Real Estate anywhere (outside of a tax haven like Monaco the Bahamas) can never be a primary “PT” asset.
Why? It is too visible and can easily be confiscated. A very modest vacation home held in the name of a straw man might be an exception.
Remember the motto – “If you can sleep in it, on it or under it, RENT IT!”
However, we are not in a perfect world. Thus, a bit of diversification might be prudent … In our own personal life a bit of property ownership has been extremely profitable. Why? Risk is almost nil on a “no money down” deal. What’s that?
Where the property acquired has loans and mortgages exceeding it’s value –or it was a rent to own deal. No personal liability on loans is desirable and can be achieved (among the many ways) by using a trust, foundation, straw man or a corporation to hold title. Procedure Quickly take cash out through rents, refinancing or partial sales (as in the case of selling time-shares, condo units or empty lots in subdivisions).
You can get rent in advance if you ask for it. I asked for and got a year’s rent in advance on a Puerto Rican apartment property. Thus, at least for a year, I will be totally unconcerned about whether property in that area is appreciating or dropping.
Note: Garages. Storage facilities and trailer (camping) parks may be safer investments than residential property. Why? They are not subject to socialistic rent controls. They stay at full occupancy even in economic depressions. Commercial property like retail stores and restaurants, plus AirBnB vacation rentals suffered greatly during the unexpected “Black Swan” Corona crisis. Many of these premises were ordered shut down for over a year.
WHY HOLDING COSTS MUST BE CONSIDERED
Holding Costs on rental property are nominal in most of Europe. There, taxes, etc. can be as little as .05% of property values per year. For that reason you don’t need the proverbial “deep pockets” … If necessary, apartments with little or no overhead, can be left empty almost indefinitely. Obviously, if squatters or looters are a danger, this must be considered too.
In the USA, property taxes alone can often be 6% of value per year. Condo/syndicate/management charges can be another 10%. This makes the holding of high-tax vacant property without income an impossibility unless you have very deep pockets. PLUS — irrational faith in future hyper-inflation. Then too, unlike BTC or a hidden box of gold coins, most real estate, especially income property requires looking after.
–Management of tenants, repairs, staff for maintenance, accountants and lawyers for reporting, income tax, compliance etc. Then too, property ownership will usually inhibit your flexibility & ability to move your ass and your assets safely & fast.
WHEN TO SELL GOOD PROPERTY? PROBABLY NEVER
The price appreciation of any property is mostly due to two factors:
1) The depreciation of money. A 1931 USA dollar is worth 2c in 2021. The purchasing power of almost all fiat (paper) money in almost all countries drops every year – on average, around 6%. This means that almost everything seems to have price appreciation.
2) The increase or decrease in the real values– inflation adjusted price– is due to the utility or prestige value of the property (i.e. LOCATION!)
Economic activity in any area is usually the driver of rapidly increasing value. Silicon Valley California start-ups created many multi millionaires and local prices and rents followed.
Exceptions? In desirable vacation areas, or tax havens like Monaco there are other attractions.
3) In my experience, physically attractive property (in the long run) like waterfront homes in a warm climate generally makes a comeback when inept Socialist or Fascist governments as in New York City, or in the South coasts of France & Spain all make a mess of things with rent controls, wealth taxes and restrictive laws. Even in the U.K., Russia, China, Poland and Vietnam, property values eventually bounced back. When? When the socialists were eventually replaced by more sensible regimes. This will certainly happen in Cuba –eventually. Unfortunately, in the long run, we are all going to be dead. Once again, your age and a common sense estimate of the time-scale future events should show you the correct path to take.
A house that cost a million dollars to build 20 or 30 years ago in an expensive San Jose suburb (Silicon Valley, California) is now worth $100 Million +/- current selling price (30 years later). Why?
Only because there are so many new-rich guys with enterprises or juicy jobs nearby. They don’t want long commutes– they will pay what they can afford –needing to live near their biz, plus there is always the prestige or pride of ownership factor. However, when the local or state government gets too greedy, and taxes seem too crazy, the rich guys and their businesses relocate to cheaper places like Austin, Texas or Florida where there are little or no exorbitant state and local income taxes.
There is another reason places become ghost towns:
If the local industry (car making) is decimated by competition from abroad as it was in Detroit, the wealthy people & the workers move. Then the value of Detroit property drops like a rock.
In Europe, Biella, Italy was once a thriving hub of the textile industry. It now has some of the cheapest real estate prices in Europe. It is turning into something of a ghost town. Will it come back? Probably eventually. Maybe not. But if you can get what was a million dollar mansion for 10% of replacement cost, it might be a good deal.
If a PT senses a major disruption coming, it may be time to re-balance holdings, take profits (or losses) and move on to new and better deals in high growth areas.
Do you agree or otherwise? Write: <email@example.com>
CRYPTOCURRENCIES- MY OPINION FOR WHAT IT’S WORTH
The future value and utility of BTC?
In my opinion, it will be game over if and when the big brother countries pass, for instance, death penalty laws making owning, dealing in, buying, spending, or even “not reporting,” Bitcoin (etc.) a major crime. It will take brave people to continue regarding BTC as a safe haven asset.
Hitler regulated most people’s behavior by outlawing the ownership of foreign assets… Even listening to foreign radio was a major felony during WW2. Not everyone, but most Germans and people in the occupied countries stopped taking any risks especially when they could be denounced by neighbors, friends, and even their own spouse and children.
WILL BITCOIN PLAY A MAJOR ROLE IN THE FUTURE?
My thought is that every businessperson or investor should have some exposure to Bitcoin and the cryptocurrency industry. Digital, encrypted currencies are an extremely valuable tool for any Permanent Tourist or Digital Nomad. The modern ability to control your own wealth without the need for banks and financial intermediaries is an option that should not be overlooked, especially in respect to financial privacy. Cryptocurrencies enable the public to take back control over how we transact and use money. For far too long, unelected central bankers have debased and manipulated the financial system in ways that don’t serve the best interest of the people. Crypto now represents one of the most important innovations that have developed over the past generation because of the way it addresses the problems that are inherent in our fiat currency system. The Covid pandemic has accelerated the rate that people have begun to adopt and consider Bitcoin as a feasible alternative to paper currency. With the adoption of crypto, we’ve already seen a massive transfer of wealth take place.
If you were lucky enough to get your Bitcoin cheap, then, IMO, recovering one’s investment, with some profits, is usually a prudent course of action. Then, why not? Stay in the game with the casino’s money by taking out & re-deploying all original investment & profits along the way. That advice is for the passive investor. Needless to say, being a dealer or trading in some risky or perishable product is always profitable if one is diligent and knowledgeable.
A good PT is compliant and law-abiding, at least on the surface. No reason to risk jail or worse for any amount of money.
The PT Philosophy includes laying low & staying off the radar of Big Brother. This posture will always be more or less possible. But to be a successful & prosperous PT requires vigilance, common sense, and flexibility. Lest you forget, a basic rule is to say Bye Bye Big Brother. How? By moving or appearing on paper to have moved to other countries – places where you can freely enjoy & do the things forbidden in your home country.
Ask <J.BraswellConsulting@protonmail.ch> 2021