I’m Personally Pursuing This Strategy
Prepare to have your mind blown…
I was poking around recently on a Portuguese real estate site—since I’m in the process of moving to Portugal this summer on the country’s new D8 Digital Nomad visa—and I found a lovely 1,300-square-foot, three-bedroom, two-bath apartment, eight minutes from the beach in a suburb of Lisbon.
Cost: about $400,000.
That’s fairly amazing in itself—a beautiful, well-appointed apartment next to the sea in one of the country’s top beach communities for $400,000.
But here’s the blown-mind part…
Annual property taxes are about $1,200.
That’s mind-blowing to me because the last property I owned, in south Louisiana, cost me nearly $4,000 in annual taxes back in 2016, just before I sold it. And its value was about $320,000. I just looked up that property as I was writing this, and the most recent tax bill was more than $5,000.
This, to me, is yet another in a litany of reasons why a life abroad can make so much sense financially: For substantially fewer dollars, you can live at or above your current standard of living.
As a digital nomad who went through an expensive divorce and who spent down his savings going back to school, I am acutely aware of taxes. I want to legally minimize my taxes as much as possible so I can grow my finances in the run toward retirement.
But, frankly, my attention to this point has focused exclusively on personal tax rates, since I am a renter here in Prague. Moreover, I wasn’t sure I ever wanted to own another home (I’ve bought and sold eight properties in various states I’ve lived in across the U.S.). Sloughing off the burdens of home-ownership—repairs, upkeep, property taxes—seemed freeing.
Alas, I’ve remarried. And we’re now in an environment where I expect inflation will remain at well-above average rates for some time. I’ve seen my apartment rent increase and I know rental rates are going to keep escalating no matter where I choose to call home.
Because the facts and circumstances of my life have changed, my perceptions of what I want have changed.
Now, I would prefer to actually own a house or apartment and lock in my monthly cost.
And, so, I’ve been examining properties in Portugal, where annual property tax rates are sharply lower than they are in any U.S. city where I’ve owned a house.
But that just had me burrowing down a deep rabbit hole.
I started wondering: How cheap are property tax rates elsewhere in highly desirable countries?
Get this: In Ireland—one of the loveliest countries on our little marble, and clearly a first-world nation that exceeds the U.S. in numerous standard-of-living categories—a house up to €350,000 (about $385,000) imposes an annual property-tax bill of… wait for it …
€346, or $380.
Yes. $380. Less than $32 a month.
Insane.
That’s a massive savings of more than $3,500 on what I was paying for the same-priced house in the U.S. seven years ago. I mean, apply to that, say, a decade of living overseas and you are squirreling away real money. Assuming a 5% annualized return, and we’re talking about a roughly $45,000 bump in your nest egg.
That is not insignificant.
I looked as well at Panama, Costa Rica, Mexico, Spain, and Thailand, if only because I know they’re popular destinations with American retirees and digital nomads … and a few of those I’d gladly call home myself.
In Panama, a property valued at less than $120,000 pays zero property tax. Over that threshold and it’s 0.5% to 0.7%, meaning a $400,000 property (which is pretty darn luxurious in Panama) pays at most $2,800 per year.
In Costa Rica, it’s 0.25% of the appraised value, which is obviously not necessarily the purchase price. I will just assume the appraised value is $400,000 to keep the apples separate from the oranges. Property tax due: 0.25%, or $1,000 annually.
Mexico is bit more complicated with taxes assessed by the different municipalities. I’ll stick to Tulum, a lovely and popular beachside retreat on the Caribbean coast. Rates there are about 0.15%, or roughly $600 annually.
Spain… between 0.4% and 1.1%, depending in the region where you live. So, $1,600 to $4,400 annually on that $400,000 property. (You can see Spain is not necessarily the cheapest options, but I’d gladly choose Barcelona or Malaga over just about any city I’ve called home in America.)
And as for Thailand… 0%.
You will pay zilch in property taxes.
I saw some Thai homes when I had boots on the ground there last fall. Stunning beachfront villas wrapped around a courtyard pool and a back gate that literally steps out onto the sand. Palm trees. Warmth. Sea breezes. Thai food!
And 0% property taxes.
You’re living likely royalty.
That faint boom is your mind exploding.