The One Asset The USG Can’t Seize

Buying a house abroad is a brilliant move when you want to get money offshore. [The Rude Awakening] February 20, 2024 [WEBSITE]( | [UNSUBSCRIBE]( The One Asset The USG Can’t Seize [House] Our house in Il Piemonte. [Sean Ring] SEAN RING There are convoluted ways to protect your wealth. And there are fun ways to protect your wealth. Buying a house in another country is a fun way of protecting your wealth. Owning a house abroad is one of the ways asset protection is open to the elite… and the more modestly well-off crowd, as well. If you’ve always dreamed of owning a home in Provence, Tuscany, or Andalucia, buying a house may be more affordable than you think. Since I just closed on our new family home, I thought I’d write about our experience and turn it into a guide for you. Here are the steps you need to take to buy a home abroad. 1. Research and Select a Country Your journey begins with choosing the correct country. Consider factors like climate, culture, political stability, economic conditions, and legal restrictions on foreign property ownership. Countries like Spain, France, Italy, and Portugal are popular among expats due to their favorable climates and relatively straightforward purchase processes for foreigners. Dream big. Don’t buy a house in Portugal because it’s cheap if you’ve always had an affinity for French culture. There are plenty of bargains to be had in France, as well. 2. Understand the Legal Framework Each country has its laws regarding real estate transactions and foreign ownership. Some countries restrict the types or locations of property that foreigners can buy. It's essential to understand these laws to avoid legal pitfalls. Hiring a local lawyer who speaks both your language and the local language is the most important step you can take. These lawyers provide invaluable guidance and ensure the legality of your purchase. I wouldn’t trade my lawyers in Italy for all the tea in China. They spoke English and translated all my documents into English before I signed the official Italian ones. In Italy, if you’re not proficient in Italian, this is a legal requirement. Require your lawyers to do the same regardless of the country you’re purchasing in. Another benefit is that lawyers know all the tricks estate agents and sellers try to sneak by. Good lawyers will protect you from their shenanigans. 3. Financial Planning Budgeting Consider not only the purchase price but also taxes, legal fees, real estate agent fees, and ongoing maintenance costs. I’d add at least 15% to whatever the purchase price of your house is. That should give you enough cushion. Exchange rates can significantly affect your budget, so monitor them closely. Every time the USD rises against your new country’s currency, you should be looking at houses and converting some currency over. Financing Securing a mortgage in a foreign country is challenging. Some buyers finance their purchase in their home country or pay cash. If you opt for a local mortgage, be prepared for potentially higher interest rates and down payment requirements. Again, this is why hiring a good lawyer is essential. If you’re financing in the country you’re purchasing, your lawyer will negotiate on your behalf. This saved us mountains of time. Taxes Understand both the one-time taxes associated with purchasing the property and the ongoing property taxes. Some countries also tax foreign property owners differently. Again, your lawyer will tell you all about these. That’s why keeping at least 15% of the purchase price handy is essential. 4. Hire Professionals Real Estate Agent Choose an agent with experience working with foreign buyers, if only for their language facility. They navigate the local market, find properties that meet your criteria, and negotiate on your behalf. Lawyer As mentioned above, this is the most important thing you can do to protect yourself. Accountant An accountant familiar with both your home country's and the foreign country's tax systems can advise on how to structure your purchase to minimize tax liabilities. Like my lawyer, I wouldn’t trade my accountant for the world. Not only has he got my tax liability into the single digits percentage-wise, he’s been involved with my house purchase and lets me know what’s deductible and what’s not. 5. Due Diligence Conducting thorough due diligence is crucial. This includes checking the property's title, ensuring it has no outstanding debts, and confirming that all necessary permits and approvals are in place. In some countries, it's also wise to check that the land isn't designated for agricultural use, which can restrict foreign ownership. Sounds tough? Leave all this to your lawyer. They’ll do it as part of their fee package. (My lawyer cost me EUR 7,000 for the entire process. It was entirely worth it.) [External Advertisement] [Joe Biden’s Biggest Mistake]( On February 27, 2023, Joe Biden made a decision that could cost the U.S. government $9 trillion dollars...and cut the living standards of American citizens by 25%. How you handle this situation will be one of the most important financial decisions you ever make. [Get the full story here ]( [Click Here To Learn More]( 6. Plan for Your Stay If you're moving permanently or spending significant time abroad, consider how you'll integrate into your new community. Research healthcare, education (if you have children), banking, and transportation. It's also a good time to start learning the local language if you still need to become fluent. A big mistake I made was not learning Italian before I arrived. I'd be in big trouble if my wife weren’t so good with languages! And don’t worry about your kids. My son was fluent in Italian within nine months. 7. Visiting the Property While virtual tours can be helpful, nothing replaces seeing the property and its surrounding area in person. A visit can reveal issues not visible in photos or videos and give you a feel for the neighborhood. Enjoy this! Imagining how you and your family will fit into old farmhouses or new villas is all part of the fun. 8. Negotiating and Making an Offer Once you've found a property you love, it's time to make an offer. Your lawyer will guide you on the typical buying process in that country, which can vary widely. Negotiation is customary in some places, while properties sell at or above the asking price in others. We wanted our house badly and paid the asking price. That was good enough. 9. The Purchase Process Purchasing a property abroad can be lengthy and varies by country. In Italy, it takes forever; ours took nearly ten months. In the UK and Spain, it’s much shorter. It often involves signing a preliminary contract, paying a deposit, and completing the sale after all legal checks have been completed. Ensure you understand each process step and what's expected of you. Again, your lawyer should guide you through this. 10. Relocation and Integration If you plan to live in your new home, consider the logistics of moving and settling in. This might involve shipping belongings, setting up utilities, and adapting to a new culture. Community forums and expat groups are good resources for advice and support. The parents of your children’s new friends are a likely group of new friends for you. 11. Insurance Property insurance is vital; in some countries, additional types of insurance may be recommended or required. Research your options and ensure you're adequately covered. Your mortgage bank, if local, will likely oblige you to take at least mortgage insurance. Your lawyers will advise you on the rest. 12. Estate Planning Buying property abroad can complicate your estate. Consult with your home banker/lawyer/advisor to understand how your property will be handled in the event of your death, and consider making a will in the country where you're purchasing the property. Wrap it up in a trust if that’ll keep your affairs in order. Wrap Up Buying a house abroad is an involved but fun process that requires careful planning, research, and professional assistance. By understanding the legal, financial, and practical aspects of purchasing property in a foreign country, you’ll make informed decisions and navigate the process more smoothly. Give yourself time. You’ll likely need a year or two from start to finish. Whether seeking a sunny retirement home, a bustling city apartment, or a serene countryside retreat, thorough preparation is vital to achieving your dream home abroad, away from the prying eyes of the USG. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( In Case You Missed It… The Mathematics of Wealth [Sean Ring] SEAN RING Since we have today off, I thought I’d share my most popular post. Originally written for the Morning Reckoning, it outlines five simple math formulas to help you on the road to wealth. See you tomorrow! We’re Screwed If We Don’t Do the Math Most economists agree that there’s an inverse relationship between women’s literacy and birth rates. Economists concluded that the more women read (and are educated), the less they want children. I’ve always thought that conclusion didn’t match reality. I believe the more women can do the math, the fewer children they want (for lifestyle reasons). That is, numeracy, rather than literacy, drives decision-making. There are many examples of career women who can afford – and have – more children. Sara Blakely, Victoria Beckham, and Amy Coney Barrett come to mind. But this column isn’t about demographics. It’s about innumeracy, which we’ll define as incompetence with numbers. It’s what I think society’s big problem is. But instead of whining about the causes, symptoms, and cures of innumeracy, I will give you a few rules of thumb. You can use them to see if your decision-making changes. For my part, these simple equations and rules gave me a target. Specifically, I knew how far ahead or behind I was and how far I had to go to reach my goal. I won’t bombard you today, as the fewer and the simpler, the better. So let’s start with five simple rules to see if they change how you think. The Rule of 72 You have probably heard of the Rule of 72 and might wonder why I’d include such a rule. Let me first state the rule, and then we’ll discuss how to use it. For most people, the Rule of 72 tells them how long it will take to double their money if it’s invested at a constant rate of return. For example, if you’re earning 10% per year on your portfolio, it’ll take 72/10 or 7.2 years to double your portfolio. If you wanted to back out the math, assume you had a $100,000 portfolio. $100,000.00 x (1 + 0.10) ^ 7.2 = $198,622 The Rule of 72 isn’t perfect. But near enough is good enough in this case. If a superstar financial advisor earns you 20% per year, it’ll only take 3.6 years to double your portfolio. Let’s use this rule to look at inflation… something Sleepy Joe doesn’t want you to do. Historically, central banks have tried to keep interest rates around 2%. That meant a currency lost half its purchasing power in 72/2 or 36 years. You’d barely notice the loss in purchasing power, as it’d take so long to rear its ugly head. You’d probably go to the grocery store and wonder why eggs are “suddenly” double what they used to cost in 1983. We’ve all done something like that, haven’t we? But with inflation hitting 10% as it recently has, a currency loses half its value in only 72/10 or 7.2 years. Realistically speaking, Chairman Pow says, “We’d love rates to go back down to 2%, but that’s just not realistic. We’re now happy with a 4% target.” In that case, the dollar would lose half its purchasing power in 72/4 or 18 years. If you think eggs are expensive now, just wait until 2041! The Rule of 72 is a great way to look not only at returns but also at purchasing power erosion. Net Worth Indicator This is a great targeting mechanism, and I regret that I only just found it. It’s from The Millionaire Next Door by Thomas J. Stanley and William D. Danko. Multiply your age by your realized pretax annual household income from all sources except inheritances. Divide by ten. This, less any inherited wealth, is what your net worth should be. If you hit this number, you’re an AAW or average accumulator of wealth. According to the authors, to be considered a PAW (prodigious accumulator of wealth), you “should” have at least twice this number. What I like about this indicator is that it’s simple to calculate. And it gives you a target. Full disclosure: I’m a UAW, an under-accumulator of wealth. But I won’t use this number to feel bad. I choose to think bigger and achieve better results. If you’re unhappy with what this number tells you, I suggest you do the same. Julian H. wrote in with this great question about the formula: I'm familiar with The Millionaire Next Door book and always wondered what's the logic behind the formula age x income / 10. Do you have any knowledge about that? In the book, there are no specifications about that, and I can't find anything valuable on the Internet. Thanks in advance. Best. Julian H. Julian, as far as I can see, this formula is produced with linear regression. That is, the authors took net worth, age, and income and produced a line of best fit. [New Biden Bucks Follow-Up Available Now]( Since posting the original Biden Bucks presentation online, millions of people have viewed it. Snopes and the Associated Press have even attempted to “fact check” and claim some warnings are false: Point being, the message has raised a storm and caused a lot of controversy. But in the time between the message and now, a lot of new developments have come to light. That’s why an update to the original prediction was just released… one which will likely be even more controversial. [>> Click here now to access the Biden Bucks follow-up](. [Click Here To Learn More]( The 50-30-20 Rule Tweaked This is a great way to allocate your monthly paycheck. And it’s super simple: - 50% of your income goes to paying your “needs.” These include rent or mortgage payments, car payments, groceries, insurance, health care, minimum debt payments, and utilities. - 30% of your income goes to paying down your debt. Once that’s done, this becomes discretionary entertainment expenses.* - 20% of your income goes to future investment. *In the original formulation, 30% go to your “wants.” That’s fine, but I think paying down your debt to zero takes priority. I couldn’t believe how fast my debt disappeared. It took about six to twelve months. But it was gone and gone for good. I’ve run a monthly credit card balance maybe once or twice in the last twenty years. And it’s thanks to this little system. 3x Rule for Buying a House Another one I love, and that would keep many rich people out of trouble, let alone those of lesser means. Never spend more than three times your gross annual income on a house. I’m in the process of buying a home right now, and I’m well within this rule. My down payment is ready and won’t empty my account, and my monthly payments are easily manageable. Far too many people only calculate their monthly payments based on their current mortgage rate. But if you have an adjustable-rate mortgage, this could easily lead to tears. There’s no need to overpay for a McMansion. The Normal Distribution (Bell Curve) Finally, we get to simple probabilities. [Bell curve] Again, this is just a rule of thumb. Nothing in finance is “normal.” But this can help you distinguish investing realism from fantasy. Let’s give an example. Let’s say Stock ABC has earned an average of 5% annually. That return is accomplished with a standard deviation around that 5% average of 2%. If we assume normal returns – a dangerous thing in finance, but we do it all the time – then ABC has a 68% chance of returning between 3% and 7%. It has a 95.6% chance of returning between 1% and 9%. And it has a 99.7% chance of returning between -1% and 11%. Here’s the thing, though: it can undoubtedly crash far below a -1% return, and it may moonshot 45% on the FDA approving its new drug. But the probability of either of those scenarios happening is very low. Knowing this distribution is essential for setting your expectations as an investor and gauging what the market thinks of your potential investment. If you can adjust your thinking to be more probabilistic, you’ll be shocked at how differently the world will appear. Wrap Up The absolute last thing I wanted to do was to patronize you. But I also don’t want to assume you know things you may not know. So I hope, at the very worst, this was just a refresher of things you may have put on the back burner. But if there is a lot of new material here, I can’t encourage you enough to deploy this new knowledge as early and as often as possible. Please let me know if you’d like to see more of this. And if you found this unhelpful in any way, do let me know that as well. I’ll see you tomorrow when it’s back to regularly scheduled programming! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. Please read our [Privacy Statement.]( If you are having trouble receiving your Rude Awakening subscription, you can ensure its arrival in your mailbox by [whitelisting Rude Awakening.](