Nomad Capitalist: How to Reclaim Your Freedom with Offshore Bank Accounts, Dual Citizenship, Foreign Companies, and Overseas Investments

by Andrew Henderson

In general, it is a good idea to obtain a second residency in a country that does not tax you if you live there part-time. Obtaining a second residency is, for many people, the first step on the road to a second passport, but it is also a way of showing that you live in that place now and not Canada, Australia, New Zealand, or any other country that taxes you based on your residence there.

That said, as long as you have the right professional assistance, if you are a consultant, coach, or run some sort of services business where you and any other employees make (or break) the business, then your transition into a new offshore company should be relatively painless. However, if you own valuable intellectual property or passive income streams such as patents, royalties, domain names, or even websites, you will have one extra step.

After all, you would not give away that $10,000-a-month AdSense website, so why would your company in the United States simply gift it to your shiny new offshore company? You wouldn’t, and the tax man knows that. If you have hard assets that you could sell, you will need extra professional advice on how to handle your new company.

On a more positive note, it may be possible to set up shop somewhere that offers grant money or other incentives. The United Kingdom has a number of programs to incentivize new technology ventures with cash. One of my friends received a six-figure grant from the UK government, which made the prospect of setting up a UK tax-paying company more palatable.

Chile, for example, has made it easy for entrepreneurs to join its state-run incubator, Start-up Chile, and receive an equity-free grant in exchange for setting up a business in Chile, even if only temporarily. The prospect of a pile of cash with no strings attached has brought many primarily Spanish-speaking entrepreneurs to Chile.

It is a simple matter of choosing to work smarter, not harder. People talk about working smarter all the time, but they say it in reference to increasing conversions on a landing page by 4% by changing the button color from red to green. Why not eliminate 50% of the expenses you have to pay at the end of the day instead? That sounds like working smarter to me. You can double your income by eliminating taxation simply by moving your business to a country that will treat it with respect. That, in a nutshell, is what it means to have an ‘offshore company.’

Physical precious metals is one of only two assets that US citizens can own overseas without having to report it. If you have ever thought about going offshore as a way to gain privacy, gold is perhaps the best way to go about it without breaking any laws.

In fact, it is possible to store as little as one silver coin worth about $20 in Le Freeport. It is also possible to start with $20 and gradually build up each month.

For that reason, the best precious metals to buy are those with a low spread, or a low ratio between the buy and sell prices.

I recommend buying gold bars that are small enough that you can sell only part of your lot if you need to. Hundred gram bars are good because their current sales price of around $4,000 each allows you to own a number of them.

Gold and silver offer protection against the political and geopolitical events that affect paper currencies, all while remaining liquid, divisible, and universally recognizable.

Just as you would insure your home against disasters that you hope never hit, your wealth needs insurance from financial disasters that could wipe out what you have worked so hard to build up. Gold is that insurance.

The key is that your assets are stored in a place where the people in power are different than the people in power where you bank or run your business.

There are even services now in Singapore that will allow you to borrow against your stored bullion. That means that you can buy gold or silver, put it in a non-reportable private vault account, and then borrow back a good chunk of the value either for personal investments or business expenses, depending on who owns the gold.

Part of what makes Asia a great place to store assets is that they are making a big push to do so. Where a pro-business culture and desire to serve comes first, the Asians are well positioned thanks to their eagerness to dominate this market. The fact that Hong Kong has literally no restrictions on bringing in or taking out cash helps, too.

That is why perhaps the best place to store gold in Europe is Austria, where a few private vaults take privacy to a whole new level

(a reasonable storage rate for gold is under 1% annually), it is insanely inexpensive when you consider private vault storage is actually available to the masses.

it is ownership of assets like gold that differentiate Nomad Capitalists from the more garden variety digital nomads who are only focused on lifestyle and not on securing and growing their money as well.

when making most decisions: know what I want, research and find it, and then attempt to make a decision the same day. For example, I once bought an apartment near Georgia’s free trade zone for all of $5,200. We needed an apartment for several clients to use and the price could not get much lower. The decision to buy was simple, so I went for it.

It was that deal that gave birth to a philosophy that I now live by: know why you are buying. The reason this philosophy is so vital is that not all investments are made equal. Consequently, the decision-making process behind each type of investment will change according to the purpose of your purchase.

The United States and Europe lead the race with crowd equity and crowd debt sites like RealtyShares, Peerstreet, and France’s Wiseed that allow anyone to invest in a share of everything from residential rentals and fix-and-flips to sprawling commercial properties, and all with as little as $1,000.

For instance, comedian Jay Leno hosted The Tonight Show for more than twenty years, yet famously claimed that he never touched the money he earned from the gig. Instead, he chose to bank all of it while living off of money he earned as a stand-up comedian. In the same way, I like to use investments to support my current lifestyle, while leaving my business profits in the company.

focus on creating what I call a ‘perpetual runway.’ This is done by focusing on the process I described in the section above: reinvest business profits into ‘cash cow’ investments that generate monthly income that you can live on and use to enjoy a dream lifestyle, all while focusing on growing your current business or businesses.

For example, the first property I bought in Tbilisi, Georgia cost $49,000 to buy and another $12,000 to fix up. While I eventually decided to make the property my home in order to scout out more investments, I was able to receive an offer for $70,000 before I took it off the market. While a $9,000 profit would not have been amazing, the benefit of getting paid while you learn is powerful.

For cash flow, I prefer to purchase a lot of apartments, commercial real estate and other cash-flowing assets. I focus less on properties with potential appreciation and more on those that I am happy to have be linear (that is, assets that do not go up in value in a big way in the long term) but that throw off lots of cash.

As long as the market outlook is generally positive and the government is friendly to investors, I worry less about capital appreciation, so long as the cash flow is good. In some cases, I am getting a 10%, 11%, or even 22% cash yield. By following this system, I can double or even triple my percentage return on subsequent deals.

As Nomad Capitalists, we invest not to hit that home run but to generate sustainable income flows from passive sources like rental income or side businesses with scalable processes. Most investors fixing and flipping real estate, for example, do not create procedures on how to handle what they do. They have to reinvent the wheel every time they take on a new project, rather than automating the process and the income it generates.

While land is not exactly liquid (buy the wrong land and it could take years to sell), it can be an excellent alternative to keeping money in the bank. It is more like buying gold or silver bullion – it is a hard asset, but it generates no cash until it is sold.

If you are a US citizen, foreign real estate is the second of the only two types of non-reportable assets available to you. That means that you can legally choose to not disclose to the IRS your ownership of property in another country, adding an element of privacy to your finances that no bank account can offer. In addition to privacy, owning land can either serve as the beginning of your next great business opportunity – such as my hotel friend’s interest in building an $8 million hotel that could net $3 million a year – or as a long-term hold to increase your wealth over time.

There are several reasons to consider including agricultural land in your foreign investment portfolio. One of my favorite reasons is that you can often get crazy deals on this particular type of land since there are times when people really need quick cash in exchange for their land.

This means that you can pay less than its current worth because what it is worth now is usually a less-than-tangible number. Unlike on a residential property (the price of which can more accurately be pinpointed), the price of agricultural land is more of a range rather than a specific value. The only judge of the worth of agricultural land is what someone is willing to pay for it. You can get some very attractive entry points on agricultural land. Compare that to similar long term assets like gold and silver, which have highly defined entry points. Everyone knows exactly what the price is, and you know what an ounce of gold is worth to the penny. Because of that, no one is going to sell you gold for $200 under spot just because they need quick cash. They do not have to. Precious metals are a well-defined liquid market.

Agricultural land also has some pretty solid long-term fundamentals behind it. As the world population rises and economies develop, emerging countries will demand more high-quality proteins. If this plays out, the value of agricultural land will surely increase.

Land allows you to put some of your money into assets that cannot be taken from you and in locations that subject your money to a different set of rules.

Entrepreneurs should not be squirrelling their money away for low-single-digit returns when they could easily take that money and turn it into a profitable business. If you are smart, you can double, triple, or even 10x your money. If you can do that, why would you tie that money up in an IRA just to get a tax deduction?

You get a tax deduction on the money you put into certain retirement accounts the same way Wile E. Coyote lays down birdseed for the Road Runner on the exact spot where the boulder is supposed to drop. It is just a distraction to keep you from realizing the true cost of remaining in the system.

The moral of the story? First, there is a benefit to having cash on hand, not just to renounce your citizenship, but to pursue all the other opportunities that are available to sharp businesspeople and investors.

For example, I once worked with someone who wanted to own a condo on every continent, both to live in and to invest. This is an incredible example of how you can live a dream lifestyle by detaching from your current reality. I am working on a somewhat whimsical list of dream residences of my own, as well. Instead of a home on every continent, however, I prefer a home for every kind of mood or activity: the ski chalet in the Alps, the beach home in Montenegro, the cattle ranch where I can build my ‘Summer Palace’ and get away from civilization, the list goes on. Owning land gives you the flexibility to customize each location to your liking.

Productivity from comfort equals money, but labeling an emotional real estate purchase as a pure ‘investment’ is not accurate.

I am currently working on a residency in Eastern Europe for which I am required to purchase a home in the country. Fortunately, there is no price threshold; you can buy any house for any price. And the cost of land in this particular country is dirt cheap. While I found one 600 meter home for €4,300, I plan to purchase a 2,000 meter parcel of land for €6,000 that will allow me to build a second structure, or whatever else suits my fancy. In this case, with one minimal real estate investment I will be able to qualify for a second residency, purchase a home, and have extra land available that grants me the flexibility to do whatever I want with it.

The first issue you must address is how much money you have available to invest. After factoring in monthly expenses, I prefer to save a set percentage of my earnings as part of an emergency fund for the cost of living overseas. You want this to be a one-to-two year emergency cash reserve that is easily accessible, regardless of what the situation may be or where you are located. After that, I calculate the amount of money I want or need to reinvest in my business in the next six months. From there, I consider all remaining money part of my immediately investable assets, which I then divide between cash-flow properties, long-term land investments, gold, businesses and other overseas investments.

I recommend putting 10-15% of your investable portfolio in something like agricultural commodities that have a long-term upside.

Personally, I choose to invest roughly the same percentage in long-term agricultural investments as I do in precious metals. If you were to allocate around a third or a quarter of your investable portfolio in tangible, long-term assets – part in precious metals, part in land – you could then have somewhere between 10-25% in cash,...

The best strategy is to conduct personal on-the-ground research in your chosen location. I have been able to apply basic investing and negotiation principles in each market and have never overpaid for my first property in any country, but you will not get the truly great deals on your first go. And you most certainly will not get them if you are not willing to put in a little time where you are looking to buy.

he suggested that Albania was the last slice of undeveloped coast in all of Europe.

I remembered a friend of mine who had spent much of the early 2000s buying up oceanfront land outside of San Juan del Sur, Nicaragua, which — in terms of my Arizona-California example — is about as close to the far more developed Costa Rica as you can get in Nicaragua. Within a decade, his land was worth ten times that, and now probably even more. The takeaway? If you find the next big place, you can make a fortune.

Buying land can be a pain no matter where you go. It is doable, but difficult. For some, the difficulty of finding the real deals either keeps them from entering the foreign real estate market or leads them to seek easy options that never lead to the best deal.

If you look online, you will find properties that are not real, were sold several years ago, have the wrong number listed, or are reported in hectares when they should be in acres or vice versa. It is not as sophisticated or as organized as in the United States and other more developed markets. But that is precisely why the opportunity is so golden for those willing to put their boots on the ground and seek out the great deals.

To me, though, there is a silver lining to a lack of financing overseas: it forces you to find good deals. When you are buying an asset entirely with your own money, or your company’s money, you find better investments because you can use leverage (i.e., a loan) to cover it up.

If you want to earn passive income while growing your principal over time, investing in up-and-coming markets is an excellent way to do so.

the key is to find the ‘next Singapore’ – a place that is moving up the bell curve, but has not made it past the peak quite yet. These are places where growth and friendly policies will lift the country into a future success story.