Lief Simon's True Confessions—"My Biggest Losers"
Sept. 12, 2014, Panama City, Panama: Lief Simon has invested in real estate in more than 20 countries over more than 20 years, making nearly three-dozen purchases in total. Here are his biggest winners and losers.
Dear Live and Invest Overseas Reader,
A reader wrote in last week to tell me she was done with international real estate investing. She's invested in four opportunities I've written about over the last 10 years, and none of them has played out as expected. She wasn't upset, just matter of fact, writing to let me know that she's going to stick with U.S. real estate going forward, as that's something she feels she understands better.
Can't argue with that logic.
This very reasonable lady lost everything on one direct-developer investment she made. I invested in that deal, as well, so we were able to commiserate. The developer, as it turns out in hindsight, was in over his head. He didn't have enough experience or local knowledge to understand the complications he would encounter, and so these complications weren't factored into his business plan or projections. Bottom line, he wasn't properly capitalized and went belly up.
I've lost money on a few direct-developer investments. Others have played out well. I consider an investment of the kind I'm talking about, one where you're getting in on the ground floor right there with the developer, comparable to investing in a start-up company pre-IPO. You have the potential for big reward, but the risks are great, as well. (My pre-IPO investments have a higher loss rate than my direct-developer real estate investments, for whatever that's worth.)
You can minimize your risk with a direct-developer investment by asking for land as collateral—though that's not always what it's cracked up to be. Right now I'm invested in three direct-developer deals where the development isn't moving forward but I have property as collateral. The truth is, though, should the developments be forever (as opposed to temporarily) stalled, the land I hold as collateral in each case isn't worth much. What would I do with these little islands of property unless or until the planned developments they were meant to be part of play out?