Should You Buy Real Estate or Donate? The Pros and Cons of Each Citizenship-by-Investment Option

Faster than naturalization and in some cases, marriage, citizenship-by-investment is the most efficient way to diversify your passport portfolio.

But the process does not entail sending your hard-earned money in an envelope to a foreign government. Contrary to popular belief, most programs offer several investment paths, including options that may allow you to recoup and earn a return on your original investment.

In this article the citizenship-by-investment experts at JH Marlin Attorneys at Law break down return-on-investment of the major options you have in most CBI programs: Real estate investing vs. government donation.

Real Estate for Citizenship-by-Investment

Many of the clients we work with at JH Marlin are already real estate investors or at least own property elsewhere in the world. These high-net-worth individuals understand the value in investing in homes, commercial properties, multifamily units, and their own residences.

So the option of investing in real estate in a foreign country to gain citizenship is not farfetched.

However, for the clients who are not interested in real estate nor have invested their funds in property elsewhere, a foreign real estate purchase can be a scary proposition. We understand their hesitation.

To alleviate this apprehension – In all of the programs we cover in the Caribbean, Europe, and around the world, we help our clients understand their options, find the right property if they choose to invest in real estate, and apply for the respective citizenship-by-investment program.

Are you wondering which options are best for you? Let’s examine each:

Pros of Investing in Real Estate

1. Potential for Return-on-Investment — All five Caribbean CBI programs offer government-approved real estate investments. However, the difference lies in the investment threshold and of course, potential yield on that investment. Through rental yields and appreciation, investors can generate a significant income from their property purchase. However, in most programs, investors notably cannot sell or transfer their property during the initial holding period – five years in Grenada’s CBI program, for example.
2. Physical Residence — Unlike a donation, a real estate investment is a tangible asset that can provide peace of mind, a sense of security, and of course, a residence for you and your family.
3. Liquidity — Real estate investments are not as liquid as other forms of investments. But in comparison with a nonrefundable government fund donation, it is. After holding your real estate property for a certain time period as regulated by the respective citizenship-by-investment program, investors may sell their property or holdings and invest their funds elsewhere.

Cons of Investing in Real Estate

1. Higher Investment Threshold — Because investors have the potential to generate significant income from their property, the price is higher than the donation option in each country. For example, the St. Kitts & Nevis citizenship-by-investment program offers investors the option to purchase government-approved property worth at least $400,000 USD, which can be resold after a seven-year holding period. Their real estate investment option is much higher than their nonrefundable Public Benefit Option donation at $250,000 USD.
2. Additional Costs and Taxes — Beyond the initial investment, real estate ownership comes with ongoing maintenance costs, taxes, and insurance, which can erode the net returns. For this reason, many real estate investors in citizenship-by-investment programs choose to contribute to multifamily or commercial properties where they are one of many investors and do not manage the property themselves.
3. Added Complexity — Because investors must first find and do due diligence on a property that interests them, the citizenship-by-investment process is slower in the case of real estate purchase. However, Vanuatu’s citizenship-by-investment program is unique for approving applications before investments are made. So this guarantees no sunk costs if an application were to be rejected.
4. Market Risk — Foreign real estate markets are subject to fluctuations just as the market is in your home country. So the value of a property investment and the income it generates can vary based on market conditions, potentially affecting the return-on-investment.

Each of the five Caribbean citizenship-by-investment programs offer a real estate option. The Maltese CBI program is unique because while it requires a nonrefundable donation to the National Development and Social Fund, investors may also choose to invest in real estate for €700,000 and hold the investment for five years – or rent a property for more than €16,000 annually.

Now, let’s compare real estate investments in CBI programs with another popular, more affordable option – the government fund donation.

Government Fund Donation for Citizenship-by-Investment

As we mentioned, all but one citizenship-by-investment programs around the world either require or offer a nonrefundable contribution to the government as part of their application.

The Turkish CBI program is lone program that does not offer a donation option, instead requiring a real estate investment of $400,000 USD or bank account deposit of $500,000 USD.

Let’s examine the pros and cons of donating your funds in these programs:

Pros of Donating Funds:

1. Simplicity and Speed — Remember that real estate purchases in citizenship-by-investment programs can require lengthy due diligence and investment processes. In comparison, donating to a government fund is straightforward and can expedite the citizenship application. The Antigua & Barbuda CBI program, for example, offers citizenship in exchange for a $100,000 USD donation to the National Development Fund for a family of up to four. This route eliminates the complexities associated with property ownership.
2. Affordability — In almost all cases, the donation option in CBI programs is the more affordable investment path. Since they receive this investment directly instead of levying and waiting for property tax on real estate property, governments prefer this route and incentivize the action with lower costs. For example, the Antigua citizenship-by-investment program requires $100,000 USD in donation but doubles their requirements for real estate investment to $200,000 USD.
3. No Additional Costs — Unlike real estate, a donation is a one-time cost without ongoing financial obligations, reducing future maintenance to zero and making it easier to calculate the total expense of citizenship acquisition. The fund donation is a fell-swoop investment that does not incur extra tax liability nor require more attention.

Cons of Donating Funds:

1. No Direct Financial Return — The primary drawback of this donation route is the lack of direct financial ROI. Yes, the nonrefundable government contribution is a sunk cost. With real estate, investors may get their money back or get a hefty return on their investment after maintaining ownership of their property for the required holding period.
2. Less Engagement with the Host Country — While the government fund option is a non-recoverable donation typically towards the nation’s socio-economic development, investing in real estate can create a deeper connection and economic ties with the country. A donation, while beneficial to the country, does not offer this direct, tangible link. However, in some cases, governments can use their citizenship-by-investment program donations to improve life and infrastructure in their countries.

Investor Preferences

So now you have heard both sides of the coin and real examples of how these CBI programs deploy their investment options.

Which appeals more to you?

In our experience of working with hundreds of high-net-worth and ultra-high-net-worth individuals of various nationalities, we have helped investors with both donations and real estate purchase in all of the citizenship-by-investment programs we offer.

But the more affordable, quicker donation option is the preferred investment path of our clients.

Depending on your investment profile, budget, risk tolerance, desired process, and other long-term goals, your best option may differ. Each path has its merits and considerations, making it critical for investors to assess their priorities thoroughly before making a decision.

If you would like to get started toward a second citizenship and sovereignty, JH Marlin can help guide you in the right direction. Contact us here.