Job Discussion Forums

[jw72]

To the long-term expats out there:

How does one plan for and budget a retirement savings while living overseas? Are there any investment companies or organizations that specialize in helping expats with this issue?

Thanks,
John
[email protected]

[Deconstructor]

[Guy Courchesne]

I imagine it depends on what kind of residential ties you maintain to your home country. There is a thread about this way down the list.

Mexico is famous for hosting retired persons who draw upon savings from home. There is a class of visa for this. For those expats still working, there are local funds, bonds, real estate schemes, etc. Not sure if Mexico has anything like an RRSP for foreigners though. My wife and I have chosen a local real estate savings plan, with both short and long term investment goals.

[tedkarma]

Hi John,

I've been teaching overseas since 1989 - and ended up investing in rental properties in the States. It's not difficult and it will give you the income stream that you will need when you get older. I have an excellent property manager for a couple properties and one that scuks for another one (soon to be replaced) - but generally it isn't difficult to manage it from overseas.

As far as investment/brokerage accounts - I've looked at many of the so called "offshore" outfits - none of which (in my opinion) provide anything as good as your local credit union back home. When you are visiting back home - set up your accounts - my old credit union (Arizona State Savings and Credit Union) offers everything I need - I can do it all on the internet - and they even have a bill pay program. These things are MUCH easier now than they were 15 years ago! I also have a couple brokerage accounts - though I tend to feel that the stock market is more like gambling - and put my real money into real estate. The stock market can dump 50% tomorrow - but the rent keeps coming in. I will like that when I am 80.

If you select the right countries and circumstances � as has been my experience - you can save MUCH more teaching overseas � than you could at home.

Just my opinion.

A fast edit: I think that when you live overseas - you will need to rely on yourself for these issues much more than you would at home. No employer is going to set up a 401k for you - and most "financial consultants" (my opinion only) are just looking for a commission. Educate yourself - read everything you can. Start with Rich Dad, Poor Dad.

[JZer]

[tedkarma]

I think, to do things correctly, legally, and knowledgeably � that you need to hire a licensed real estate agent. I�ve done it both ways: hiring a property management company and hiring an agent (who really is a salesperson supplementing their income with management). Now � I use only professional management companies. Many real estate agent types are just newbies � and they come and go. So if you hire the agent of a real estate brokerage � you will see many come and go.

If you hire a professional management company � you will usually work with the same person (often the owner � or his delegates) for many years. One manager - I�ve been working with for over ten years. Excellent � I�d trust him with my last dime. This is not to say that you shouldn�t scrutinize the reports and question things from time to time � and give your manager some direction as to how you would like things managed.

The real key is to minimize turnover � which keeps the income stream running and minimizes maintenance expenses. This is slightly at odds with the manager�s goal - which is the highest income possible (they work on a percent). But the highest rents mean lots of turnover � and repainting repairs etc. A smart manager will know that low turnover (primarily aided by slightly lower than market rents) also means minimal management hassle for them. I am soon to change a manager who likes the high rents, high turnover � she continues to make a high income � but my income has diminished greatly. (most managers will charge an additional fee when they must find and place a new tenant � this increases their income too).

Many other little tricks � don�t kick out tenants that bounce a check from time to time or habitually pay late. Big deal. I have one tenant � who has lived in a unit for over six years now. Late often � so what - she pays a late fee � used to bounce checks � now just pays with money orders. BUT . . . she has lived in that unit for years . . . and my maintenance expense has been almost nothing. With tenants coming and going I�d be painting, replacing carpets etc etc.

Anyway, long answer to your short question. I probably spend at most an hour a month on five rental units (except at tax time � then a couple hours to organize it and post it all to my tax guy). The managers e-mail with any questions and for approvals of spending over certain limits � and mail monthly/quarterly statements. Do scrutinize the statements � even honest people make mistakes. (had a roof that needed repair once � and the manager forgot that the roof was under warranty � from the same company � and got a nice refund)

I used to manage my own properties when I lived in the States � what a giant headache! If I lived there now � I would still hire a manager.

Quick edit: Never hire family or friends - it will only ruin your relationship - your manager-owner relationship should be - and remain professional - and all business.

[JZer]

Thanks for the information. I think I will have to go with the high turnover because I am going to focus on renting properties to college students. The reason I plan to rent to college students because I plan to buy in an area where you would only get $700 for a house if you rented it to a family but if you rent it to colege students you will receive $1200-$1400. Plus the properties in my area go for $100,000-125,000 for a 4 bedroom house.

[Tamara]

Wow! This is really helpful information. Thank you for such detail. I hope I have the opportunity to follow your advice one day.

[tedkarma]

JZ,

Yes, college property is quite different. Just make sure you have a good manager - as you can expect more legal issues to arise with a transient tenant base. I had an old junker once near the University of Arizona - that performed very well for me. Expect high maintenance costs - but you are right - usually the properties can demand premium rents - that make it worth while. A whole different ball game from the one I am playing.

For value � it is good to look at your area � but where I invest � you can/should figure about $1 per month income for every $100 you pay for a property. Thus a $100,000 property should give you a gross rent of about $1,000 a month. Good management will make the difference on the net income.

Also, know that college properties will often be vacant all summer, and you may have turnover twice a year. Another issue is rotating tenants � people moving in and out without your knowledge (those d*mn kids! ). Just a �heads up� � but still a good plan. Don't forget to calculate an expected gross and net to compare your possibilites - with a healthy vacancy and maintenance margin for the university property.

T

[JZer]

[merlin]

The way things are going in the world don't forget the shotgun and ammo fund. An m-14 might also be a nice little "collector's item".

The cheapest retirement insurance policy you'll ever get, I'd say.

[James_T_Kirk]

Thanks for the great info T! I am also looking into buying properties and renting them out within the next few years. How large are your units? Can you direct me to any resources on the web that explain how relationships work legally between owners and property managers?

Cheers,
Kirk