Investing into real estate by proxy

[JustAnotherNomad]

My question is inspired by @dziter 's post here:
https://www.offshorecorptalk.com/threads/buying-real-estate-before-changing-tax-residency.30287/
I have been thinking about how you can get a mortgage at decent interest rates to invest into real estate in a country without being resident.
Usually, it is either very difficult to get access to financing for non-residents or the interest rates are high. And on top of it, you usually need to have a lot capital to start with. But of course what's interesting about real estate is the leverage you can get through a mortgage, especially at low interest rates.

My suggestion in the above thread was to loan money to relatives. But they would need to have a solid income, otherwise they would not be able to get a loan, or the interest rates would again be higher. If your parents are retired, their income might be quite low.
Anybody have any other ideas?
Could it make sense to simply hire your parents through your offshore company? Or to have your parents set up a local company that has a contract with your offshore company, and then have that local company hire your parents? Then they would have an income. Sure they would have to pay tax as residents, but maybe that could be offset by lower interest rates? They would also certainly have deductible expenses for buying real estate in their own name. Once they have bought the real estate, you could also fire them again or close the company.
Would something like that work? Or is it just a big risk because it would create ties to your home country/increase the risk of an audit?

 

[CaptK]

In the UK you can use a proxy who has to be a resident to buy the property and use many different avenues to both have security and control.

As this is not on the MTG I cant go into much detail what you have said is viable but it needs to be done with diligence.

You are better to use a proxy than family members because of the link.

 

[CaptK]

TodMca said:
in case of UK, without considering many other aspects at this point, one major problem would be taxes including one stamp duty land tax (SDLT) applicable on acquisition. There was a lot going on during the last few years introducing various regulations to reduce foreign investment in real estate..
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True but you have to pay some form of that regardless of what country you buy in.
The current tax incentive has dramatically reduced SDLT in the UK to boost the market.

There are many legal ways of doing it and making it work including tax mitigation.

 

[CaptK]

TodMca said:
For something like this to work the company should have low corporate tax rate & low personal income tax re employment.
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Not necessarily you remember you carry your costs/debts forward.

 

[Martin Everson]

JustAnotherNomad said:
I have been thinking about how you can get a mortgage at decent interest rates to invest into real estate in a country without being resident.
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Simply work with an international bank resident in your of income that has a branch in your country of investment to obtain a lombard loan. You can get 12 month loan rates as low as 1.5-2% from a brokerage or private bank. You then rollover the loan principle each year and just be paying the interest. However if you don't have the assets i.e a portfolio of investments to back any loan then a cross border mortgage will not have favorable conditions.

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[JustAnotherNomad]

TodMca said:
For something like this to work the company should have low corporate tax rate & low personal income tax re employment.
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Yes, I haven't done the math yet. But strictly speaking, you don't have to keep them employed forever, only long enough to get the loan.

 

[JustAnotherNomad]

Martin Everson said:
Simply work with an international bank resident in your of income that has a branch in your country of investment to obtain a lombard loan. You can get 12 month loan rates as low as 1.5-2% from a brokerage or private bank. You then rollover the loan principle each year and just be paying the interest. However if you don't have the assets i.e a portfolio of investments to back any loan then a cross border mortgage will not have favorable conditions.
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Yeah, that's the thing. I was thinking about getting leverage. If you can't get a loan of more than your net worth, it's not that exciting to invest into real estate.
Unless maybe if you could use the first property as collateral for the next one?

 

[JustAnotherNomad]

Sounds difficult... I was hoping for some good way to pay 10-30% and get a loan at 0-3% for the rest. So that the tenants could pay for everything.

 

[JustAnotherNomad]

There are many countries where that's the norm - but only for residents.

 

[PAULIE100]

I have arranged mortgages in Spain and Portugal for the last 17 years for non residents. There is no problem with this in personal names. Interest rates in Portugal are circa 1.5% on bank repo properties, and some banks are still giving upto 100% lending on their own stock. Spain more difficult now.

 

[JustAnotherNomad]

Very interesting! Can you give some more details regarding what is more difficult in Spain?

 

[CaptK]

Yes would be very interested in both.

 

[PAULIE100]

JustAnotherNomad said:
Very interesting! Can you give some more details regarding what is more difficult in Spain?
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It is more difficult to obtain a high LTV on quality properties in Spain now. Can still get 100% but not so great quality stock. Can get 70% loans max there on resales. 100% is still achievable in Portugal on bank repos, 75% on normal sales. Interest rate at 1.5% is pretty good, even less on some banks spreads.

 

[CaptK]

It would be worth getting one if it only costs me €500 per month to service.

 

[PAULIE100]

CaptK said:
It would be worth getting one if it only costs me €500 per month to service.
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On the Algarve you are looking at approx 250k min for anything decent that rents well. Mortgages upto 40yrs (age 75). Although there are bank properties all over Portugal. I can help advise on income necessities.

 

[CaptK]

Please PM or email me.

 

[JustAnotherNomad]

Isn't it more of a vacation home market on the Algarve? Isn't that more risk? What about expected appreciation? What do you think about investing in the outskirts of Lisbon, for example? Or in Porto (which seems cheaper than Lisbon)?

What about Spain? I think there are some tax benefits once you own multiple properties?

 

[PAULIE100]

JustAnotherNomad said:
Isn't it more of a vacation home market on the Algarve? Isn't that more risk? What about expected appreciation? What do you think about investing in the outskirts of Lisbon, for example? Or in Porto (which seems cheaper than Lisbon)?

What about Spain? I think there are some tax benefits once you own multiple properties?
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Yes, the Algarve is more vacation, but there is also a great long term rental market there. Prices have not appreciated on the Algarve quite considerably over the last 5 yrs, and it hasn't depreciated in the current climate. You also have the NHR regime in Portugal that we can work with. Depends how far from the outskirts of Lisbon you want to invest...both Lisbon and Porto have appreciated madly.

 

[CaptK]

Are the mortgages in PT interest only or capital repayment?

 

[PAULIE100]

CaptK said:
Are the mortgages in PT interest only or capital repayment?
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Emailed you...bounced back.. They are all capital repayment these days!