Here’s an article I wrote for CentralAmerica.com
Two roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;
Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,
And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.
I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.
- Robert Frost
Living in Nicaragua inspires you to invest in this developing country. There seems to be an abundance of opportunities to fill the gaps of what doesn’t already exist. Even living mostly paycheck to paycheck, we still have dreams of owning something in Nicaragua. We want to build a home that we can come visit and rent out when we are not here.
After working in the real estate business briefly, I heard there was a loophole that allowed you to “self invest” your 401k or IRA. This intrigued both Kharron & I since we had some money in our retirement funds that didn’t seem to be invested well. Using the money in our IRAs to invest in Nicaraguan real estate sounded too good to be true!
Let me explain: We quickly learned that using a 401k verses an IRA is much more flexible when buying real estate. First off, with a 401k Plan, when you make a real estate investment it does not trigger the Unrelated Debt Financed Income Rules and the Unrelated Business Taxable Income (UBTI or UBIT) tax (IRC 514). However, this exception does not apply to IRAs. In other words, using a “Self-Directed IRA” to make a real estate investment would trigger the UBTI tax. Secondly, traditional IRA’s only allows an individual to contribute $5,500 annually ($6,500 if the person is over 50 years old). A Solo 401k plan allows for contributions up to $59,000 per year. Since we’re planning on building a vacation rental, being able to reinvest the profits back into our retirement fund was important to us.
There is one catch, the typical 401k plan does not usually allow for investing in real estate, so most people form a “Solo 401k Plan”. This is a traditional plan, but covers only one employee (and spouse), and allows you to bypass some regulations. If you have or create a Sole Proprietorship, your business can obtain a Solo 401k Plan. Since a 401k Plan is a trust, the trustee on behalf of the trust can take title to a real estate asset.
Don’t let all this mumbo jumbo fool you, after a lot of research we were still thoroughly confused on how to proceed. Luckily we found the company IRA Financial Group. For a small fee of $1,500, they did all the work for us. They set up the Sole Proprietorship, created The Reid Dynasty 401k Trust, and helped us figure out how to roll our existing retirement funds into a the new Solo 401k Plan. We decided to use Fidelity Financial for our Solo 401k since they have a product called a “Non-Prototype Retirement Account” for Solo 401k’s & I already had my IRA with them so in theory the rollover would be easier.
Everything was set up after a couple months and we started looking at land we wanted to buy.
Hiring someone to clean your home and help care for your children is a common dream for Expat parents living in Nicaragua. It is important to know the labor laws and follow them so that you do not end up in a confusing legal depute with someone you once considered family.
The Ministry of Labor reports the 2016 minimum wage for a domestic worker is C$4,669.50 per month (or $166.75 at the time of writing this). Standard wage in San Juan del Sur seems to be about C$200-C$250 ($7-$9) per day or C$5,040-C$6,440($180-$230) per month domestic help.
A standard full time work week is 8 hours per day, 6 days a week, with Sundays off. It is common to provide a meal for workers if they do not get that time off. Otherwise one hour lunch break is required and is usually taken from 12-1pm. Since our house cleaner works through lunch time, she usually eats lunch with us, or takes her portion of what we are eating home in some Tupperware. If your domestic worker has to pay a lot of pasaje (bus fare) or taxi fees, then giving some money towards that is common.
One you have a schedule agreed on, always make sure you get a signed written time indeterminate contract. That spells out any areas either party feels can be a bit grey.
Whether an employee is let go, fired, or quits, they are entitled to 1 month (30 days) pay for every year worked for the first 1-3 years and 2/3 month (20 days) pay for every year worked from 4-5 years. The max owed ever owed is 5 months pay. Also you must pay any unused vacation time and percentage of 13th month in portion of how many months into the year work is terminated.
This is something we just recently learned about. Our house cleaner is aware that we are planning on moving back to the US in another year and a half and she asked for her “indemnización” now so that she could use the money to finish constructing a room in her house for renting. After much research we decided to go ahead. This meant the original contract with her would be terminated and we’d write a new contract. We felt like this was to our benefit because at the end of our time living here, we won’t owe as much on our exit.
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