Investing in Private Islands ~ Now is the Time to Pursue that Dream!
By Paul Benson
Tuesday, June 24th, 2014
Ever dream about owning your own private island? Now is the time to pursue that dream! Private islands, the ultimate status symbol, are generally associated with the jet set, royalty, Hollywood’s elite, and business tycoons.
In 2009, Aga Khan, a respected religious figure and one of the world’s richest men (with an estimated net worth of $800 million), reportedly bought the 349-acre Bell Island in the Bahamas for $100 million — the highest price ever paid for a privately owned island. Richard Branson bought his Necker Island retreat in the Virgin Islands for a mere $305,770 in 1979, converting it into a one-of-a-kind private island retreat after investing $10 million.The island is available for $56,000 per night for you and 28 of your closest friends: quite a steal, relatively speaking.
Aristotle Onassis, whose actual worth is still a mystery,bought Skorpios Island in Greece for a reported $22,083 in the 1960s. The heavily guarded island, left to billionaire heiress Athina Onassis, has an estimated worth of $200 million.
Johnny Depp, seduced by the exotic Exuma Islands when filming Pirates of the Caribbean, bought Little Hall’s Pond Cay — a 35-acre island in the Exumas listed for $3.5 million — in 2004 for an undisclosed price.
Leonardo DiCaprio fell in love with Blackadore Caye in 2004 while staying at the private island resort of Cayo Espanto. He purchased Blackadore Caye in Belize with Cayo Espanto owner Jeff Gram for just under $2 million.
DiCaprio and Gram are working with the Four Seasons hotel to create a five-star luxury resort based on environmental design and conservation on the tropical island. Leading the way with innovative green technology, DiCaprio and Gram are incorporating natural energy sources such as water, sun, and wind into the plans.
A Buyer’s Market for Private Islands
Many private islands listed on the market are under a million dollars, and in some parts of the world such as Nova Scotia and Canada, they’re as low as $50,000.
As they become more affordable, folks with a flair for adventure and seeking a private, relaxing oasis can become island owners.
Asking prices for habitable islands have adjusted significantly from their pre-2003 peak levels given the global financial crisis and real estate marketing meltdown. This has lead to twice as much interest in private islands in the past three years.
Exuma Cays in High Demand By Wealthy Americans
Because of its proximity to the U.S., the Bahamas is popular with wealthy Americans — specifically high net worth Americans and the Hollywood elite seeking the cluster of 360 islands in the Exuma Cays.
On May 15th, 2014, Innocence Island, the largest privately owned Bahamian island with its own runway and airport code, was auctioned off by Concierge Auction and snatched up for $17 million by an undisclosed buyer.Given that the island was originally listed at $55 million with the potential to develop into a resort, the $17 million price tag is definitely a steal!On the heels of the sale of Innocence Island, the Big Grand Cay Archipelago Estate located in Northern Bahamas was brought to an online auction by U.S.-based auction house CBRE Auction Services.
Though the bidding for the $11.5 million island began at a mere $1,950,000 and the price at which it sold on May 25th, 2014 was not disclosed, local broker John Christie confirmed that the bidding during the auction was robust and led to a final price well in excess of the starting bid.
This auction is yet another sign that the private island market is on the way back up. Christie concurred, adding, “The desire for private island ownership is hotter than ever.”
Other islands listed for sale in the Exumas market include the 554-acre Darby Island listed at $40 million, Saddleback Cay, a private 47-acre island with a 3,000-foot airstrip and seven white sand beaches priced at $15.6 million, and the seven-acre Goat Cay priced at $4.8 million.
Why the Interest in Bahamian Islands?
Proximity to the U.S., the desire for privacy, and the ability to own a piece of paradise at prices much more affordable than 2003 peak levels are not the only things attracting high net worth buyers to the Bahamas.
The Bahamas is politically stable and welcomes foreign private ownership, with constitutional laws that guarantee personal property. In addition, the Bahamas provides an excellent investment opportunity for individuals seeking healthy, tax-free profits.
A highly tax-friendly country, the Bahamas is considered a tax haven, providing advantages such as:
- No personal income tax
- No corporate income tax
- No capital gains tax
- No withholding tax
- No business tax
- No estate tax
- No gift tax
- No inheritance tax
- No death duties
- No employment tax
- No sales tax
What to Look for When Buying a Luxury Island
Purchasing an island is not as easy as it looks. Most high net worth buyers are looking for islands with infrastructure already in place. Remember this rule of thumb: private islands cost approximately 20% less than their mainland waterfront counterparts.
With private islands, however, it is not just the cost of the island you need to take into consideration, but also how costly it will be to make it habitable.
Despite the spectacular 360-degree views and reduced price tag, to build on an island can cost up to 50% more than it would on the mainland; barge rentals for moving workers and materials can cost you thousands of dollars a month.
For example, installing solar power may cost you anywhere from $15,000 to $80,000, and the cost of a desalination plant may be anywhere from $20,000 to $100,000, depending on volume. When budgeting for the purchase of an island, take into consideration these extra costs.
Other factors to keep in mind when purchasing an island include:
- Electricity: Ideally, the island you plan to purchase will come with electricity powered through underwater cables running from the mainland. If it does not, you may provide electricity through environmentally friendly options such as solar and wind power or through power generators.
- Fresh Water: A scare commodity on a private island is a resource you will not take for granted. If you are close enough to the mainland, you may run pipes from the water supply to your island; if not, you’ll have to consider cisterns (used for catching rainfall), desalination systems, or digging a well on your island.
- Private Island Weather and Hurricanes: Warm-weather islands in the Caribbean and the South Pacific are wonderful year-round retreats; however, it goes without saying that hurricanes and tropical storms are a fact of life in these climates. Preparations to withstand extreme whether conditions must begin as soon as you break ground on your island home.
- Transportation and Communication: Though you can travel to your private island on helicopter, as a private island owner, boats will become a part of your daily life. Remember that owning a boat has its own set of ongoing costs including repairs, insurance, and dockage. As for communication, the best way is through satellite phones using cell towers. However, the bandwidths are very slow, and the cost per minute is relatively high.
The private island market, in particular Exuma Cays, is becoming increasingly popular among Americans. I am excited and very optimistic about the increase in purchasing a piece of paradise.
Now is the time to buy!
Until next time,
Paul Benson for Wealth Daily