Money does grow on trees. Rachel Jensen, the VP of Sales at ECI Development, shares how you can literally turn trees into money through investing in teak, a tropical hardwood tree, in Panama. With her knowledge in international investment, she walks you through the business model of teak investment, showing you how much you can earn in a specific number of years through their payment plan options. With the promising figures she presents, you will surely be lured towards a long-term investment goal with Mother Nature as your medium. Knowing how any investment comes with a risk, Rachel reveals the riskiest time in the investment and getting past that. Discover the great value in investing in teak as Rachel spells out its profit.

—

Teak Investing An Intro with Rachel Jensen

Our guest is Rachel Jensen. With a background in Biology and Spanish and an original intent of continuing on a medical school, Rachel’s life took a 180-degree turn after her first medical mission trip to Nicaragua. She joined the ECI Development team in 2012, starting as the organization’s marketing intern at the administrative office in Managua, Nicaragua. At the end of her three-month internship period, she had to make a decision between accepting a full-time position with ECI or chasing her dreams at Panama with the US Peace Corps. She ultimately chose ECI Development. Originally from the suburbs of New York, Rachel now calls San Pedro, Belize home. She is the Vice President of Sales and Marketing for ECI Development, a regional development company based throughout Latin America and Costa Rica, Belize, Panama and Nicaragua. From the ground up, she has built and grown the sales and marketing department at the Grand Baymen community. Due to her strong passion of connecting folks with international real estate that meets their goals, she was awarded Salesperson of the Year for 2014, 2015 and 2016.

In addition, Rachel structured the Teak for Residency Program in both Panama and Nicaragua to assist those looking to pair up a residency with alternative options outside their home countries. She is a resident of Panama and thoroughly enjoys the Latin American lifestyle. She’s often on the road educating folks at international events about the markets and opportunities abroad. In 2017, she was invited to be a founding member of the Rotaract Club of Ambergris Caye and she was elected for the club’s Director of Professional Development. Furthermore, she’s the Cofounder of a bi-annual women’s retreat, 5 Days to Freedom, helping guide women toward financial, spiritual and international freedom. That’s quite the resume in just a few short years. It’s pretty incredible. Rachel, thank you for joining our team.

Thank you so much for having me. I’m looking forward to joining you and your readers on this conversation.

You’ve got some pretty awesome international opportunities, something we get into a little bit. It’s even more outside of the norm, so to speak in that you’re investing in more agricultural assets or you have those as options. Can you tell us a little bit about that?

The group I’m with, ECI Development, we build real estate communities throughout Latin America. Additionally, we offer for offer folks teak parcels. Teak is a luxury hardwood that’s used for a lot of fine furniture and outdoor furniture as well and also Chris-Craft Boats, the really high-end boats. The reason that it is so popular and considered luxury is because of the remarkable qualities that it has. Within this company, within ECI, we offer folks the opportunity to start their international journey. It is a pretty new topic to broach. A lot of the reasons for that is because people are realizing that they don’t have to be multimillionaires to own something overseas. I think previously there is this connotation that if you own real estate overseas or if you did any sort of banking or investing overseas, then you had a huge pot to pull from and it didn’t matter if you’re spending a million here, a million there, but that’s not the case these days.

As it becomes easier and you learn more about the international markets, we’re seeing more people are deciding to do something overseas and there’s a handful of reasons for that. One of the big ones that I’ve heard over the past few years is this international diversification factor. I think a lot of people are worried about what’s going on in their countries and are understanding that maybe it’s a good idea to do something in another country help spread that risk out. We’ve all heard the term don’t put all of your eggs in one basket and that doesn’t only apply to different parts of the market, but it also implies to different countries. Having all of your investments in one town or one state or even one country is really quite risky. We offer people the opportunity to do something outside of their home country.

One of the big parts that are important for us is the educational aspect of it. We want you to understand why you’re doing what you’re doing and then connecting with something that makes sense for you. A lot of people have decided that teak is something that is of interest to them because there is this international component, and also hard asset components. Like ownership of the real estate, you do get titled to the land. You also own the trees that are growing on your parcel and you’re able to see it. You’re able to go visit your parcel, hug your trees and people really liked knowing that it’s real, it’s there, it’s literally continuing to grow in value. That’s just a little overview of what we do.

What does the business model of a teak investment look like? Trees can take a little while to grow.

They do. The ones that are valuable are the ones that have longer harvest cycles. It’s very easy for us, especially in this day and age where we’re so used to things being instant and getting a return tomorrow or getting a return next week that we typically forget to fill our portfolio with those long-term assets. When you look at what a lot of the ultra-wealthy have in their portfolio, in the huge endowment funds like Yale, Harvard and Northwestern, a lot of them have timber in their portfolio because it is something different. It’s not the traditional stock market, it’s not the traditional rental houses. It really provides a different aspect. When it comes to ownership of timber and specifically in this case teak, it is a 25-year harvest cycle. That’s a long time for people to consider. We have farms that are different ages. The first one is nineteen years old, which means we’re only six years away from the first harvest. We have another plantation that we just sold out which is three years old in Nicaragua and then another farm where we’re starting the planting. It’s starting at age zero.

The neat part is that you don’t have to wait until the end of the 25th year to start to see your returns coming back. There’s a process called thinning and that’s when you remove the trees that aren’t really growing properly. This is strategically done where you overcrowd in the beginning and then you cut down the trees that aren’t growing properly. You sell them and then as an owner, you receive the thinning profits from those times in the harvest cycle. Specifically with this teak ownership, you get the title to the land and you get the ownership of the trees. We have had a couple of people say, “What if I don’t want to harvest in 25 years?” You don’t have to, but it will be a little bit harder when you do want to harvest to find a company that’ll harvest it for you, especially if it’s just one plot.

I would assume there’s probably no financing structure and it’s an outright cash purchase?

More or less. We do have payment plan options. We understand, especially in the United States where we’re so used to financing homes, 20% down, 80% financed. With our opportunities, we do have payment plans where you put a deposit down and then over a twelve-month period, you would pay off the balance. For some people that works great, especially because you know what your income’s going to be each month. Other people when they’re able to pay off the parcel entirely, they’ll do that maybe a month or two in. It depends entirely on what the owner is able to do. We do like to have those conversations to really personalize it to see what makes sense for each person.

I think about the possible downsides in one that really sticks out is a forest fire. How much of a risk is there generally and then how do we mitigate that risk with these investments?

That definitely would be a risk in the first three years of the teak growing. After age three, teak becomes resistant to fire, rot, termites, anything that you consider a risk when it comes to timber, which is also a reason why teak is considered to be as valuable as it is. We do have newborn teak available right now. At prior to age three, we take extra precautions. We put firewalls up. We make sure that we use insecticide. Once we get past that third year, then the teak is resistant to a lot of those risks. It’s a little funny in this case, specifically with teak, I wouldn’t consider forest fire or risk. The risk I would consider would be more along the lines of if there is no market for teak at the time that we’re harvesting. When we’ve done our research, we know that teak has been around for over 200 years and sold to the marketplace for over 200 years. That may be the case, but probably it wouldn’t. That would be a risk.

The neat part is that timber doesn’t expire. Unlike agriculture like mangoes or something like that where you have harvest season and if you’re not selling your produce at that point, then it expires and you don’t have any product to sell. Teak specifically and timber generally, as it continues to age, it literally continues to grow in value. If you think of a log, a teak log or a tree that’s growing, every year that it’s growing, it continues to grow in diameter. What brings value to teak is the larger it is, the more you receive from it in terms of profit. You’re not really losing anything there. You’re losing some time if you were banking on that harvest yield at exactly the 25th year, it would be a downside. The upside is that you don’t lose any product from it. You just continue to let it grow and then literally grow in value.

They always say money doesn’t grow on trees. I’m sure you’ve heard that a million and one times.

It does grow in teak. It’s funny, we do tours out to our teak farm with owners and with people who are looking at the opportunity. Every now and again we’ll have someone in the group who has a little plastic baggie and is collecting the seeds from the trees. They’re little pods that fall from the trees. Those are the seeds that will bring a teak tree to life. There’s always someone in the back of the group who’s collecting these little seeds, putting them in their bag like, “I’m going to start my own teak farm.” Some guy in Rhode Island was like, “I’m going to start the first teak farm in Rhode Island,” which can’t really do because you don’t have the right climate for it. It’s funny because there is so much value in the trees. Every now and again we’ll have these guys collecting the seeds.

What is a typical return if we’re going to put numbers on it? What are we talking about?

Let me give you an example. Our smallest investment in Nicaragua is baby teak. One quarter of an acre starts at about $6,800. Over a 25 year period, that grows to about $101,000. That’s net, that’s after fees are taken out and whatnot. Also, over that 25-year period, you have the thinning proceeds paid out throughout. You don’t have to wait all 25 years until you see that return again. At age twelve is where you start seeing the first thinning payout. It comes pretty quickly, especially with folks who realize that time goes by quickly. Before you know it, you’ll be seeing year twelve. That’s generally what the numbers look like. In Panama, it’s a little bit different. In Panama, the trees are already nineteen. For a quarter-acre parcel, it has a little bit more of an entry. It’s about $23,000 and then the projected return on that looks to be about $79,000 because the harvest is in six years versus the 25 years for the newborn teak. You can see that in Panama because the trees are already at that point, obviously way past age three, with very little risk at this point. There may be something with the market where maybe we don’t harvest and you’re in the sixth year from now, but otherwise, the numbers pan out, I’ll tell you that.

As real estate investors, we really like to try to avoid taxes. When we cannot avoid, we reduce our tax bill legally. Are there any possible tax advantages to this investment?

For the Americans, you probably know that you have to report your taxes. You may be able to find loopholes or not necessarily paying them, but you do have to report everything. Do remember that for any investments you make overseas as well. Any income that you make, you do have to report it. In Panama, there are really great reforestation benefits and our farm is certified reforested, which means you receive these benefits. The first one is that there is no property tax. The second is that there’s no income tax in Panama. I recommend consulting with your CPA or financial advisor about what that looks like for you because depending on your tax income, will depend on your bracket, but in Panama, you don’t necessarily have those taxes.

Nicaragua is a little bit different. We’re working with the government to put together a reforestation program. We started that about a year and a half ago and I do believe definitely by the end of the 25-year period, we’ll have something set in stone for that where it’d be a program in a sense that mirrors what Panama is offering. At this point, it’s about 8% that you’d be paying to Nicaragua in taxes. I don’t know if anybody who’s reading this has any international investments where you’re already receiving income and maybe you are paying tax in that jurisdiction where you have that investment. There’s also between a lot of countries tax credit. Let’s say you pay $10,000 in taxes to the Nicaraguan government, then if you owe $12,000 in taxes to the United States, you only pay the United States $2,000 because you’ve already paid $10,000 in Nicaragua.

There is a system like that that just depends entirely on the country. Some countries don’t have tax credits and you’d be double taxed. That’s really important to understand before you go into any investment. There are some countries, Colombia for example, where you are taxed quite heavily, especially with rental income. I think it’s about 35%. I don’t remember if they have a tax treaty or not with the United States. You have to bear that in mind, no matter what opportunity you’re looking at is how are you going to be taxed. In Panama, it’s super advantageous. In Nicaragua, it’s not horrible, but we’re definitely working on some reforestation benefits to benefit the owners so that they can come out in Nicaragua untaxed.

Rachel, what is the best investment you’ve ever made?

I’m going to answer this two-fold. For me, because I’m at that age where my time is valuable, what I’m learning is that I need to learn and to take that next step. For me, the best investment that I made was moving abroad, learning, finding mentors and really searching in this international space for what that next step is. I do see time as an investment. For me, I think that the six years I’ve spent abroad have been an incredible investment for my future. It’s helped me to see the world. It helped me to understand the opportunities that are out here, and from being global, I’ve made good investments. I do own real estate here in Belize. I do personally own teak and I think that the teak will perform quite well in six years at harvest. I do invest in the States in real estate as well. Having this global portfolio is important and I do see that as being one of the best investments I made was with my time and spending it overseas.

What is the worst investment you’ve ever made?

I bought a condo in Belize and I bought it because I was planning to put it into the rental system that’s here. I was thinking about long-term rental because I didn’t necessarily want to wear and tear from nightly rentals. I ended up spending more and more time in it and I ultimately decided to live in the unit. While I bought it with this intention of renting it out in generating X hundred dollars per month, instead I’m the one who’s paying the X hundred dollars a month to live there. From the perspective of it, producing an income for me, it hasn’t early done that, but I do plan at some point, if I decided to spend time outside of Belize or in another country, to put that unit into the rental system. I’d say it’s an investment on hold right now where it will produce something down the line, but not necessarily right now.

What is the most important lesson you’ve learned about investing?

For me, I’ve learned that doing your due diligence is extremely important. When I bought that condo in Belize, I was looking all over Ambergris Caye. Ambergris Caye is where I live and there are tons of condo projects here. Ultimately, I decided to own with a company that I’m with because I know the developer. They’ve been working in this region for 25 years. They have a strong track record. Even though it was a pre-construction condo, I felt confident that they were going to complete it. I knew the quality of construction that it was going to be built to and I felt very safe. I did look at other properties because my main goal was once you don’t necessarily want to live in the community where I was working, but when I was looking at the different properties around, I realized that not a lot of them were built to North American quality and standards. It’s gone through a change of managers or developers over and over again. There wasn’t really consistency. I’ve unfortunately seen this quite a few times where developers go belly up and unfortunately ended up losing things.

When I was deciding where it was that I wanted to invest my money, I did do that at the time of doing the due diligence and learning more about my own company that I work with because I felt that was important. Luckily, I haven’t made a bad decision. Everything’s been working out as planned, except for the fact that I live in the unit I bought as an investment in the rental. I think it’s that due diligence generally and that’s true for everybody no matter where in the world you’re looking, especially overseas where you don’t necessarily have the same regulations that you have in the States. I know in the States, we’re very familiar with big brother. Big brother can act against us or it can work with us, and many times it’s doing us a lot more favors than we realize. When you do go abroad it can be the Wild Wild West. Just take that time to really go through your documents, go through the personnel of the organization, and understand their business plan is absolutely critical in all of it.

How can our readers get in touch with you?

Feel free to reach out to me at [email protected] and mention that you read this at Passive Wealth Strategies for Busy Professionals so I make sure that you’re always getting the greatest deals and updates that we have going on. That would be the best way or feel free to give me a ring. The best line is our 1-800 number. It’s 1-800-290-3028.

I want to thank you for joining us and sharing all your knowledge. It’s a very interesting model and a very interesting opportunity. I definitely like the idea of making a return while getting residency overseas, particularly in Panama. To everyone, I really hope you learned something. If you did, please subscribe on iTunes or wherever you get your podcast. If you’re enjoying this, please tell a friend and bring them into the fold. Let’s help them bring their wealth up, raise their income and all that good stuff and bring them along on the journey with us.

Thank you so much Taylor, and I love what you’re doing to remodel the concept of helping folks really achieve their financial freedom. It’s so important, especially in a world now. Hopefully, you’re all paying attention to Taylor’s advice and feel free to reach out if you have any questions specifically about the global side of real estate.

Thanks for reading. We’ll talk to you on the next one.

Important Links:

• ECI Development
• Grand Baymen Community
• Teak for Residency Program
• Rotaract Club of Ambergris Caye – Facebook Page
• [email protected]
• iTunes – Passive Wealth Strategies for Busy Professionals
• ECIDevelopment.com

About Rachel Jensen

With a background in biology and Spanish, and an original intent of continuing onto Medical School, Rachel Jensen’s life took a 180-degree turn after her first medical mission trip to Nicaragua. Ms. Jensen joined the ECI Development team in 2012, starting as the organization’s marketing intern at the administrative offices in Managua, Nicaragua. At the end of her 3-month internship period, she had to make a decision between accepting a full-time position with ECI, or chasing her dreams in Panama with the US Peace Corps. She ultimately chose ECI Development. Originally from the suburbs of New York, Ms. Jensen now calls San Pedro, Belize home.

Today, Ms. Jensen is the Vice President of Sales & Marketing for ECI Development, a regional development company based throughout Latin America in Costa Rica, Belize, Panama and Nicaragua. From the ground up, she has built and grown the sales and marketing department at the Grand Baymen community. Due to her strong passion of connecting folks with international real estate that meets their goals, she was awarded Sales Person of the Year for 2014, 2015 and 2016.

In addition, Ms. Jensen structured the Teak for Residency Program in both Panama and Nicaragua to assist those looking to pair up a residency with alternative options outside of their home countries. Ms. Jensen is a resident of Panama and thoroughly enjoys the Latin American lifestyle. She is often on the road educating folks at international events about the markets and opportunities abroad.

In 2017, Ms. Jensen was invited to be a founding member of the Rotaract Club of Ambergris Caye and was recently elected for the club’s Director of Professional Development.

Furthermore, Ms. Jensen is the co-founder of a bi-annual women’s retreat, “5 Days to Freedom,” helping guide women towards financial, spiritual and international freedom.

• Here’s How »

• passivewealthstrategy.com