retirement and investing. Savvy investors are taking advantage of the opportunity to invest in rentals for snowbirds and furnish themselves with a second home in a Caribbean paradise. Experts in the following locals say now is the time to start digging for investment treasures that will pay off big time in the future.
Belize is located in mid-Cental America and is only an hour and 45-minute flight from Miami. Buyers can rest assured that the economy is stable, and the real estate market has matured. Investors will find no international pitfalls to trap them legally since Belize is a part of the British Commonwealth and there is no capital gain tax. Properties are less expensive than many other places in the Caribbean. Hot spots include the Cayo District and San Pedro.
The Cayman Islands also have a favorable economic forecast along with a popular vacation lifestyle. Their rules for international transactions strict and the British colony’s government is friendly to foreign investors. Titles can go in company or personal names. The Caymans have a housing inventory that is affordably priced. The average price of a two-bedroom condo is $350,000. Rented out at $2,500 net, the return on investment will be seven percent over time. Additionally, there is no income tax, property tax, or capital gain.
A varied natural landscape and a politically and economically stable country make Costa Rica a popular investment choice. A rising GPD is fueling investor interest. Canadian and U.S. tourists and snowbirds keep the rental market strong. Property can be bought easily with a simple tourist visa, and foreigners have the same rights as locals in terms of property ownership. Hot spots include the Southern zone and the northern Pacific coast.
The Turks and Caicos Islands
Located north of the Dominican Republic, the Turks and Caicos Islands have one of the Caribbean region’s fastest growing real estate markets. Depending on size and location, investors will pay between $250,000 and $800,000 for a condo and $250,000 for a home. Most properties come fully furnished because there is no room to store furniture. The Turks and Caicos have relaxed rules for conducting business. There are no taxes, but there is a one-time stamp duty payable at the time of purchase. These islands have a bright future as a vacationer’s paradise.
How you prepare for taxes can be the difference between making a huge profit or ending up in the hole following a real estate investment. Due to some reforms to US tax regulations, real estate investors now have even more opportunities to save money, but there are also some new challenges they may encounter. These changes are likely to make a big difference for real estate investors in the upcoming years, so it is important to fully understand them.
Deducting Loss Is More Difficult
Most investors end up with losses in the first few years of owning a property, and they used to be able to deduct this loss on their taxes. However, with the new legislation in place, people will not be able to deduct a loss for the tax year it occurs. Instead, they have to wait and carry over the loss to the next year. For new investors, this can make finances a little harder to keep up with especially without the cash flow from their investment.
Tax Brackets Are Slightly More Favorable
The adjusted tax brackets for the tax law mean that some people do not have to pay quite as much taxes as they used to. The savings are only very high for those in the highest tax brackets, but even people in lower tax brackets can still expect to save a little money with the new tax law.
Doubled Deductions for Depreciation
Real estate investors now have the option of doubling up to $1 million for certain properties. The regulations for using Section 179 deductions are a little complicated, but if you qualify, you can deduct things like furnishing, real estate depreciation, and interior improvements.
Investors Are Offered a QBI Deduction
A new advantage for investors will be the Qualified Business Income Deduction. This lets people take a 20 percent deduction on certain types of income, so it can provide big savings. Any investment operated as a sole proprietorship, partnership, trust, estate, or S corporation may qualify.
More Properties Qualify for Improvement Expense Deductions
Changes to regulations mean that investors may be able to offset up to 100 percent of their expenses for improving certain types of properties. Not all properties qualify now, but investors can use the deduction for many types of restaurant, retain, and leasehold properties.
With the new regulations in place, real estate investors need to be wary of what an impact these changes make on their investments. Make sure to brush up on your research to find out how these new tax regulations will affect you.
The goal of any investor is to diversify their portfolio. Some people tend to be savers while others are wanting to make money to invest in other projects. No matter where a person falls on the investment spectrum, everyone gets a little antsy when the interest rates are on the rise. Have no fear because there is still much profit to be made regardless of where the interest rate stands. However, both investors and savers should be wary of a few pitfalls and avoid them at all costs.
The Involvement of the Federal Open Market Committee
Anyone that has paid attention to the housing market has noticed that the interest rates are slowly creeping back up. Gone are the days of getting a home with a two or three percent rate. The hike is all part of a plan guided by the Federal Open Market Committee.
Investors worry that these rates help when it comes to money market savings accounts and certificate of deposits, but will it hurt the housing market? The good news is that the housing market is doing great. It’s unlikely that a crash like 2008 will ever be repeated. So the market can take a bit of a shift and remain unscathed.
The Difference in a Savers/Investors Approach
Just how much has the interest rate increased? The most recent increase happened in September of 2018. The rate rose 2.25 percent. In December of 2019, the rate is set to grow another three percent. Lastly, the FOMC says that the interest rate remains steady into 2020 and will then level off. Investing cash into savings accounts, money market mutual funds, and other accounts that are affected by interest rates can undoubtedly benefit savers. While savers may be elated by the news of the rates, investors are concerned.
Savers should know that present-day rates are not like days gone by where one couldn’t find a decent rate. Anyone that holds a bond will face a mixed bag. When the interest rates are on the rise, the value of existing bonds decrease. Part of the reason for the decline is that these older bonds must vie with newer ones that offer higher yields. It’s advisable to keep bonds maturities for a short while until the rates plateau. Any dividends made from the old bonds can then be used to invest in new, more profitable, ones.
Making Wise Investment Decisions
Investors are concerned because the stock market has taken a bumpy ride this year and the increase in September only added fuel to the fire. An excellent place to invest is in commercial mortgage securities. The rising rates cause mortgage REITs to increase dividends. Be careful about pulling money out of the market to quickly invest it into a savings account that may ultimately lose money because of inflation. Stay the course and keep the investment portfolio in line with risk tolerance and age.
It’s important to consider the ways that investing in a vacant plot of land differs from other types of real estate investments before committing your resources. A vacant plot of land presents different challenges, but it also offers unique opportunities. Learning more about these differences can help you determine if this is the right route for you, and it can help you identify the best opportunities in your market.
Plan a Quick Exit Strategy
The market for vacant plots is even more volatile than the market for residential and commercial real estate. It won’t take much for the market to take a downturn, leaving you with a plot of land that is essentially worthless to developers. To avoid that situation, you should have a quick exit strategy before you even make an offer on the land. You shouldn’t plan to hold onto the land for more than 36 months at the longest.
Don’t Let the Land Sit Idle
Even as you begin looking for land developers, your first concern should be to look for ways to earn passive income from the land
. Depending on the location of the land, you can put up a billboard, divide it up into parking spaces, or turn it into a fruit and vegetable garden. There’s no reason this land can’t be earning you money from the moment you take possession of it.
There’s More Work to Be Done
Once you buy the land, you may think that you’ll just sit back and wait for developers to start submitting offers. That’s not quite how it works. If you really want to appeal to developers, it’s up to you to do the legwork to get the land ready for development. This means getting the land surveyed, applying for the necessary permits, and getting the property zoned. For larger plots, you might also have to get the land subdivided. Developers will look for land that already has been prepared in this way, which is commonly known as entitling the land.
As is the case with any type of real estate investment, it’s also up to you to do your research in advance of investing in any property. This means conducting title searches to ensure the land has a clear title and researching the market to evaluate the land’s potential value. As long as you do your due diligence, investing in land and offering it for development can be a lucrative opportunity.