This Caribbean Rental With Guaranteed Cash Flow Could Be Your Eventual Dream Retirement
Oct. 26, 2012, Ambergris Caye, Belize: Grand Baymen, on the Caribbean island of Ambergris Caye, Belize, offers rental units with three years of guaranteed return that also make ideal retirement residences.
Dear Live and Invest Overseas Reader,
Ambergris Caye, Belize, is a sun-seekers' paradise whose white sandy beaches, topaz waters, and swaying palm trees have been attracting both tourists and retirees for the better part of two decades. Thanks to this, San Pedro, formerly a simple fishing village, has grown to a full-fledged town with paved roads (well, three of them anyway), hotels, restaurants, boutiques, and even a wine shop. The tourist traffic has also helped create a short-term rental market on this small island.
Many hotels have been built over the years to supply it, as have many condo complexes. Short-term rentals on the island generate cash flow for both investors and part-time residents and offer an opportunity for future retirees to purchase a condo today and rent it out to general cash flow to help pay for their eventual retirement home.
Grand Baymen is one such condo community in San Pedro that we've told you about in the past. The developer here has contacted me to alert me to the launch of a new phase of one-bedroom apartments specifically intended for the rental market. He has put together a program that is attractive for both investors and future retirees. The big attraction is the guaranteed rent for the first three years.
Normally, I avoid guaranteed return investments. You have to question how a developer is going to be able to afford paying out the guaranteed yield. Maybe by overpricing the units? In truth, that's often the case.
In this case, however, I know the developer well. The pricing for these new units is in line with prices for condos of similar quality, and the developer owns an operating resort, meaning he has the ability to fill the units with renters to generate the income to cover the guarantee. In addition, he also has the financial stability to make up any shortfall should he not meet the occupancy rates needed to generate the required cash flow.
You don't have to take the guaranteed yield offer. You could simply buy a unit and put it into the rental pool yourself. You'd have to expect, though, that the units in the program would be filled first.
The real benefit of the offer the developer has packaged for these one-bedroom rental units (other apartments are available for those looking for something larger, but those don't come with the yield guarantee) is that he is also offering financing. The terms tie into the three-year guarantee. You make a down payment of 20% (US$23,980) and furnish the apartment (the developer has put together an US$8,000 furniture package). You finance the balance with the developer over the three-year guaranteed-yield period and then can refinance at the end of those three years through a local bank if you'd like.
The developer financing is at 10% interest with a 30-year amortization. This translates to a monthly payment of US$842. The monthly guaranteed rental income from the developer is US$1,250. Out of that US$1,250 per month, you pay the mortgage, the HOA fees (US$82 per month), and the property taxes (US$25 per month). That leaves you with a positive cash flow of US$301 per month. That's an 11% cash-on-cash return on your down payment and furniture cost.
After the guarantee period, you can refinance with the bank and keep your unit in the rental pool, pay off the loan and move in, rent out the place yourself, or any combination of those you like.
If you're an investor, this is a great opportunity to invest with a relatively small capital requirement (US$31,980 in total). You don't have to qualify for the initial developer financing, and you know that your first three years of mortgage payments are covered going in.
If you're a future retiree, you could buy today and lock in a good price on your apartment, enjoy some extra cash flow over the next three years, then move in when you eventually retire in three or more years.
The apartments are to be built in a development where the amenities are already in place, and the developer has a track record both in development and resort management. Both renters and owners at Grand Baymen have access to the beach through the sister resort Exotic Caye.
For the price, you'll be hard pressed to find a better offer from a developer on Ambergris Caye or anywhere in the Caribbean. For more details, inquire here.
Lief SimonContinue Reading: