Friday, June 12, 2009
FIRPTA: Thumbs Up or Thumbs Down?
Generally speaking, the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) requires that a non-U.S. citizen have 10% of a real property transaction (typically based on selling price) withheld as a “deposit” for potential tax liability. Like most tax laws, there are defenders and detractors of FIRPTA. Recent declines in inbound foreign investment due to current market conditions has renewed the discussion on FIRPTA's pros and cons. While NAR has no official position at this time, international property specialists need to be familiar with the law. Read NAR Treasurer Jim Helsel's recent blog on FIRPTA, and then download a 20-min. training module for use in a company sales meeting on working with foreign nonresidents who buy, sell or rent U.S. property.
Transnational Retirement Markets
One of the major reasons for the growth in transnational real estate transactions, particularly in the Americas, has been the aging of the Baby Boomers. Older Boomers have long cast their eyes south to countries where an attractive climate has been enhanced by a lower cost of living than in the U.S. Increasingly developers have noticed this and have begun creating communities designed to attract the soon-to-be retired, both Americans and Europeans. Thus, Mexico, Panama, and Costa Rica in North America; Brazil in South America; and Spain and Croatia in Europe have been the scene of a mini building boom, mostly of self-contained communities featuring comfortable housing and recreational amenities.
Analyze the Market
The key to marketing anything is to identify the target audience and then determine what it is that the audience thinks it needs and wants. Hence, it’s probably reasonable for you, as an international real estate professional determined to be successful in the Boomer market to ask: what is the typical Boomer looking for in considering his or her last home? The answer will shape the way in which you approach this market from both the demand and the supply side.
I believe there are four factors with which to answer this question. Together they constitute the check list most Boomers use when considering relocation, whether domestically or internationally.
Factor 1:
Where will my retirement savings go farthest?
This has always been a major consideration and was probably responsible for the earliest enclave settlements of retirees from the United States in Mexico. It also sent many Americans and Europeans to Italy, Spain, and the Balkans. Now, with many facing a reduced retirement income because of the financial meltdown, cost has risen much higher on the priorities list. Finding “bargains” makes you, the real estate professional, more valuable in the buyer’s search process.
Factor 2:
Will I have access to adequate medical care?
Aging usually means increased consumption of medical services. The inability to find proper care for an illness, either sudden or chronic, becomes a growing fear. Retirees increasingly value easy access to good medical care on their list of needs for a retirement community. This concern has, in part, spurred the growth of college and university towns as destinations for older households, since these communities usually have strong medical establishments. While scenery and recreation are attractive, easy access to quality medical care is crucial.
Factor 3:
Can my family visit conveniently?
Good air, rail, or road facilities will add to the attractiveness of any retirement location. Easy access to transportation ranks high on the list, so that the retiree can have the kids and grandkids down, can visit them occasionally, and can be reached in case of emergency. “Getting away from it all” only works if you can get back to it all when you want to or need to.
Factor 4: Are their potential friends there? Boomers have lived their lives in groups. To most of them, there are no strangers—only friends they haven’t met yet. As they retire, they will seek out other Boomers, usually from the same part of the world. In the United States, this pattern has taken on the form of the avian flyways followed by migratory birds. So, Northeasterners migrate to southeast Florida, Midwesterners to the west coast of Florida, Chicagoans to Arizona, etc. In the early movement of retirees to Mexico, this pattern has held, and even now newer developments have had success in marketing to a particular area in the United States. Boomers will be attracted to other Boomers; the creation of a successful retirement development is increasingly tied to the attraction of a critical mass of like-minded consumers.
Position Yourself for Success
The market for retirement communities designed to attract Baby Boomer retirees is already significant. It will only grow in the future. Begin with the fact that there are over seventy million Baby Boomers.This year, the largest single group of Boomers is turning 52. So, we can expect that increasing numbers of households will be moving into that stage where retirement planning takes on a very concrete meaning.
The old conventional wisdom says that climate is every-thing—the sensibility that fueled growth in California, Florida, and Arizona. But that conventional wisdom does not work for Boomers. Their concerns when looking at retirement possibilities are much broader. Recreational facilities must exist after dark as well as during the daylight hours. In addition, their resources are greater than those of previous generations (despite the recent financial turmoil that has reduced wealth), so they see many more opportunities, including places that are relatively new to the roster of potential second homes.
Now, because Boomers can look forward to a long retirement, health, mobility, and friends have become priorities in choosing a new place to live.To be successful in these markets, you must understand these factors and use them in your marketing.
By John C.Tucillo, PhD, CAE
Global Perspectives in Real Estate
Published by the CIPS Network of the National Association of REALTORS®
Analyze the Market
The key to marketing anything is to identify the target audience and then determine what it is that the audience thinks it needs and wants. Hence, it’s probably reasonable for you, as an international real estate professional determined to be successful in the Boomer market to ask: what is the typical Boomer looking for in considering his or her last home? The answer will shape the way in which you approach this market from both the demand and the supply side.
I believe there are four factors with which to answer this question. Together they constitute the check list most Boomers use when considering relocation, whether domestically or internationally.
Factor 1:
Where will my retirement savings go farthest?
This has always been a major consideration and was probably responsible for the earliest enclave settlements of retirees from the United States in Mexico. It also sent many Americans and Europeans to Italy, Spain, and the Balkans. Now, with many facing a reduced retirement income because of the financial meltdown, cost has risen much higher on the priorities list. Finding “bargains” makes you, the real estate professional, more valuable in the buyer’s search process.
Factor 2:
Will I have access to adequate medical care?
Aging usually means increased consumption of medical services. The inability to find proper care for an illness, either sudden or chronic, becomes a growing fear. Retirees increasingly value easy access to good medical care on their list of needs for a retirement community. This concern has, in part, spurred the growth of college and university towns as destinations for older households, since these communities usually have strong medical establishments. While scenery and recreation are attractive, easy access to quality medical care is crucial.
Factor 3:
Can my family visit conveniently?
Good air, rail, or road facilities will add to the attractiveness of any retirement location. Easy access to transportation ranks high on the list, so that the retiree can have the kids and grandkids down, can visit them occasionally, and can be reached in case of emergency. “Getting away from it all” only works if you can get back to it all when you want to or need to.
Factor 4: Are their potential friends there? Boomers have lived their lives in groups. To most of them, there are no strangers—only friends they haven’t met yet. As they retire, they will seek out other Boomers, usually from the same part of the world. In the United States, this pattern has taken on the form of the avian flyways followed by migratory birds. So, Northeasterners migrate to southeast Florida, Midwesterners to the west coast of Florida, Chicagoans to Arizona, etc. In the early movement of retirees to Mexico, this pattern has held, and even now newer developments have had success in marketing to a particular area in the United States. Boomers will be attracted to other Boomers; the creation of a successful retirement development is increasingly tied to the attraction of a critical mass of like-minded consumers.
Position Yourself for Success
The market for retirement communities designed to attract Baby Boomer retirees is already significant. It will only grow in the future. Begin with the fact that there are over seventy million Baby Boomers.This year, the largest single group of Boomers is turning 52. So, we can expect that increasing numbers of households will be moving into that stage where retirement planning takes on a very concrete meaning.
The old conventional wisdom says that climate is every-thing—the sensibility that fueled growth in California, Florida, and Arizona. But that conventional wisdom does not work for Boomers. Their concerns when looking at retirement possibilities are much broader. Recreational facilities must exist after dark as well as during the daylight hours. In addition, their resources are greater than those of previous generations (despite the recent financial turmoil that has reduced wealth), so they see many more opportunities, including places that are relatively new to the roster of potential second homes.
Now, because Boomers can look forward to a long retirement, health, mobility, and friends have become priorities in choosing a new place to live.To be successful in these markets, you must understand these factors and use them in your marketing.
By John C.Tucillo, PhD, CAE
Global Perspectives in Real Estate
Published by the CIPS Network of the National Association of REALTORS®
The Currency of Trust
As business people we are all aware of our bottom line— how much we make, how much we spend, how much we owe, how much is coming in, etc. In international business, however, that bottom line is sometimes not as active as we would like it to be. Sometimes the bottom line is less a factor in our dealings globally because it can take much longer to develop the business to the point of closing a deal. Simply building the relationship can take months, or even years, before the business flows. So how do you justify the time and effort of international business development while keeping your eye on the bottom line?
Choose Consciously
For me, it’s conscious choice. In part, I find the international arena so personally and professionally fulfilling, that I’m prepared to spend more time, and perhaps a little more money with no guarantee of a timely return. Also, as many international specialists have learned, once the business does start to flow, it can flow pretty well. There’s an extremely high loyalty factor in international business. Make one client happy and soon their friends and family will be contacting you.
These are nice concepts, but I do appreciate that in today’s market few of us have the luxury of not watching the bottom line. If the money is not flowing into our accounts, then our bottom line is suffering and business decisions must be made accordingly. It is within this market reality that one can understand the temptation of looking for easy ways to grow the bottom line.
Think Globally
Bernard Madoff’s $50 billion Ponzi scheme is a painful example of how focus on the bottom line ultimately resulted in not only huge financial loss and ruin, but also in an equally significant loss of trust. Madoff’s scheme illustrates how global we really are. The lead in a December 21, 2008 International Herald Tribune article by Diana Henriques reads, “By the end, the world itself was too small to support the vast Ponzi scheme constructed by Bernard Madoff.” She continues,“Just as the scheme surpassed national borders, it left local regulators far behind. Its lies were translated into a half-dozen languages. Its larceny was denominated in a half-dozen currencies and its victims are scattered from Abu Dhabi to Zurich.”
While I’m sorry for those who lost money—particularly the charities and not-for-profits who may never recover from their losses—I’m equally saddened by the loss of trust associated with this scheme. In these tumultuous economic times global business may seem more risky and many foreign investors are sitting on the sidelines to see how the dust settles. With that in mind, I share with you a mindset that I hope you’ll embrace in your international business dealings.
The International Currency
In CIPS courses we talk about currency fluctuations and their impact on cross-border deals. Another currency that I think we need to talk more about is an international currency, which is intangible. It is the currency of trust.
The currency of trust must be spent carefully, and in the right places. We may need to spend this currency more slowly, and over some period of time, to learn what makes our potential business partners tick, but it does need to be spent. We must learn to listen to each other, to the cadence of our speech, to the ideas we express, and about what we hope will bring us closer to understanding each other.
We must strive to build our relationships on a foundation of understanding, to strengthen the walls with our business philosophy and, finally, to secure the roof of the structure out of our mutual trust in each other. In doing so, we will have built an invaluable and lasting partnership with each participant dealing in the currency of trust, from which—through mutual respect, honor and complete trust—the real currency will make our bottom lines flourish.
In 2009, though I may choose to watch my bottom line by being more cautious in the spending of dollars, I will be looking for more and improved ways to spend my international currency of trust to build the future and look towards better economic times worldwide.
By Barbara Schmerzler, CIPS, ABR®, CRB, GRI,TRC
Global Perspectives in Real Estate
Published by the CIPS Network of the National Association of REALTORS®
Choose Consciously
For me, it’s conscious choice. In part, I find the international arena so personally and professionally fulfilling, that I’m prepared to spend more time, and perhaps a little more money with no guarantee of a timely return. Also, as many international specialists have learned, once the business does start to flow, it can flow pretty well. There’s an extremely high loyalty factor in international business. Make one client happy and soon their friends and family will be contacting you.
These are nice concepts, but I do appreciate that in today’s market few of us have the luxury of not watching the bottom line. If the money is not flowing into our accounts, then our bottom line is suffering and business decisions must be made accordingly. It is within this market reality that one can understand the temptation of looking for easy ways to grow the bottom line.
Think Globally
Bernard Madoff’s $50 billion Ponzi scheme is a painful example of how focus on the bottom line ultimately resulted in not only huge financial loss and ruin, but also in an equally significant loss of trust. Madoff’s scheme illustrates how global we really are. The lead in a December 21, 2008 International Herald Tribune article by Diana Henriques reads, “By the end, the world itself was too small to support the vast Ponzi scheme constructed by Bernard Madoff.” She continues,“Just as the scheme surpassed national borders, it left local regulators far behind. Its lies were translated into a half-dozen languages. Its larceny was denominated in a half-dozen currencies and its victims are scattered from Abu Dhabi to Zurich.”
While I’m sorry for those who lost money—particularly the charities and not-for-profits who may never recover from their losses—I’m equally saddened by the loss of trust associated with this scheme. In these tumultuous economic times global business may seem more risky and many foreign investors are sitting on the sidelines to see how the dust settles. With that in mind, I share with you a mindset that I hope you’ll embrace in your international business dealings.
The International Currency
In CIPS courses we talk about currency fluctuations and their impact on cross-border deals. Another currency that I think we need to talk more about is an international currency, which is intangible. It is the currency of trust.
The currency of trust must be spent carefully, and in the right places. We may need to spend this currency more slowly, and over some period of time, to learn what makes our potential business partners tick, but it does need to be spent. We must learn to listen to each other, to the cadence of our speech, to the ideas we express, and about what we hope will bring us closer to understanding each other.
We must strive to build our relationships on a foundation of understanding, to strengthen the walls with our business philosophy and, finally, to secure the roof of the structure out of our mutual trust in each other. In doing so, we will have built an invaluable and lasting partnership with each participant dealing in the currency of trust, from which—through mutual respect, honor and complete trust—the real currency will make our bottom lines flourish.
In 2009, though I may choose to watch my bottom line by being more cautious in the spending of dollars, I will be looking for more and improved ways to spend my international currency of trust to build the future and look towards better economic times worldwide.
By Barbara Schmerzler, CIPS, ABR®, CRB, GRI,TRC
Global Perspectives in Real Estate
Published by the CIPS Network of the National Association of REALTORS®
Subscribe to:
Posts (Atom)
