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Use Your IRA to Invest in Costa Rica Real Estate

Use Your IRA to Invest in Costa Rica Real Estate

With the new policies and direction the US is enacting, the normally stable Tax Code’s laws and rates are in a very unpredictable juncture.

While it is a given that the wealthy will get tax breaks, the uncertainty comes at trying to guess to what threshold will these breaks trickle down.  Surely the rich will get their tax breaks, but someone has to pay for it. Where will the line be drawn as to who gets the breaks and who gets the bill, and what side of the line will you be standing?

Many are taking steps to provide some shelter for their assets from the volatile economic and political climate that is the current reality in the U.S. As the need to insulate the wealth they worked hard to accumulate increases, many of them are now taking their assets offshore.

It is not as hard or as complicated as it sounds or as it once was. And it is no longer only an option for the few super wealthy corporations and individuals.

For the majority of mature professionals’ or aspiring retirees’, their largest asset is their retirement account. Ironically, in many cases it is one of the lowest performing investments in their portfolio. Often these holdings simply sit neglected for years as their custodians tend to allow them to drift in the financial currents.

A great deal of us are unaware of how much control and flexibility we have with these tax-deferred or tax incentivized accounts. For many many years now the very wealthy have used these types of accounts to not only accumulate wealth but also to shelter their wealth offshore… completely legally.

As most things, thanks to a couple of unscrupulous “bad apples”, the term “offshore accounts”, tax havens, etc. have come to have a tinge of illicit undertones. Strangely enough, “offshore investments” doesn’t seem to suffer from the same negative light. Why is that strange? Because offshore accounts are generally created or maintained through offshore investments.

Here is where it gets interesting; not only are these absolutely legal methods U.S. companies and individuals can use to lower their tax liabilities, you can make these investments and therefore get to these offshore accounts, with your IRA and 401(k). Yes, that is right; you can make investments through tax exempt self-directed IRAs.

“Investing through a trust or company organized in a tax haven is a perfectly legal thing to do,” said Stewart Patton, a U.S. tax attorney who specializes in taxes for Americans living and investing abroad.

Until recently two of the main obstacles to most people truly considering this were costs and unfamiliarity, even among most in the industry. Fortunately, over the past several years it has become more commonplace, so much so that the process and the costs have been streamlined. There is now a number of reputable U.S. Certified IRA Services Professional (CISP) and Offshore Investment Lawyers that are fiscally sound, time-tested and, most importantly, operating in a completely legal fashion adhering firmly with the US’s IRS tax laws.

Read Investing in Costa Rica Real Estate Using Your IRA

This has opened the floodgates of options available these account holders as well as started a new trend of asset protection by investing offshore. Offshore investing is simply a wide variety of investment approaches that capitalize on advantages presented outside of an investor’s home country.

Tax advantages

Perhaps the number 1 reason many people are taking their money offshore is for tax reduction. Many countries offer tax incentives to foreign investors. They do this to promote a healthy investment environment in order to attract international wealth. For a tiny country with very few resources and a small population, attracting investors can dramatically increase economic activity. There are several ways that this strategy helps you legally minimize your tax exposure. For instance; if the trustor is a U.S. resident, their trustor status allows them to make contributions to their offshore trust free of income tax. However, the trustor of an offshore asset-protection fund will still be taxed on the income that the trusts generates. Also, because you are not doing business as an individual, and are now operating as a corporation, and the corporation does not engage in local operations, little or no tax is imposed on the offshore corporation.

Asset protection

Another driving force behind moving your money offshore is asset protection. Investing company, whether through your IRA or otherwise, allow you to “reassign” ownership of some of your assets. Basically you simply create and register a legal company in another country, and then transfer the wealth or to that corporation. This provide shelter not only from taxes, but from litigation. By making these on-paper ownership transfers, individuals are no longer susceptible to seizure or other domestic troubles.

Increased verification

Some countries restrict the international investment options to private citizens. Many investors feel this hinders the ability to truly diversified their investment portfolio. Offshore accounts give investors easier access to international markets and to all major stock markets. On top of that, there are many opportunities in developing nations, especially in those that are beginning to privatize sectors that were formerly under government control.

For instance, as of 2010, Costa Rica ratified the Central America Free Trade Agreement (CAFTA). This deleted that some of the government monopolies should be privatized. As Costa Rica is already a developing nation with a booming economy, maneuvering yourself to be in a position to take part of that emerging market provides you with incredible opportunities.

Costa Rica has long been a favorite offshore investment destination. Why Invest In Costa Rica?

Traditionally structuring your investments and assets to take advantage of all of these benefits has been cost prohibitive for normal citizens and investors. Over the years the streamlined process has made its much faster, safer and cheaper. To use the same example, in Costa Rica it would cost roughly from $500-$800 to register a corporation, known as a “Sociedad Anonima” (S.A) , or an LLC, known as a “Sociedad de Responsabilidad Limitada” (S.R.L). After that it would be a matter of being able to fund this newly formed corporation.

Here is where having an experienced CISP, who either specializes or is thoroughly familiar with self-directed IRAs is vital. Their fees will range anywhere from $500-$5000 (or more if you’re lucky enough to have that large of an asset) depending on the size and complexity of the account.

Is Investing In Costa Rica Actually Safe?

More than half of the world’s assets and investments are held in offshore jurisdictions and many well-recognized companies have investment opportunities in offshore locales. Still, like every investment you make, use common sense, choose a reputable investment firm, and you must ensure that due diligence is thorough.

Before considering such an investment, it is wise to do some research and make sure you are up to the task. However, if you are thorough, there are some excellent opportunities for investment.

We recommend that you first speak with a CISP about your specific accounts.  They will be able to explain how you can use your 401(K) in coordination with your IRAs to make such and investment, along with the benefits and liabilities.  Done correctly you will be able to avoid any fees or penalties imposed by the IRS.  Then you should speak with a lawyer or law firm that is familiar with the process of creating an offshore corporation. we have several attorneys that have done this type of transaction for years. We would be happy to refer you to one of these attorney in Costa Rica’s top law firms.

Talk to someone about Offshore Asset Protection in Costa Rica.

Our mission is to help people looking to buy properties in Samara, Costa Rica. If you would like any extra information or suggestions, or simply would like to get a list of professionals can speak with, Contact Us. We are here to help.

How to Finance in Costa Rica

How to Finance in Costa Rica

Considering how to finance property in Costa Rica?  Montana Samara Estates can help.

It is important to note that buying property in Costa Rica can be considerably more affordable than purchasing property in the US. A beautiful home surrounded by nature, with an ocean view in Samara, Costa Rica, will cost you only a fraction of what a much lesser property would cost you in the U.S.

So, you have found the perfect property for sale in Samara, Costa Rica but you don’t have all of the capital to close on the deal. What now?

See our property map and price list.

There are several options for you to obtain this perfect property without all the money up front. Some are more attractive and easily accessible than others.

Financing is often difficult for any foreigner. Even as a U.S. citizen in the U.S. if you do not have a stable, moderately long residential history, and no local job or income, having a bank finance a major purchase such as a home or property would prove very difficult. So, you can’t really blame Costa Rican banks for being a little conservative in their lending practices.

Lending Practices & Loan Costs in Costa Rica

Costa Rica has been much more of a cash economy than the U.S. Though this helped it tremendously during the economic crash in 2008. However, it means getting your capital from a lending institution generally means very high interests and much shorter repayment periods if you want the interests rates to remain just shy of ridiculous.

Mortgage rates and costs through a bank in Costa Rica can be more than double what you will see in the States.  Closing costs alone can be frightening. In the US, the state with the highest commission rate for mortgage loan charges 1.04%. So, on a $300K home you will pay the bank about $3,000. In Costa Rica, the mortgage commissions are usually in the range of 2.5%. That same mortgage would cost you $7,500 just as a fee.

As for the rates, they are generally done on a sliding scale. For instance; you will pay 9% interest for the 1st year. Then you will be switched to Tasa Basica Passiva (TBP), or Basic Passive Rate (currently 6%) +2.5% for the 2nd year. On the 3rd year it will be TBP +3.5% . From the 4th year on it will be TBP +4.5% . Simply put, on your 4th year you will be paying roughly 10.5% based on current rates.

Contact Us about our 0% financing.

It is easy to see why, even if you could qualify, most people avoid getting traditional mortgages through banks.

So, other than that, what are some preferable options?

Until recently most buyers who require financing chose to borrow funds in their home country. Generally, they look to do it with a Home Equity Line of Credit or take a second mortgage on their house and use the proceeds to fund the purchase in CR. Some of our current residents have found it more favorable to get a second mortgage on their house in their home country and use the cash to purchase property in Costa Rica.

Don’t want to use your current home to finance your home in Costa Rica? No problem, Montana Samara has a better option for you.

Over the last several years, successful, well-established and financially stable real estate developments have started to offer a much more affordable and easier finance option; owner financing. Owner financing is a great way to buy a home or property in Costa Rica if you need some time to “move things around.”

Montana Samara Estates has a wide variety of possibilities with some very attractive and convenient options. We are large enough to be able to comfortably offer owner finance arrangements that are slightly skewed in your favor. Our aim is to generate revenue through sales, not through our financing.  As such not only do we offer favorable financing arrangements, we are willing to sit and work out custom terms based on your specific needs and timeframe.

While the typical owner’s financing is short term with 3 years maximum at an interest rate of 7-9%, with a 50% down payment, we can offer you financing with only 20% of the price down and flexible terms for payment of the balance.

We will work with you to help you buy that property for sale in Samara Costa Rica.

Your interest rates will be based on a combination of the percentage of your down payment and you are required repayment term.

As an example, if you invest with 25% down, and need a 10 year term, we can offer you a 9% rate. However if you have 25% down and only need 3 years repayment, we can offer 7%.

Do you have 50% to put as a down payment and only need a 2 year term? With these factors we can offer you 5% interests, roughly only .75% more than US rates, practically unheard of in Costa Rica.

Ask about our 0% financing options.

Owner financing properties for sale in Samara, Costa Rica through Montana Samara Estates.

With our owner financing there are no monthly payments. Payments are made quarterly, semiannually or annually.

Seller financing can be a huge opportunity for a real estate investor to quickly obtain the asset without immediately presenting the full initial investment amount. It can also allow a residential buyer to close on their dream property quickly, eliminating potentially losing the property, even if the full investment amount is not immediately available to them.

Why do we offer financing?

It often enables buyers to buy now to take advantage of bargain pricing, while allowing us to sell more of our properties for sale in Samara, Costa Rica quicker.

We are able to offer this on many parcels as they are free and clear of debt. So, this allows you to secure your piece of paradise while the prices are still low. Prices and construction costs are steadily rising.

Learn About Building in Montana Samara Estates. 

Being able to secure the land with much less of your savings or available liquid helps you get started building right away. It just makes sense to start enjoying your home or rental income from it as quick as possible. You even use this income to help pay the financing will off.

Because of the unstable conditions in the US and Europe, Costa Rica is looking better all the time to retirees, investors or just everyday normal people who want to get some of their savings or assets safely offshore, away from Uncle Sam’s ever changing rules.

This can be a great investment for you to almost instantly increase your wealth or at least access to wealth:

You add so much value to your property by building. For example; if you build a $120,000 home on an $80,000 lot on Montana Samara Estates, you will have $200,000 invested in a home that will sell for $300,000. There is a strong market for ocean view homes in this price range.

With so many options to help you finance your Costa Rican dream home, there is no reason why you shouldn’t “Carpe Diem”!

Contact us to see your options are for your dream home in paradise.

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