Dateline: En route to Hong Kong
This time last year, I told you how I traversed the streets of Central here in Hong Kong alongside an endless array of beautiful women, only to feel “less than” because of the US passport I carried with me. For, in the age of FATCA, highly conservative Hong Kong banks don’t need the headache of taking on toxic Americans and the reporting requirements that come with them. Today, I find myself in a similar position to last year, feeling a bit let down… not because the bankers at stable financial institutions in Hong Kong were showing me the door, but for another reason entirely. It all started when I recently sold my last United States asset: a home I lived in for awhile in the western US. Some might ask why the Nomad Capitalist owns any US real estate at all. I suppose that’s the downside of being a real, transparent human being rather than a cartoon character. You’ve heard me say that owning US real estate is a bad idea. My friend Cody Shirk recently made the case for the next US real estate crash, and why it’s coming soon. I do believe buying into US real estate is a bad idea in the short-term because prices in much of the country are unsustainable. In the mid- to long-term, I believe the bankrupt US government (as well as even more bankrupt local governments that don’t have the luxury of printing money) will find more and more new ways to rip off real estate investors in the form of higher taxes, fees, and other nonsense. The proof of these things is unmistakable. For instance, some municipalities are tripling local property taxes… virtually overnight. (Of course, cronies like those at Madison Square Garden in New York get special loopholes written just for them.) Other places like Detroit and Oakland are telling residents that, unless they get stabbed in the face, they are on their own for any kind of city services. In the neighborhood my home is in, hedge funds came in and snapped up distressed properties at a bargain for their decent rental yields. (Decent being subjective, of course; foreign real estate often outperforms even the best US yields). Now that prices have gone up 75% since I bought, they are dumping their inventory and cashing out. Only, there is a problem: with prices up that much, yields have of course fallen. That means the only market for homes like mine is suburban couples. With the US economy still in shambles and real unemployment levels recently peeking over 13% again, how big do you think that market is? Not very. So I’m gladly taking a large tax-free gain and walking away.
The problem: how to wire money overseas
Here’s the scary part though: filling out the sale paperwork online via Docusign, I came across the form that says “where do you want us to send the proceeds?” After my mortgage (at a mind-bogglingly low 3.625% interest rate) gets paid off, the title company needs to know where to send my money. The form lists option for a check to be sent to a physical address (city, state, and ZIP code required, of course) or to a bank account. So I started entering my bank information. Only, it wouldn’t let me. The form for sending proceeds required me to enter an ABA routing number and account number. Something that American banks, not offshore banks, use. First, I called my real estate agent on the ground. I told him I want to send the proceeds to an offshore bank, to which he replied that I should call the title company and ask how they wanted the form completed. “Make sure you do it right the first time, since re-submitting that form will cause problems”, he said. So I called the title company… “I’d like to have my proceeds wired to my bank account in Singapore. Can you explain how I should enter the information on this form?” The response was nothing less than astonishing. “Singapore? Where is that?”, the title officer replied. When I informed her that it was overseas, she replied that she had never seen anyone do that. When I asked what foreign buyers in the US market did with their proceeds, she replied – with the intonation of someone guessing – that they probably just deposited the money in some local bank account. It’s always nice to know the people assisting with your financial well-being are guessing. I spoke earlier this week of the issues in the Philippines condo market, which include clueless real estate agents, but the same thing can happen in the “highly sophisticated” financial system in The Land of the Free. If you’re new to the world of offshore banking, you may know that wiring money overseas has become increasingly complicated. I was sitting with a banker in the United States several weeks ago who said that any international wire transfer that could not be sent online had to be approved by a phone banker who had “unilateral” control to send or deny the wire. The money you hold in your US bank account can essentially be held hostage by clueless American bankers – some of whom may also have never heard of Singapore… or any other foreign country, for that matter – telling you you’re not allowed to wire your own money out of the country. I recently got an email from a reader in California who experienced just that. He purchased my Guide to Banking in Singapore, got on a plane, and opened an account. He said it was all so easy, and he actually deposited a few thousand dollars in cash into his account. The problem, he told me, was getting his US bank to allow him to send money. He said the Singapore bank’s SWIFT code was deemed “suspicious” by his bank and his wire was refused. He had to make several phone calls before someone even knew what he was talking about. When it comes to wiring money overseas, American banks and real estate professionals have no clue. In fact, I’m convinced that the average American believes in the Middle Age concept of a pit of dragons at the end of the earth… only the borders of the United States are the end of the earth. If you have funds in US banks or other US assets that you want to move offshore, you now have multiple forces working against you like never before. Not only are laws like FATCA making it harder for you to even open an offshore bank account, but the people you need to rely on to actually move your money have been brainwashed into believing there is “no place like home”. I can’t help you solve the problem of your own bumbling financial institution, but I can help you find accounts to save yourself from the jingoistic madness that is the modern day US financial system. My Passport to Freedom DVD set will introduce you to nearly 20 experts on offshore banking, investing, and living. For less than $1,000, it’s some of the best unbiased advice you can get.