U.S. Taxes are going up!  It’s time to think ‘Outside the Box’!

by G. Hugh Bodell

The US Elections are over, but the dye was cast long before November 4^th.

Let’s face it the economy is in trouble, not only the US economy, the world economy.  The Wall Street binge is over...for the time being, but we have a new binge in place and one with much deeper pockets.

As I write this, governments are pouring money into fixing the problem and fixing it fast.  Let’s add it up (US Dollars).  US bailouts, AIG – originally 85 billion, now 125 billion, plus the mortgage crisis 700 billion, European governments collectively have committed nearly 200 billion and now, to fix the lull in its awesome manufacturing machine, China is going to pony up 586 billion.

Wow, in less than three months heavy hitting governments have thrown over 1.6 trillion bucks into the global economy.  Hang onto your hats folks, that is over $233 for every man, woman and child on the planet.

Where is this windfall coming from?

It’s coming from you, the middle class entrepreneur, professional, manager or executive.

Taxes are going up for you!  Oh sure the tax bite will first drop on high-end earners, but sorry, there just ain’t enough of them in the prosperous world to fill that deficit and besides, they started shielding themselves from an overly uncomfortable tax bite long before this debacle, that’s why they’re “high end earners.”

So is the taxman going after the little guy?

Remember, this is a global thing, the little guy is really, really little.  $233 would support Barrack Obama’s half brother for almost 20 years.  He lives on a buck a day.  Even if the Kenyan Government could impose a 50% tax on the poor guy, his 233 bucks won’t be paid back into the global government coffers for 40 years.

No guys and girls, while you work hard and strive for a better life, you are the only visible target for governments to get the tax revenues they need.  The dough is going to come out of your pockets, savings accounts and retirement accounts.

So what’s the answer?  Think ‘Outside the Box’, think like those high earners, think like those Wall Streeters, and think about sheltering some of your hard-earned money from the taxman.

Tax shelters are legitimate investments that as an unintended consequence for taking a certain amount of risk you are permitted to deduct certain expenses from other sources of income.  There are lots of perfectly legal tax shelters but what I want to concentrate on for your first venture ‘Outside the Box’ is real estate, not real estate in the depressed markets of the US, but off shore real estate, specifically, real estate in a bit of Paradise.

I know, I know, ‘real estate, are you crazy, putting money into property anywhere in the world right now is nutty.’

Well, you would be right if the country of interest was the US, the UK, or even most of Europe, but remember think ‘Outside the Box’, think Belize.

Formerly British Honduras, Belize is a small (8,867 square miles, 22,960 km²) but magnificent little country in Central America with 185 miles of Caribbean coastline!  It’s a nation that is slightly larger than Massachusetts in terms of square miles but it has a population of just over 300 thousand people.

It is the destination point of divers, water sports lovers and ecotourists from all over North America (it used to be our secret) but in recent years, Europeans have joined the parade.

The reasons are simple, for the divers and snorkelers it has the longest complete barrier reef in the Western Hemisphere and the second longest in the world.  For those more interested in the romance of the seaside paradise there are miles of white sandy beaches on the warm, topaz, romantic Caribbean Sea with dozens of lagoons along the coasts and in the northern interior.  When you add in ecotourism and for those who seek a bit of adventure, the Mayan ruins and an interior virgin rainforest that covers 12.7 percent of the country's total land base, you have a fantastic vacation destination for a broad population.

By the way, English is the official language giving it another attribute attracting vacationers from North America and the UK.

Why the travel brochure information?

The secret to real property investment anywhere in the world is location, location, location and Belize is one fantastic location.

The foundation for tax sheltering real estate revenue is in growth in value supported by tax-deductible expenditures, but pivotal to that formula is that the value of the real property investment rise at a rate that exceeds the cost to carry.  Therefore, the income is either deferred, converted to capital gains or both.  North America had that party for more than a decade, it ended in 2006 and it crashed by October 1, 2008.

The new opportunities are offshore because you can add to that prescription for asset growth the fact that if structured correctly and with planning, that income/asset growth can be sheltered from the taxman.

As a result of the soon to be overtaxed world citizens’ realization of this opportunity, Belize is just starting to enjoy that investor friendly environment.

But don’t take my word for it, those in the know, like Coldwell Banker, CNN Money and the United States Government agree with me.

According to a recent article by Coldwell Banker, there are "seven inarguable reasons" to invest in property in Belize: 1-Stability, 2-Tax Friendly, 3-Popularity, 4-Massive Tourism Interest, 5-Location & Language, 6-Natural Beauty, 7-Real Estate Availability.

Property prices in Belize are still on the rise.  While North America was in the midst of its real estate market slide down a long and slippery slope between 2006 and 2007, the price of a home in San Pedro, Belize increased on average 18.6%.  When you add to this rise, the fact that the base price of real estate is still low and affordable you have the perfect ingredients for a booming real estate market.

CNN Money, in its article ‘Hottest Foreign Second Home Markets For 2007’, includes Belize as second in the top six hottest markets for 2007 globally.

Of course, a major concern to all international investors and one that the new offshore investor should be worrying about is the security of your offshore investment.  Well, rest easy if you invest in Belize.  In a recent speech, US Ambassador to Belize Robert J. Dieter said, before an international audience, “Recent business surveys have reflected the positive side of the stable political environment and free market atmosphere in Belize by giving Belize high marks in terms of business and labor freedom.”

Now for the last pieces of the puzzle that emphasizes the attractiveness of the tax shelter aspect of owning investment property in Belize.  There are no Belize capital gains or estate taxes and the property taxes are very low.  Rental demand is on the ascendancy so rental yields are improving thus assuring the internal Belize generated cash flow to carry the leveraged portion of the investment.   Finally, Belize tax on rental income is at only 1.75% of gross receipts.

Where does the money come from for this potentially great investment?  The best bet is probably leverage!

Leverage your home in the US, where the interest on primary residence borrowing is deductible, generally up to 100% of the interest costs and invest in affordable, income producing property in a location where values are on the ascendancy, available properties are limited and local tax laws respect the value of an investor.

Think ‘Outside the Box’, investigate Belize, a safe opportunity to protect your assets, watch them grow and have some fun.

I have a colleague who has an interesting process for investing offshore.  Unlike those high earners and Wall Streeters, who invest remotely and are comfortable with property investing sight unseen, he carries out his investment research in person.  He not only physically visits his potential investment property but also takes the opportunity to get a feel of all aspects of the country where he intends to invest.  He also has a lot of fun ‘researching’ his potential investments.

I recommend this approach for your investing in Belize, particularly if this is your first adventure ‘Outside the Box’.

Schedule a vacation at the much touted and glorious Ambergris Caye, the largest island in Belize and make it a point to visit the Sapphire Beach Resort, a fantastic new, gated community on the Caribbean and one of the opportunities you should be looking at.

Not only will you get a first hand experience of the great investment potential for sheltering some of your hard earned funds, you will have a fantastic vacation in Paradise, and its all just two hours by air from Houston or Miami.