Top Real Estate Investment Marks For 2010

Dec. 6, 2009
Casco Viejo, Panama

PLUS: Adjust Your Assets...Timing Isn’t Everything...Nostalgic In Berlin...Surviving Prague...

AND: Retire In Luxury?...
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Dear Overseas Opportunity Letter Reader,

Resident global real estate investing expert Lief Simon has taken out his crystal ball. Looking ahead to 2010, what does he see? Here’s a quick look at what Lief predicts for key markets worldwide in the New Year.

Lief says...

"Here are the five markets where I’d think about putting my own money over the coming 12 months:

1. Panama. Yes, I’m well invested, but I’m also actively shopping and keen to buy more at the right price. In Panama City, buy any apartment (new or resale) for which you can negotiate a price that will translate to a good yield. Sellers are very open to your offers, and it’s going to continue to be very possible in this market to see net rental yields of 8% and higher. I’m currently seeing 12% net from my avenida Balboa rental.

Outside the capital city, buy land in the path of progress. The region that best qualifies is the Veraguas Province, not only the west coast of the Azuero Peninsula, but throughout the province in general, including in the mountain and river towns of Santa Fe and San Francisco, etc. New President Ricardo Martinelli hails from Veraguas. He’s already making it clear that his home province is going to benefit generously from the aggressive investment in infrastructure this country continues to make.

2. Philippines. Along with Panama, this is the other market I’m most focused on. Great opportunity for yields through resort rentals and condo hotels. You’re going to be hearing a lot more from me on why you should be looking closely at the Philippines right now over the coming months.

3. Dominican Republic. Shop for land—early-in lots in planned developments or raw ocean-view land.

4. Australia. Look for renovate-to-flip opportunities. This commodity-based economy is already recovering from its downturn, and I believe it is going to continue down this track, seeing steady appreciation. In fact, the demand for housing in key markets in this country continued to outpace supply even through the global financial meltdown. Again, I see this continuing.

5. Colombia. The market I’m most interested in understanding better in the New Year. I’m planning a scouting trip early 2010.

"What about other markets I’ve recommended and invested in in recent years? Here’s what you need to know about past picks:

1. Nicaragua. Yes, current President Daniel Ortega has adjusted this country’s constitution so he can run for re-election in 2011 (the country’s constitution disallowed any president to sit consecutive terms; Ortega didn’t feel ready to move on, I guess, so he recently changed this). Running again doesn’t guarantee winning again, though, and, as long as the opposition parties unite, as they’re already indicating they will do, Ortega should be out. The Nicaraguan on the street has had enough of his do-nothing, blow-hard politics. Still, the guy is a loose canon. I’m well invested in Nicaragua and holding tight, happy to wait out the Ortega Factor. Eventually, Danny’ll go away. Meantime, I don’t intend to invest further. If you don’t currently hold a stake in this country with a beautiful Pacific coastline and a history of political strife, consider it. Understand the risks and shop for a deal. You should be able to find one. Right now, this market is dead, meaning sellers can be eager.

2. Ecuador. There is no compelling reason to believe prices in this country will increase. I wouldn’t buy here now, with the possible exception of productive land. Though, if you’re in the market for farmland, for example, you have better choices.

3. Costa Rica. On sale! However, real estate in this country was so over-priced pre-crash that even a 40% to 50% drop in asking price might not get you where you want to be. Remember Costa Rica’s track record for infrastructure (they had not built a new road in nearly 40 years until recently) and remember, too, that the current administration is broke. The Costa Ricans are making some effort to improve their battered roads and collapsing bridges and even to build, finally, long-promised new ones. But you have to wonder where all the money will come from. And, to buy now, you have to see some reason for prices to turn around and move up again. I don’t anytime soon.

4. Brazil. Good opportunities, especially in vacation rentals at the beach. Also a growing middle class, which is an important indicator when shopping real estate investment markets. However, this isn’t an easy place to do business. Moving money in and out of the country can be complicated. Plus, you’ve got a currency risk. The real is strong right now. Factor this in to your buy decision. Also understand the currency exchange implications for whatever terms of purchase you choose. If you sign on for a long-term monthly payment program, consider buying reals ahead.

5. France. A short-term rental in Paris remains a solid long-term, bolt-hole play. You won’t get rich this way, but a short-term rental in the City of Light means steady yields over the long haul.

6. Argentina. Yield plays in Buenos Aires can make sense if you buy for the right price, and productive land in the interior can be a good play (again, if you buy right and if you’re buying for the very long term).

7. Uruguay. Not the time for investment. Great place to live or retire, but I see no compelling reason for appreciation. The exception can be an investment in a beach apartment for rental yields; however, prices have risen, so you have to shop harder to make the numbers work."

Kathleen Peddicord

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P.S. What else this week?

• "La crise," as the French refer to the current down economic cycle they find themselves struggling through, notwithstanding, the short-term rental market in Paris continues strong.
  
  So explained our rental manager in this city when I met with her earlier this week. "Every one of my apartments is rented," she continued. "In fact, I need more inventory."
  
  Yet our apartment has been vacant since our tenant of one year vacated in August. Three months without cash flow later, Lief and I have been growing concerned.
  
  "If all of your apartments are rented, and you could fill more if you had them," I couldn't help but wonder aloud, "why is ours sitting vacant?" Our rental manager’s reply reminded me of one of the advantages of real estate investing...

• "The Poles are leaving," remarked a friend over lunch one afternoon in Paris this week. He was speaking of Ireland.
  
  "You know the market is dead now that the Poles are moving on."
  
  The Poles began moving in just about the time Lief and I took up residence on the Emerald Isle ourselves. This was more than a dozen years ago, when, for the first time since the Famine, this country was a net-importer of population. Not only did this generation of Irish, upon finishing their education, opt to remain at home to launch their job searches, but the Poles and others from throughout Eastern Europe began seeking out the land of the Celtic Tiger in search of opportunity.
  
  Fast forward 12 years, and the jobs are gone, along with the economy that supported them. Gone are the construction gigs...gone are the international call centers...gone is Waterford Crystal...and down, down is the pub trade. There aren't enough jobs these days for the Irish themselves, much less any immigrant labor force. So the Poles, et al., are pulling out.
  
  From the day we arrived in Ireland, I began predicting the collapse of both the Irish real estate market and the country's economy in general. We invested in a house certain that we were buying at the top, sure that we'd never see our money out of the place. We bought because we needed a place to live with our children, not because we expected to reap any
  profit.
  
  Forecast anything long enough, and you're likely to be proven right. In this case, nearly a decade of further growth preceded the validation of my soothsaying. The market began to tumble about a year after we sold our Waterford home and moved to Paris. In retrospect, we timed this market brilliantly--executing our exit strategy as if on cue. In truth, it wasn't nearly so much genius as good fortune. Still, we walked away with more than three times our money. Meantime, we enjoyed a half-dozen years of Irish country living. Here we are today in Panama City, deliberating once more. Should we invest in the house we're currently renting in Casco Viejo? The market is this part of Panama's capital, in particular, is over-priced; sellers are generally unrealistic in their asking prices...

• "My wife and I want a luxury lifestyle. In a recent article, you said that Buenos Aires, Argentina, and Kuala Lumpur, Malaysia, are good candidates for luxury living on a budget. Are these really the only two options for the kind of lifestyle my wife and I are looking for at a reduced cost?"...

• "These days," writes Correspondent Paul Lewis from Berlin, "buses surround the little white hut in the middle of the street that once was the center of innumerable spy stories and is still preserved as one of the Cold War's most potent symbols, complete with its make-believe American, British, French, and Soviet policemen and a big sign warning that 'You are about to leave the American Sector.'
  
  "For the past month, visitors have been flooding into this city to celebrate the 20th anniversary of the fall of the Berlin Wall, or '20 Jahren Wallfall' in German, not without traces of nostalgia..."

• "Prague has abolished the tourist season," writes Correspondent Paul Lewis from that city.
  
  "Summer or winter, spring or fall, this Central European city, straddling the River Moldau (or, if you must, the River Vltava, in unpronouncable Czech), is crammed with foreign visitors of every age, tongue, and hue.
  
  "Often called Europe's most beautiful city, Prague is a concentrated blob of pure baroque architecture, totally, utterly unscathed by the Second World War because Czech resistance to Hitler's advance collapsed at the frontier. The Communists took over after the War by coup, which spared the buildings. But Prague has a darker side..."