Real Estate Bets in Shaky Times

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Whether someone is buying a property for a primary residence, a vacation home, or a rental property determines how ownership should be structured legally, according to Lipschultz. One disadvantage: Certain U.S. banks won't lend for offshore real estate, probably due to concerns about it not being protected under U.S. laws.

Buying a property for a primary residence gives the same tax breaks you'd get by owning personal property in the U.S. But if a property is put into a structure like a limited liability company, you could forfeit the right to a home-exclusion benefit when it's sold, he warns. If you're renting property and the local jurisdiction recognizes limited liability companies, then using an LLC would provide adequate liability protection from renter lawsuits.

For example, if a home is being held for investment purposes and there's interest or debt incurred, that debt might be considered investor interest expense and there would be limitations on the size of the tax deduction, he explains.

5. Fractional Home Ownership

For those who dream of owning a vacation home but find the prices too expensive in light of the small amount of time their families will actually be able to spend there, fractional home ownership has become an attractive option. Until recently, it's been reserved for the very wealthy—those who can afford the typical Ritz Carlton cost of $250,000 for a share of an actual property on a world-class golf course, plus $75,000 in annual fees for golf club membership and home maintenance.

That's now within reach of folks in much more moderate income brackets, thanks to Private Quarters Club, which is owned by real estate developer Devcon Development in Jupiter, Fla. The company offers shares in three-bedroom luxury villas in Fernandina Beach, Fla., and Lake Geneva, Wis., for $79,900, plus an all-inclusive annual fee of $4,000. That buys you 21 days a year at any of the six villas that have been built on the Amelia National Golf & Country Club in Fernandina Beach or the 20 villas now available at the Geneva National Golf Club. Owners can book their stays with a full-time concierge up to a year in advance.

Owners are using the villas mainly as vacation homes, but they make sense as investments as well. Not only are they a tangible investment for family use and fun, but they're also a hedge against inflation because people can expect to pay the same price 10 years from now as they pay today, says Joe DeSilva, chief operating officer of Private Quarters Club.

Because owners have fee-simple deeds on their shares, they can bequeath them as part of an estate to family members. In addition to having them for personal use, business owners can use them as perks for trading partners who want a place to play golf for a week or for internal company use as incentives for their most productive salespeople, DeSilva suggests. "If they do it right, they could find themselves with a tax write-off."

However, fractional owners should be aware that they won't be able to sell their shares at a profit until all 17 shares of each villa are sold out. Within two to three years, Private Quarters plans to have a total of 20 villas on the Amelia golf course and 40 villas in Lake Geneva.

Bogoslaw is a reporter for BusinessWeek's Investing channel.