Work Abroad but earn in USD

Sunday, April 17, 2005

An Investment and a Loan Source For Argentina Expats

To understand this investment idea better, read my earlier post on the lack of mortgage loans for expats. A few days ago I was thinking... Expats are having trouble going to banks to get mortgage loans, so why not get together and solve this problem ourselves?

Mortgage Pool For Expats

Suppose a group of expats and other investors came together to form a mortgage pool. We put the money together in a fund and then make private loans to other expats buy property abroad. If banks won't lend to us, why don't we work together to help each other as well as make a profit in the process.

We could easily screen potential borrowers, checking their credit report in the US. We'd force them to put down a large down-payment on the property -- 30%, 40%, or more -- to protect against default. A local Argentina Trust Company could hold the actual mortgage on the property on behalf of the investment fund and represent the fund in Argentina. If the borrower stopped making payments, the trust company could foreclose and reacquire the property. Since the borrower put down such a large amount in the beginning, the fund likely wouldn't lose anything on a repossession.

Loans would be denominated in dollars, protecting fund investors against currency risk, and the interest rate charged to borrowers would be high enough to ensure everyone in the fund good returns on their investments without much risk -- mortgage loans are some of the safest loans you can make, after all.

I've discussed this idea with my accountant and there's even a way we can structure it so that fund investors would be earning interest tax-free. So, if 9-11% tax-free returns with very little risk sound good and you'd be interested in hearing more, let me know. If we can get at least 10-15 people who are willing to put up $10,000 or 20-30 who can put up $5,000, we could get a fund started.

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Blogger said...

Funny. We think alike as I'm in the middle of forming a company to do just what you are talking about. I'm not just thinking about Expats though. I'm thinking about locals as well.

I know a guy that does this in Rio with high interest loans to taxi drivers who want to buy their own taxis. He has a lien against the taxi and if they miss a payment he gets the taxi back.

I have purchased many properties in Argentina and I always find it very very awkward no matter how many times I do it to pay CASH at a closing. That's right. All property purchases here for the most part are in cash. You bring a bag full of cash and they sit there at the table counting it. It's so primative.

I've already started an Argentina corporation that will deal with investments in Argentina so great minds think alike!

5/12/2005 11:30:00 PM  

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