Sunday, October 07, 2012
In the last few days, we've looked at two ways to help you buy a property overseas - developer and seller financing. Today, we're looking at a third option using funds you already have.
You can use the funds in your IRA or 401k fund to buy international real estate. You should check with your custodian on the rules and regulations. Some rules apply to every retirement fund. And sometimes custodians apply their own investment restrictions.
You can buy any type of property using your funds- condos, agricultural land, single family homes, commercial property or office space.
You can buy and flip the property. You can rent it out. You can even buy properties with other partners.
Some general rules apply. Your retirement fund is meant to benefit you when you retire. You can't use the property personally until you retire. If you buy a vacation home you'll have to wait until you retire to enjoy your first vacation in it.
But if you buy your retirement home now using your funds you can rent it out. Any rental income earned must go back into the retirement fund. However, you can sometimes set yourself up as the property manager and pay yourself a reasonable fee.
You can't purchase a property that you already own using your funds. And you usually can't purchase from family members or "disqualified persons" (which includes anyone providing services to your IRA fund).
It's worth checking with your custodian to see what you can do with your funds. There's a whole world of possibilities out there. You can diversify outside the U.S., outside the dollar and enjoy growth and strong rental income.
Here are three options that would make great retirement homes in the future - and excellent rental properties in the meantime.
Costa Rica. Costa Rica's southern Pacific is an amazing place. Mountains plummet down to soft-sand beaches. Waterfalls crash down craggy hillsides. Vast forests filled with exotic wildlife spread out across the horizon. This is the most dramatically beautiful corner of Costa Rica.
And it's attracting more tourists and home buyers thanks to a new coastal highway that's opening this coast up.
You'll find lots of little restaurants, a deli, a coffee shop and a new hospital close by. This place makes a great retirement location where you can swim, surf, hike, sail, fish or try zip lining, a canopy tour or white water rafting. Of course, you could simply kick back in your hammock in the tropical afternoons.
A lack of big hotels or resorts here means rental opportunities. One owner in the gold standard community in this Pacific hot spot earned a whopping $88,000 in rental income last year from his three-bed three-bath house. With the low holding costs in this area his net rental income almost hit $80,000. You can find out more about this community here.
Dominican Republic. You'll love the laid-back island feel of this little town. You'll love the gourmet restaurants, Italian ice cream store, strong espresso from the sidewalk cafes and warm breads and pastries from the French bakery.
This location boasts 19 miles of walkable beaches with clear blue water and white sand sprinkled with palm trees. It's chic, low-key and understated. And a vacation or retirement home in this town can generate a nice income.
This three-bed two-bath condo is in a complex with a swimming pool and landscaped grounds. The condo comes with a spacious terrace and it's fully furnished. It's only 50 meters to the beach. This complex is popular with renters, operating at almost 100% occupancy in high season. It's on the market for $145,000. Get more details here.
Belize. This small peninsula is a barefoot paradise with friendly English-speaking locals, good food and a relaxed vibe. It's a slice of paradise for divers, snorkelers and anyone that likes messing about on the water. It's got pretty beaches, a lagoon, a huge coral reef and hundreds of tiny sandy islands scattered across the neon-blue Caribbean Sea. Retirees and tourists come here for its natural beauty and small town atmosphere.
This house, priced at $750,000, sits right on the sand and only steps from the sea. It's got a deck and swimming pool. Its layout as three units (two one-bed condos and a three-bed condo) maximizes rental potential. The three-bed condo with a master suite and deck with beach and ocean views occupies the top floor.
The current owner rents all three units out. He earned $54,000 net in 2011. That's $54,000 after he paid all his overhead and running costs. That's an impressive 7.2% net yield based on the current asking price.
Once you retire you could live in one of the units and rent out the other two and still enjoy an income stream. Get an information package here.
So, your retirement funds can buy overseas property. That overseas property can earn rental income to top up your fund before you retire. It's an excellent way to diversify your assets.
Best of all, it's a way to get the retirement or second home in the sun you've always dreamed of.
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