Author Topic: Investment Strategies for Nomads  (Read 25696 times)

bw

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Re: Investment Strategies for Nomads
« Reply #15 on: October 17, 2017, 11:34:22 am »
Here another one for a bit of diversion from a fellow biker from Cape Town (Kamaya)

What else would one do?...

Driving from Jhb. Not sure where to stop to sleep. The GPS - that seductive electronic siren suggested Hopetown would be doable before sundown at the current pace. Hopetown? Hopetown! Now there's a fine place to stay considering all that is going on...

It also suggested a bouquet of guest houses. The Lavender guest house piqued my attention. My logic was that, I am in so deep behind the boerewors curtain that this isn't curtains we're talking about, this is shutters baby, and how does lavender make its way past the plethora of vans, kloofs, tjies and plaase?

A desperately gorgeous sunset of complex purples and pinks was putting itself to bed with me a mere 10k's to go and it looked like if I can locate the local bottle store I might have been able to gate crash natures revelry. Maybe even get a gorgeous picture to feel happy and hopeful to.

Bonus! Hopetown is small enough with an obvious need that the only bottle store is open till 7!

"Do you have an un-oaked Chardonnay?" Says I, keen to have some first world alacrity to make up for my arriving late for the show.

I have often been labelled an optimist. In asking for Chardonnay, un-oaked in Hopetown I might very well have set a new personal best in this discipline!

Asking in English, I'm obviously a "souty", and as such is not a well-known entity round here so I was treated a bit royal. With all the dignity that such a request seems to have required, the owner with creased brows and fat fingers walked around from the till and personally inspected the 3 bottles of white in amongst the motley bunch or reds that looked even sorrier for having robbed precious space from the rows of 6 deep brandies and other powerful spirits.

"No, meneer, I wus sure we had one soon. Must I order?"

You've gotta love small towns. Ernest politeness and smashed language.

I'll make do with the Orange River Cellars, (I'm being a snob, they do a fabulous red and not a bad white. Just not un-oaked)

Before me in the queue was an old white chap. Clearly had seen better days and much easier work. He was still a working man, dirtily obvious that, not because he wanted to, but, he had two demons to serve; poverty and alcohol.

He was the not so shining example of what happens when one isn't fortunate enough to have had a seat belt and air bags in the monstrous traffic smash between the colonial experiment and the new South Africa.

At first I was not sure what he was paying for, then I saw it, the poor man’s poorest drink; a 5 litre box wine with not one label on it. It was just a white box of hope whose fine print, by its omission, promised loss, past and misery.

Sadly, with all this, I missed my sunset by at least a half glass of wine.

Lavender and hope. It was serendipitous and mirrored exactly where I was. Exactly.

A promise of wisdom and soothing and possibility bathed in beauty, but, delivering missed opportunities, pathos and sorrow.

I am so sorry and sad... But tonight I sleep in lavender. Maybe tomorrow truer purple and pink?
 

Compromise!

The truth is that for most, the nomadic journeys must occur in the mind or value must be accorded to random nocturnal sojourns around the suburb or the occasional walk through a park where as one watches one's dog piss against a carefully maintained shrub for which we pay the necessary levy taxes.  The complex strands of any family dynamic do not always allow for the freeist of spirits to take off on whims of self discovery. I have been into a few wildernesses without exiting my front door.


bw

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Re: Investment Strategies for Nomads
« Reply #16 on: October 17, 2017, 11:54:23 am »
back on topic
....possibly even reconsider some of the capital currently 'stuck' in property as I'm not convinced it's the best choice long term...

Andre, i also have the same idea to slowly get out of property,

One of the first barriers is CGT. (As Patrick said... its a tax on inflation :mad:)

Maybe take the time to move into each one ..live a bit and then sell as a primary??

Moneypenny

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Re: Investment Strategies for Nomads
« Reply #17 on: October 17, 2017, 12:37:01 pm »
 :D Funny

Patrick

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Re: Investment Strategies for Nomads
« Reply #18 on: October 17, 2017, 02:30:38 pm »
In theory, as long as you don't establish tax ties in any country, you only need to escape the taxes of your home country. In South Africa that means don't spend more than 183 days inside SA and you won't pay tax unless you earn over R1 million.

This is quite easy for a nomad, just spend less than the qualifying number of days for each country, and check the other fine print too of course, ie some countries will tax you simply for owning property there or even having a rental agreement.

But what if you decide you want to settle in one place for longer than 6 months? Happily this is possible too. All you need to do is live in a country that doesn't tax foreign income. As someone living off investments not earned in that country, you are clearly only earning foreign income.

In Europe your options aren't great, Monaco and the Vatican! Portugal will give you a 10 year holiday on most foreign income, but that lasts just 10 years. It looks like to can get it back though after a 5 year break, so you just need to find somewhere to live for those 5 years. How about Andorra which sits between Spain and France and have 24000 Euros exempt from tax, that would do nicely for me.

Around the world though you have plenty of countries which don't tax foreign income, many of which are beautiful islands where I would love to spend some time. Here's the full list:
Angola
Anguilla
Antigua and Barbuda
Bahamas
Bahrain
Belize
Bermuda
Bhutan
Bolivia
Botswana
British Virgin Islands
Brunei
Cayman Islands
Costa Rica
Democratic Republic of the Congo
Djibouti
Georgia
Guatemala
Guinea-Bissau
Hong Kong
Kuwait
Lebanon
Macau
Malawi
Malaysia
Maldives
Marshall Islands
Micronesia
Monaco
Namibia
Nauru
Nicaragua
Oman
Palau
Palestinian Authority
Panama
Paraguay
Pitcairn Islands
Qatar
Saint Barthelemy
Saint Helena, Ascension and Tristan da Cunha
Saint Kitts and Nevis
Seychelles
Singapore
Somalia
Somaliland
Syria
Tokelau
Turks and Caicos Islands
Tuvalu
United Arab Emirates
Vanuatu
Vatican City
Wallis and Futuna
Western Sahara
Zambia

Source: https://en.wikipedia.org/wiki/International_taxation

andre

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Re: Investment Strategies for Nomads
« Reply #19 on: October 17, 2017, 03:02:01 pm »
Here another one for a bit of diversion from a fellow biker from Cape Town (Kamaya)
...

The truth is that for most, the nomadic journeys must occur in the mind or value must be accorded to random nocturnal sojourns around the suburb or the occasional walk through a park where as one watches one's dog piss against a carefully maintained shrub for which we pay the necessary levy taxes.  The complex strands of any family dynamic do not always allow for the freeist of spirits to take off on whims of self discovery. I have been into a few wildernesses without exiting my front door.



Kamanya as in Andrew Johnstone?
I've actually done the odd bit of riding with him back in the day. Mostly in places completely unsuitable for choice of bike - but fun none the less  :)
He's quite the gentleman - the thinking mans biker so to speak.


andre

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Re: Investment Strategies for Nomads
« Reply #20 on: October 17, 2017, 04:20:15 pm »
In theory, as long as you don't establish tax ties in any country, you only need to escape the taxes of your home country. In South Africa that means don't spend more than 183 days inside SA and you won't pay tax unless you earn over R1 million.

...

Source: https://en.wikipedia.org/wiki/International_taxation

That list doesn't look too bad from my perspective :) Thanks for posting!

Our short-term strategy is not to be based ANYWHERE specific for any length of time. That's until the wanderlust runs out or we need a break. Even then we might just stick around an interesting spot for a couple of months to recharge the batteries and/or curb the spending  ;D

I'll give you guys a quick rundown of our situation:

We currently have 4x PROPERTIES - valued just over R9 mil in total. As it stands right now and we rent them ALL out it should provide an income (after expenses but before tax) of around R450k pa. Expenses accounted for include rates & municipal services, levies, insurance, maintenance as well as management fees. We’re not foreseeing any other local income so if we split this income our individual tax liability is around R29k per person per year (2017-18 tax tables)

Current (restricted access) RETIREMENT FUNDS total to around R2 mil and is made up of RA’s, Provident Funds and TFSAs. This will not provide any income in the short term and I have at least 10 years to go before I can get access to a third of it so, for now, I'm leaving it out of all calcs. I’m thinking to keep adding to our TFSA’s but I’m not sure whether it’s a good idea as there’s no tax benefit but at least one has access to it and can buy a low-cost ETF.  >:( The alternative would be to take the 2x33k and add to our RAs and cut personal tax by 2 x R9k per annum…... This might be a more sensible approach?
We’ll still have some local expenses such as Medical & Travel insurance,  Disability and Dread disease cover of around R60k per year.

Other LOCAL INVESTMENT (currently) of around R500k include some ETF’s. There’s no immediate income derived from these but it's all equity-based.
We’ve got some CASH saved up and have started moving funds offshore - over the next 12 months to hopefully grow our international portfolio to around R1 mil  - all invested in Euro-based ETF’s. My thinking though is to sell our primary property next year - which should free over R3 mil and move that offshore as well to add to the pot This would decrease our local rental income by around R160k and more than halve our tax liability (then only R13k per person p.a.). Obviously, we split all investments between us to reduce tax liability.

According to my cals if we then have this 2 x R2mil OFFSHORE invested in low-cost products with a predicted capital growth of 10% p.a and a 2% dividend yield we can draw a combined R240k p.a. Accounting for 7% inflation, 5% fiscal drag correction and of course a 7% annual increase in drawings, the capital would be DEPLETED in around 50 years.  Dividend Withholdings Tax is calculated at 20% but in theory, we might be able to pay less if our tax base remains in SA. This income in addition to the remaining rental totals to around R500k p.a. (after tax) which is more that we need at the moment.

The remaining properties are all in sought after areas of CT and should keep up with inflation at the very least and the rental income is a nice constant but far from the best income generator in my opinion. From my perspective, the capital is a dead loss to me when I’m dead so one should structure it to eventually deplete. However, I’m a bit hesitant to put all eggs into the equity basket.
 
Determining a long-term travel budget is difficult as one tends to spend less if you stop moving. To start with we’ll keep moving and adjust according to budget and energy. For now, I’m working on around $30k p.a. which should be more than adequate for the way we travel. We don’t need to draw from our investments for the first year or so as we should have at least R500k cash available after flogging our cars and household content.

That’s the theory anyway.  ;)
Help me out if I'm missing something major




« Last Edit: October 17, 2017, 04:35:46 pm by andre »

andre

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Re: Investment Strategies for Nomads
« Reply #21 on: October 17, 2017, 04:32:26 pm »
Oh yes, forgot to add I have a little bit riding on some cryptos.
If Bitcoin goes beserk in 10 years from now perhaps all the above doesn't matter   8)  ;D

Nivek

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Re: Investment Strategies for Nomads
« Reply #22 on: October 17, 2017, 04:43:27 pm »
Wow, what a great position to be in at your age, well done sir!

andre

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Re: Investment Strategies for Nomads
« Reply #23 on: October 17, 2017, 04:50:02 pm »
Wow, what a great position to be in at your age, well done sir!

thanks but as said everything comes at a price or sacrifice. A bit of focus early on in life makes it oh so worth it now.
 >:( We really should be putting more effort into educating youngsters as to the power of compound interest. And what sacrifice is? Instant gratification is an illness of our time...
When my friends discuss the latest model XYZ car/bakkie/bike and think I'm nuts for driving a 20-year-old rust bucket I have to remind myself who will have the last laugh.

Orca

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Re: Investment Strategies for Nomads
« Reply #24 on: October 17, 2017, 05:27:46 pm »
EU CGT
Belgium 0%

Croatia 12%

Isle of Man 0%

Poland 19%

Spain 23%

UK £11,100 annual exemption then sliding scale

Portugal 28%

SA will not tax Capital Gains as it is residency based according to the DTA.

Stocks held in SA will be capped at 15% by the DTA for DWT.

Source: Me

« Last Edit: October 17, 2017, 05:30:22 pm by Orca »
I started here with nothing and still have most of it left.

bw

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Re: Investment Strategies for Nomads
« Reply #25 on: October 18, 2017, 02:13:23 pm »
Thank you Andre for sharing and well done on the discipline to save as you have.

Have you been travelling the last number of years? i ask as full time travelling can have drawbacks. (missing family and friends etc) 

andre

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Re: Investment Strategies for Nomads
« Reply #26 on: October 18, 2017, 02:35:59 pm »
Thank you Andre for sharing and well done on the discipline to save as you have.

Have you been travelling the last number of years? i ask as full time travelling can have drawbacks. (missing family and friends etc)

Valid question. I guess we're just not that family oriented and the idea of not being around family doesn't bother us. We don't really have much family, to be honest, and once you reach a certain age and don't have kids true friends seem to be few and far between. My wife and I have traveled together yearly pretty much since we've met. Over the last 10 years, we've attempted to do a proper 4-week trip every year. We've had some longer trips as well on the odd occasion (8 weeks in the States, 10 weeks in Japan) but for the most of it around a month at a time. It does take a certain type of person to do this kind of traveling and dont think for a moment long-term travel is always a bed of roses. Travelling can be surprisingly tough at times.

I remember, up until a few years ago, we would get to a certain point towards the end of an active trip where you would feel - it's time - you're 'ready' to go home.
I haven't had that feeling in quite a while ..

andre

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Re: Investment Strategies for Nomads
« Reply #27 on: October 19, 2017, 08:58:33 am »
For those interested - here's a spreadsheet I've built and shared recently with the  Fat Wallet guys that show the difference between investing in Rands vs investing in US Dollar due to the effect of inflation and CGT. Of course, you have to take into account the cost of getting funds offshore as well as back to ZAR which may affect the potential benefit. In my case, I don't plan on converting back to ZAR. (You can download it from attachments below and play with it - please point out my mistakes  :) )


Patrick

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Re: Investment Strategies for Nomads
« Reply #28 on: October 19, 2017, 10:05:27 am »
Nice, confirms what my calculations have shown too. I also expect CGT to rise in future as SA continues to run out of money magnifying the difference.

Orca

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Re: Investment Strategies for Nomads
« Reply #29 on: October 19, 2017, 12:46:36 pm »
I shudder to think what #andre will pay in Exit Tax. Only his primary home will escape some CGT.  :o

I'm still struggling with mine and have a cross border tax consultant working on it and will post the outcome.
« Last Edit: October 19, 2017, 12:50:51 pm by Orca »
I started here with nothing and still have most of it left.