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The first foreign property market I got into was Spain. After driving most of the coast of this country to see what I could see and to learn what I could learn, I met with a developer on the Costa del Sol. This developer had a long track record and had just launched a new pre-construction project the day before I arrived. I met with the developer’s agent, who made his pitch, showed me the floor plans, and answered what questions I thought to ask. I did have the presence of mind to ask to see the site, so we got in the guy’s car and drove to where the apartment buildings would be built.

The site was a stretch of sand with fishing boats tied up in one direction and some restaurants in the other. The onsite sales office was under construction, but otherwise we were standing on a scruffy parcel of raw land in front of the ocean.

Nevertheless, I was sold. The terms of the pre-construction offer were 5% down when signing the reservation agreement and then staged payments of 5% apiece over the two years of construction. This was back before the real estate glut in Spain, when pre-construction purchasing was very much in vogue and lots of people were making money buying and flipping. I wanted in.

Kathleen wasn’t as sold as I, though, when I called her that night from the hotel to say that I wanted to buy one of these units and needed to sign the next day as most of the best units in the first building had already been reserved (remember, the developers had only launched the project the day before I met with them). Kathleen finally, reluctantly agreed, and I signed the reservation agreement the next morning. Then I went in search of a Spanish attorney to review the deal and the developer for me.

Of course, that was backward. I should have engaged an attorney before signing anything. Fortunately, my instinct about the developer was right. The group had a good track record and was part of a large conglomerate in Spain, which meant they had money backing them.

Jumping ahead two years, when the building I’d invested in was close to completion, I got a call from the developer saying they had a buyer for my unit. I’d listed my unit for resale almost immediately after signing the purchase agreement with the developer who, in this case, was willing to re-list units for sale through their sales office. The buyer wanted to move in right away rather than waiting for a unit to be completed in another building, although that would have cost him less. We closed the deal a month before I would have had to come up with the final 50% of the purchase price and close on the condo myself.

I realize today how lucky I got with this. The timing worked out perfectly...meaning no unpleasant conversation with my wife.

If a buyer hadn’t appeared on the scene for me when he did, I had a Plan B. If I’d ended up in a position where I had to close on the unit myself, I could have obtained a mortgage for the remaining 50% of the purchase price. The property was right on the beach, which meant it was part of a limited supply compared with the big volume of cookie-cutter condos elsewhere along the Spanish coast sitting back from the beach. I wasn’t concerned about flipping this property.

I took the plunge, mostly on the strength of instinct and very aware that I didn’t know everything I needed to know about buying property in Spain. I acted on what I believed to be a great deal because it was in front of me when I was ready to act. Could I have found a “better” deal. Probably. Should I have tried? No. If I’d decided to wait and seek out a “better” opportunity, I likely would have missed out on the opportunity altogether.

That’s what happened to a seasoned U.S. real estate investor I met years ago at a conference in the Dominican Republic. This guy had gone to Costa Rica some years before I met him looking for real estate opportunities. He did his due diligence on the country and the buying process and then proceeded to look for deals. He turned down buy after buy as opportunities presented themselves, because he was waiting for the “best” deal.

After four years of looking for the best deal, the guy finally realized that the market has passed him by. Anything he was finding after four years still may have been a good deal, but he had missed out on many great deals.

His conclusion? To move on to the Dominican Republic.

When I met the guy, he had been shopping in the Dominican Republic for two years. After he told me his Costa Rica story, I figured he must have learned his lesson. Surely now, after two years of time and effort, he must have invested in something in the DR. But no, he hadn’t. He was still looking for the best deal.

Had this guy bought anything...and I mean any piece of property with good title...the day he stepped off the plane on his first trip to the Dominican Republic, he would have realized at least 25% and likely closer to 40% appreciation on that investment by the time I spoke with him. The market in the DR had gone up significantly in the two years before my first trip there...and it continued to go up at a good clip for several years after.

What was most interesting to me about this guy was that he wasn’t a novice real estate investor. He owned dozens (maybe more) of rental properties in the United States. He just couldn’t make himself pull the trigger in a foreign market.

Moral of this story? You can’t wait around for the perfect or the best opportunity. Get yourself up-to-speed and put yourself “in the market,” as I like to say. Then allow yourself to recognize a good deal when you see one...

And act on it.

Lief Simon

P.S. I’m hosting a Global Property Summit in April that will educate you on the general concepts you need to know when investing in real estate overseas while also introducing you to particular opportunities that I find most interesting right now. This will be a low-cost and efficient way to get yourself up-to-speed while, at the same time, putting yourself in key markets of opportunity for 2014.

More details are here.

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I grew up in the countryside, but a year in Manhattan taught me to appreciate the fun and convenience of life in a big city. I enjoyed having great dining and entertainment and all the amenities of city life at my fingertips, without having to own a car. While I couldn't afford a part-time retirement home in Manhattan, I could come up with the funds to buy one in another city that really appealed to me—namely, Montevideo, Uruguay. 


Located directly on one of the city's most attractive parks, living here we were an easy walk to the local tango clubs, orchestra, theater, street fairs, and some of the city's best dining. A spacious apartment with two bedrooms, it was a great place to live and a great place to invite guests...and it even earned rental income when we weren't using it.

Again, this apartment was fulfilling a dream. It was not an “investment” property. But after about four years we sold the downtown apartment, in just one day, for 76% more than we'd paid.

In the 13 years since I retired, I have enjoyed some of the world's best locations for retirement, some full-time, some on a part-time basis. For almost six years, my primary home was in Punta del Este, Uruguay, South America's #1 beach resort. With its fantastic beaches and fine dining and nightlife, it's a mecca for international travelers and offers a super quality of life for the money. 

Since retiring, I have also enjoyed a part-time home in Ecuador's Valley of Longevity. With pure air and water, the world's best weather, and some of the Andes' most staggering views, Vilcabamba is reputed to have more people over 100-years-old than anywhere else on earth.

The house in Uruguay went up 87.5% in value in six years (during the U.S. recession and housing crash)...and in Vilcabamba the home I purchased increased in value 120% in four years.

Today the apartment I purchased as a part-time home in Medellín more than pays for itself, paying me US$2,000 per month in rental income when I'm not in residence. 

In addition (and this is where I think this gets very exciting), each real estate investment I’ve made has helped to bank roll both my next real estate purchase and, in the meantime, the very appealing and adventure-filled retirement I have been enjoying with my wife all along the way.

Collectively (and this is not over-stating the fact), these purchases have enabled the amazing retirement that I've enjoyed. Prior to looking overseas, the lifestyle I enjoy today simply was not within my grasp. By reinventing my life overseas as I have, I've been able to take advantage of some of the best opportunities that the world has to offer, and I am enjoying an enviable new life as a result.

Although, in my case, if I’m honest, it wasn't always easy. I had to learn a new language and explore a number of new countries on my own. I had to unravel the local markets and try to discriminate a good deal from a bad one. I had to find good legal support and to try to separate the crooks from the good guys in far-flung real estate markets. To be honest, it took me years of travel and investigation...because no resource existed to help me.

And, in some ways, I was just plain lucky the way things turned out.

This is why I was so happy to work with Lief Simon and Kathleen Peddicord to create the first-ever Global Property Summit. During this all-new, one-of-a-kind event, Lief, Kathleen, and I, along with several dozen experts and real estate pros from around the world, will introduce you to the world's best property markets while, at the same time, arming you with everything you need to know to take advantage of everything they offer right now.

This is perhaps the best time in our lifetimes to be investing in real estate overseas. Key markets are rebounding, and opportunity is being created in real time.

Full details of the program we have designed are here.

Lee Harrison

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It's also 35 square meters. That's about 376.6 square feet.

One day last week in the office in Panama City, Lief got out a tape measure and walked off the area for the conference room where we were sitting. That room is 42 square meters.

The 35-square-meter apartment we've made an offer on in Paris is also two bedrooms. Plus a salon, a kitchen, and a bathroom. All in 7 fewer square meters than our Panama City office conference room.

The craziest part is that the place in Paris seems like reasonable space. 

How many square meters do you need to live or work comfortably in the City of Light? Many fewer than you might imagine. It's all in the configuration.

Two weeks ago when we saw the 35-square-meter apartment that got our attention, we also toured slightly bigger places. One 42-square-meter apartment was simply one room plus a bathroom. Typically a one-room apartment is referred to as a "studio," meaning no separate bedroom. I'm not sure what you'd call this place, though, as the one room was the living room, dining room, and kitchen, but not the bedroom. The bed was in the bathroom, alongside the tub.

Another apartment we considered was 40 square meters split between two levels with a miniature circular staircase connecting them. We liked the idea of two floors, until we realized that the lower floor was belowground.

Three rooms plus a kitchen and a bath in 35 square meters isn't easy to come by, even in Paris (which is why we acted quickly to put in our offer), but it makes the point—the folks in this city know how to make the most of the space they've got.

The salon and the two bedrooms in this apartment are tiny by North American standards but big enough when you get down to it. Less comfortable are the kitchen and bathroom. "Bathroom" is generous. It's more a bath closet. You could shower, brush your teeth, and use the toilet all at once without repositioning your feet if you were in a hurry. The shower head is immediately above the toilet which abuts the little wash basin. 

The day we toured the place, Lief and I spent a long while standing together at the door to the bath closet considering reconfiguration options. If we intended the place to be our full-time office right away, we wouldn't invest in a refit. The toilet/basin set-up would suffice. However, we won't be ready to operate from here, even part-time, for another year-and-a-half (that'll be the ideal time to transition Jackson to a new school in Paris). We'd like to rent the apartment over those 18 months if possible. Though our agent says we could be surprised, I find it hard to imagine someone willing to rent the place as-is, so Lief and I have come up with a preliminary plan for doubling the size of the bathroom without interfering too dramatically with the size of the adjoining bedroom.

And we're pricing mini-IKEA kitchens.

Adding in the costs of the renovations and the costs of closing, the per-square-meter price we're looking to spend for this charming little piece of Montmartre is still within the budget we imagined and reasonable in the context of what we should be able to charge renters.

The sellers have our offer. I'll keep you posted.

Kathleen Peddicord

 

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Neem is native to India, where it has been regarded for centuries as nature’s best chemist’s shop, with the potential for all the uses mentioned above and many others, as well. Today, neem is an increasingly sought-after alternative in the Western world for many chemical-based products...especially fertilizers. That demand is creating a market for both neem oil, which comes from the berries, and neem leaves.

Opting for organic alternatives is a natural path (no pun intended) for farmers. The use of chemical pesticides and chemical fertilizers is poisoning land and water supplies worldwide, creating higher costs down the line, not only for farmers, but also for governments and consumers. Farmers are looking for friendlier options. Among them, neem is one of the best.

Helping the planet is all well and good, but investors also need a decent return. The neem plantations that have been put together in Brazil by two colleagues Anthony Archer and Andrew Goodman offer the best of both worlds. Their neem plantations are projected to offer an annualized return of up to 20% over a 20-year period. While neem trees can live for well over 150 years, using a 20-year timeline for returns helps keep projections conservative. However, your heirs could easily continue receiving revenue from this investment for generations.

The neem trees in this case are being farmed as part of a larger plantation that includes coconut trees (which I’ve written about before and still recommend). The decision to incorporate neem into the original coconut plantation was organic (again, sorry for the pun). Anthony and Andrew needed fertilizer and insect repellant to use on their coconut trees. They discovered in their research not only that neem would be the best option for producing their own natural fertilizer and insect repellant, but also that this unsung tree has tremendous and varied value and that the global demand for its organic products is growing fast. 

Anthony and Andrew planted the neem they’d need for their own purposes and, in addition, set aside additional land in the plantation for additional harvests. They have worked with a local factory to assure a market for the berries the trees will produce. The care and harvest of the trees will be managed by the team already in place to manage and harvest the coconut trees; they’re able to leverage the existing plantation infrastructure and to offer a turn-key opportunity for the investor.

In addition to supporting a growing “green” demand among the world’s farmers, this neem plantation investment in Brazil also offers currency and country diversification. Brazil offers great opportunity, but the country can be a challenge for the small investor. As I said, this is a turn-key opportunity; the pitfalls and practical and administrative challenges have been worked out, making this a very appealing option for the small individual investor. 

Brazil imposes currency controls, which shouldn’t be a problem if you complete all the required paperwork correctly. Anthony and Andrew’s team take care of that for you. Making this investment, you’ll have a tax obligation in Brazil. Again, Anthony and Andrew’s team help you with that. Portuguese is the language in this part of the world, but you don’t have to learn a single word if you don’t want to, as the team behind this is fluent.

All you have to do as an investor (aside from doing your own due diligence before investing) is to tell Anthony and Andrew where you want the revenue from harvests from your trees to be sent.

The minimum investment is US$60,000. This buys you a 2-hectare plot with 200 trees planted per hectare. The first harvest is projected to be in the third year after planting, with full production starting in year eight when the trees are fully mature. The only ongoing cost (which comes out of the gross revenues from each harvest) is annual crop care. However, the first five years of crop care are included in the initial investment amount.

As the year is coming to an end, Anthony and Andrew have put together a special discount for neem investors. They are offering a 10% discount to anyone who reserves a neem plot by Dec. 16. You’ll then have 30 days to complete your due diligence and fund your investment.

This is an agricultural play where you get title to your 2 hectares (or however many hectares you decide to invest in). That fact, coupled with the long-term revenue stream these trees, which can live for generations, can provide, makes this a compelling legacy investment opportunity.

Contact Anthony and Andrew’s team here for more details.

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Meantime, it's not uncommon in this country to find developers offering financing with a very low down payment. This presents a great and unique opportunity for leverage; it also creates its own set of risks.

I knew, a few years ago, of a well-publicized launch of a pre-construction project in Fortaleza, on Brazil's northern coast. Promoters had secured a block of condos with exclusive rights to market them prior to the public launch. The developer agreed to extend a 20% discount to these early buyers and to provide developer financing with only 1% down. The condos were intended to serve the business traveler and tourist market as short-term rentals, with an eye to the anticipated demand created by the 2014 World Cup taking place in Fortaleza. The offer was well-received, and scores of investors participated. 

When the official public launch was held for invited local real estate agents, the units were offered at a 5% discount, meaning the early buyers had bought for 15% less than the initial public price. As a result, some investors made good money. Some, though, saw only modest gains, some lost money, all things considered, and many are still holding their units. What's the difference in the outcomes to date?

The terms of purchase. The cash buyers fared best. The U.S. dollar was relatively strong at the time of purchase (1.95 reais per U.S. dollar), then dropped over the following year, to 1.79 reais per U.S. dollar. Cash buyers who sold their units made 9% on the exchange rate alone, plus approximately 15% on the value of the property. For a buyer selling after one year, those two things compounded to mean a gross gain of more than 25%, before transaction costs. 

The complicating factor was the developer financing, for a couple of reasons. First, as buyers taking advantage of the developer financing were paying over time, they were exposed to the dollar's decline during the finance period. They had bought with a fixed monthly payment of 1,450 reais. Over the course of the following year, this payment increased from US$743 to US$810 per month in dollar terms. 

In addition, making time payments anywhere in Brazil exposes you to something called INCC, a government-established inflation adjustment that allows builders to keep up with ongoing increases in the cost of materials and labor during any construction period. In the particular year following purchase in this case, INCC added a total of 5.91%. 

Do the math and you understand the problem. The time-payment buyer was left with a total gain (in dollar terms) of just 9.3%, compared with more than 25% for the cash buyer, before subtracting transaction costs, travel expense for visits to the property, etc. Net gains after one year in these cases were modest, in some cases non-existent.

I think this is an important case study because it seems to fly in the face of traditional wisdom to do with how to make money investing in real estate. You make more money with leverage, right? 

When buying overseas, as this example shows, this is not always the case, though it's important to note that things could have turned out differently in our example. Had the dollar strengthened during the period in question, the cash buyer would have suffered, while the time-payment buyer would have watched as his payment went down and his unpaid balance shrunk, in dollar terms. 

That's buying pre-construction on time from a developer in Brazil. A friend, Chris, took a different route entirely when he invested in this country. He shopped on the local market and did quite well with the purchase of a house on the beach. One reason, I'd say, is because he didn't approach the purchase purely as a profit opportunity. Chris found a comfortable house right on a beach he loved for what he determined to be a greatly undervalued price. He and his wife Janet made the purchase believing they would realize a good financial return if and when they decided to sell; however, more than that, they bought because they'd found a place where they wanted to be.

Chris and Janet invested in a 2,000-square-foot house only 25 feet from the high-tide line on a reef-protected beach for just under US$62,000 (at the exchange rate at the time). The home was located on the causeway-connected island of Itamaracá, in Northeast Brazil's state of Pernambuco. Island rental histories indicated that the property could earn in excess of 6% net annual return as a vacation rental on the local Brazilian market. Chris bought with a realistic expectation of capital gain and a realistic backup expectation of cash flow. 

It wasn't long after Chris and Janet moved in, however, before word got out. Other foreigners from the United States, Canada, and the UK started buying up the remaining beachfront properties on the island. As inventory dwindled, prices went up. At the same time, the dollar began to fall against the Brazilian real, making Chris' property more valuable in dollar terms. After just 10 months, Chris sold his house for 78% more than he'd paid. That's a gross annualized gain of 93.7%.

Expenses associated with the purchase, the sale, and capital improvements Chris made totaled about US$19,000. Taking that into account, the net gain was almost 47%, and the net annualized return was better than 56%.

A very successful investment experience by anyone's standards. Part of the success here, as in our pre-construction developer purchase example, is owed to the fact that Chris bought for cash. The fall of the dollar following his purchase worked in his favor. The reais he walked away with after selling bought more dollars back home. Had he financed the purchase, his U.S. dollar payments would have gone up as the dollar weakened. 

Chris was also successful because he was on the ground. Prior to buying, he spent time scouting the nooks and crannies of the Brazilian coast. This was how he found the island of Itamaracá. Discovering good local deals is much easier if you've got time for firsthand exploring. And firsthand exploring can be a big part of the fun.

Chris' discovery of Itamaracá was a big deal. Finding an undervalued market with a dwindling inventory takes time and experience, and Chris enjoyed big rewards for his effort in the form of capital appreciation. Chris was also lucky. His capital returns were compounded by a currency gain. This no one can project or predict, and, as with the buyers in Fortaleza, this could have gone the other way. A strengthening dollar could have eroded Chris' gains, leaving him with more modest profits.

When I asked him about his experience buying and selling in Brazil, though, Chris' initial response didn't have anything to do with the profits he'd earned or the currency gain he'd enjoyed. "It was one of the best years my wife and I have spent," he told me, "living in that house on that beautiful beach. We'll always remember that time."

That's a successful real estate investment overseas.

Kathleen Peddicord

Editor’s Note: Registration for our first-ever Global Property Summitis open today. Advance interest in this event has been enormous. We expect a sell-out crowd. Reserve your seat in the room here now.

 

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Kathleen Peddicord

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.

Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.

Read more here.

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