Articles Related to Real estate

In one case, the land is collateral for eight investors. If you've ever tried to get eight people from different countries and backgrounds to agree on a single path forward and been successful, please get in touch. You have skills I lack and could benefit from.

In another case, my collateral is an apartment. This is even more complicated. The short story is that the contractor walked off the job after having been paid a substantial amount of money for the construction but before finishing the work. Somewhere between the developer signing the agreement with the contractor and the contractor bailing, the contractor stopped paying on his insurance bond that guaranteed completion. The condo development is unfinished, and we who invested along with the developer are left holding the bag.

In addition to the direct-developer investment, the lady who wrote in to me last week has lost in other ways, too, though the other investments she told me about aren't write-offs, at least not yet. One is a lot in a development where the developers haven't fulfilled all the amenities. The lot has value but no real market right now.

The woman also invested in a renovation project in a colonial city. That didn't work out because the architect she chose (on the recommendation of an attorney I recommended) turned out to be a scoundrel. She managed in this case, though, to come out a little to the good after all was said and done.

The nice thing about real estate is that, unless you're leveraged, it's difficult to lose all your investment. Still, holding property that you want to sell but can't can seem the same as losing your investment.

I've been investing in real estate for more than 20 years and have bought in more than 20 countries at this point, more than 40 purchases and counting. Most have been positive and profitable experiences. Some are still playing out, and, for these open investments, the current values of the properties are greater than what I paid for them in every case except one.

The key is to manage risk.

To that end, I follow a few mantras. I break them regularly but do so knowing that I'm breaking them. When I do, I carry out more due diligence and I'm prepared to lose my money.

Mantra #1: I don't buy property in a place where I haven't been. The corollary to this rule is to visit any property before investing in it. That's not always feasible. Further, visiting a place and seeing the piece of real estate you intend to invest in before you invest is no guarantee the investment will play out in your favor. I've visited properties and decided, as a result of my on-the-ground research, to invest only to have things fall apart.

That said, probably my best and my worst investments to date both have been in properties that I didn't visit before buying.

The one that didn't work out was a pre-construction project in the UK. Everything looked good on paper. The location was central in the town where the building was going up. A colleague had a friend involved in the project. Both assured me I couldn't lose. So I acted without making the trip to see the place myself.

Unfortunately, thanks to overbuilding in the town, which I would have recognized had I gotten on a plane, the rental projections were optimistic, to put it politely. Worse, I bought with leverage. In the end, this was a total loss.

On the other hand, I also acted on an opportunity in Panama City without seeing the project for myself. Again, this was on the recommendation of a colleague. This investment, though, has been, you could say, the most successful of my career. I've made far greater returns in whole numbers from loads of other buys, but, on paper, by the percentages, this one is near-perfect. The property has appreciated nicely in value, year on year, and has generated a double-digit net yield every one of the seven years I've owned it. It has been occupied by renters better than 90% of the time.

Lief Simon

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Granada is built around a large, shady, and bustling town square, anchored by a stately, neoclassical cathedral at one end. The streets are narrow (built prior to the automobile) and lined with rows of those cheerful, well-kept Spanish-colonial homes.

Granada usually has a good inventory of colonials in a good state of restoration. Granted, colonials can be found in plenty of places around the Americas...but there are a few things that set Granada apart:

  • Prices are low when compared with colonials elsewhere in Latin America. Completed homes are a great value, and fixer-uppers are downright cheap...with inexpensive remodeling costs...
  • The homes in Granada tend to be smaller than in many cities, with one-story houses commonly available. This makes the houses brighter, with the single story allowing for more direct sunlight. The relatively small size of many Granada colonials is due to the fact that most of them—more than 90% of those on the market—were originally second homes or vacation homes that were ultimately sold to expats and investors...
  • Many houses here also have pools in their interior courtyards, something I haven't seen in other colonial markets...
  • Granada is completely walkable. Everything you need is close at hand via attractive, level streets...
  • The fairly large expat community and the active tourist trade mean a lot of amenities that a city of 120,000 would not ordinarily have. There are great restaurants, bakeries, hotels, and B&Bs that distinguish Granada from most cities its size...
  • Lake Nicaragua, with its beaches, fresh waters, and islands, provides a great recreational opportunity and a pleasant way to escape the heat. It's also great for boating and fishing, with a huge 3,100 square miles to explore...
  • Granada enjoys good connections to the United States from the nearby airport in Managua...
  • But best of all, Granada still feels authentically Nicaraguan. You'll see old oxcarts lumbering through the streets, restaurants serve local delicacies, and street vendors offer pottery handmade according to traditions that date back centuries and have been passed down generation to generation. The city is a unique blend of native Nicaraguan city life and expat amenities.

The rental market is good in Granada, especially if you have a pool. One home I looked at recently had an asking price of US$150,000 and rents for US$600 per week. Another cost US$389,000 and rents for US$1,500 per week. Occupancies can run between 65% and 75%.

The least expensive houses I saw were priced at US$35,000, and they needed a good bit of work. But for just a bit more, you can buy something that's fit for living, as is.

One such property is listed for just US$37,000. With one bedroom and one bath, this corner property is ready to move into with practically no work.

The best buy I found is a larger, two-story home with three bedrooms, four baths, a garage, air conditioning, and a swimming pool located just four blocks from the central square. The second-story bedroom has a good view of the city rooftops, as well as the extinct Mombacho Volcano in the distance. The asking price is US$145,000, but I understand that this one will go out the door for around US$125,000.

If there's a downside to Granada it's that it can be hot. I didn't really find it unpleasant, but I did sleep with the air conditioner on, as will most people.

Also, if you want to be a pioneer—one of the first few expats to discover a city—this isn't the place to do it. There are definitely a fair number of English-speakers already in residence.

If you'd like to invest in Spanish colonial property, or would enjoy the Spanish-American lifestyle, then Granada should be high on your list. Located less than two hours from Miami, the cost of living is low, the properties are inexpensive, and the inventory of colonial-style homes is unparalleled, especially at these prices.

Lee Harrison

Editor's Note: Today's essay on the property market in our favorite Spanish-colonial city, Granada, is excerpted from Lee's Overseas Property Alert. If you aren't on the list to receive this once-a-week dispatch on the world's top property markets direct from Lee's laptop to your inbox, sign up here now.

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Sept. 1, 2014

"I have learned so much from your newsletter, and now I have a question.

"I read that Panama is an offshore investment haven and that I could live in this country tax free, but I am confused. If I relocate to Panama and run a local business or an Internet business, does that mean I pay no Panama taxes or no income taxes at all, including in the United States?"

-- Doug H., United States

Yes, you could live in Panama tax-free, even as a U.S. citizen (that is to say, paying no income tax either in Panama or in the United States). However, some work and preparation are required. You have to set yourself up properly.

If you're retired, you won't pay taxes on retirement income you bring into Panama or on any dividends or interest income earned outside the country. You would still pay taxes in the United States on the dividends and interest income, and, depending on the source of the retirement income, you'd pay the same tax to the IRS as you would if you lived in the States (although, if you live in a state that taxes retirement income, you'd avoid that tax by moving to Panama).

To live completely income tax free in Panama as a U.S. citizen, you must have a business generating earned income for you as an individual and that income must be derived from outside Panama. Panama taxes residents on income earned in the country only, so your non-Panama business would pay no taxes in Panama, and assuming it is a business where you can legitimately claim that you are earning your income outside the country, your individual income wouldn't be taxed there. Typically, this means a consulting or an Internet-based business.

If you start an active business in Panama, with sales in Panama to Panama residents, then that income would be taxable in Panama, as would any related personal compensation you receive.

In either case, your salary up to the annual Foreign Earned Income Exclusion limit (US$99,200 for 2014) can be excluded for U.S. income tax purposes. The key is that it be truly earned income.

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Another friend may learn this lesson soon. He's planted thousands of coconut trees in Panama because coconuts have become a hot commodity for both their oil and their water. He made the investment in the plantings, though, before he had pinned down a sales outlet, and now he's scrambling to find a buyer. Probably he'll be able to sell his crops locally, but the local price won't get him the profits he projected based on international market values.

I'm in the process of planting timber and fruit trees on 10 acres I own in Belize. My first question to the agriculture guy who's going to manage the work was, What can we sell easily locally? I know that the volume of production from the mixed trees I plant on my relatively small piece of land won't be enough to sell for export. Therefore, I want to grow things that the locals need and buy.

The guy I'm working with recommended a couple of hardwood trees that few outside Belize have heard of but that are sought-after for local home building and wood working. It will be 15 to 25 years before these trees are ready for harvest, though, so I've got to bet that current demand won't shift over the next couple of decades. If it does, the trees still will have value as hardwoods, but the returns will be less than we're projecting now.

For the fruit trees, again I'm going with what can be easily sold locally—avocados, bread fruit, bananas, and a few others.

Once you're sure you have an outlet for where to sell your produce, then, unless you're interested in doing the farming yourself, you need an "operator," as one colleague with many agricultural undertakings calls the guys who do the work on the ground. Finding an operator can be easy enough in countries with an agricultural base. When this is the case, you'll find many companies in the business of running farms for people. Your challenge will be to identify one who has experience with your planned crop who you can also trust.

My 10 acres in Belize won't throw off the same annual yields as a focused farm, but that's not the point with this land. This is more a personal experiment than a serious investment, and we intend to build a house here, too. Still, I'd say that planting trees is a good idea under any circumstances.

As a friend who shares this perspective likes to say, if you need the income in 10 or 15 years, you'll be happy you planted the trees...and if you don't ever need the income, you'll be happy you planted the trees.

Meanwhile, I'm researching pecans.

Lief Simon

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But you will see a few familiar U.S. icons here, such as Walmart, Sam's Club, Costco, and Home Depot. You can actually find anything you'll need in the shops downtown, but the U.S. stores will bring that familiar level of convenience that's hard to find outside the United States.

Xalapa has a number of lush parks and squares (normally called a zócalo in Mexico), each of which has a distinct personality. I stayed just down the street from Parque Juárez, which pretty much exemplifies what I like about zócalos. It was a busy social hub on Saturday night, with an almost carnival-like atmosphere, while Sunday brings a pleasant crowd of people strolling and relaxing in the traditional Mexican Sunday-style, people-watching and buying snacks from the street vendors' carts. This hillside zócalo has a unique lookout, affording a breathtaking view of the surrounding hills and city.

I was looking at my old field notes from 1998 and 2000 and saw where I'd written that "traffic downtown is not bad for a city of this size." This is no longer the case; traffic is heavy downtown and moves at a crawl. If I had a home in Xalapa, I'd either walk or use the inexpensive taxis and public transit, at least in the downtown areas.

The property market in Xalapa starts at less than US$50,000—so deep into bargain territory that you'd be hard-pressed to find such low prices in a Third World backwater, let alone a classy city like Xalapa.

The average cost per square meter in Xalapa is just US$791. To put that into perspective, I'd consider anything less than US$1,300 per square meter to be a serious bargain. However I don't see any market force here that would cause prices to appreciate quickly, so this is not a place to buy and flip for a quick profit.

You won't find a better value. Here are a few examples of what's on the market today. Properties are priced in Mexican pesos, so the U.S. dollar values I give below will change with current exchange rates.
  • A three-bedroom, single-bath apartment in Jardines de Xalapa has just come on the market. It has 72 square meters (775 square feet) of living area and a garage space. The asking price is US$37,800 (500,000 pesos).
  • I like this one in Zona Centro because it's convenient and walkable. It's a ground-floor apartment with lots of light and ventilation and a large, nicely planted, 60-square-meter courtyard. In the 111 square meters (1,195 square feet) of floor space there are two bedrooms, two-and-a-half baths, a family room, and laundry area. The asking price is US$109,500 (1.45 million pesos).
  • Also in Zona Centro, four blocks from Parque Juárez, there's a small two-story house on the market, with 90 square meters (970 square feet) of living space including, two bedrooms, and one-and-a-half baths. It's in a great location close to banks, restaurants, shopping, and one of the city's best zócalos. The asking price is US$113,300 (1.5 million pesos).
  • We also found a two-story, restored colonial for sale with 272 square meters (2,930 square feet) of living area including four bedrooms, three-and-a-half baths, a study, laundry area, and parking for one vehicle. The kitchen and baths are new, as are the Spanish tile. The asking price is US$173,700 (2.3 million pesos).
  • This one's a grand old classic colonial, just two blocks from Parque Juárez in Centro in about as good a location as you can find in the city. It's a 404-square-meter (4,350 square feet) house that would make a great boutique hotel, B&B, or just a large, traditional Mexican courtyard home. It currently has six bedrooms, with room for more, and it's in excellent condition. There is a spacious reception and great room area and an adjacent room that has space for a bar and restaurant, if you were opening a business. Tropical gardens fill the interior courtyard and servants' quarters are located in the rear of the property. The asking price is US$415,400 (5.5 million pesos).
  • In the Las Animas neighborhood, this contemporary one is probably the best value we saw. It's a large home with three bedrooms (one with dressing room and Jacuzzi), two-and-a-half baths, a terrace, and a two-car garage. It's got 240 square meters (2,580 square feet) of living space on two stories and also includes a maid's suite. Located in an exclusive, upscale community, the asking price is US$151,000 (2 million pesos). To save you the math, that comes out to just US$629 per square meter at today's exchange rates. In most markets I'm familiar with, that would be a super bargain at twice the price.
  • Finally, just out of town to the south, I have to mention the most unique home I've probably ever seen. It's called Las Hojas (The Leaves), and all of the windows are formed into the shape of various leaves. The leaf theme continues inside, where these openings are carved into interior partitions, the fireplace, etc. Thirty-inch-diameter tree trunks hold up twin lofts which serve as the bedrooms. The living areas, bedroom lofts, dining room, and kitchen all open up to the large, environmentally enclosed center courtyard. It's a multilevel home of 170 square meters (1,830 square feet), bordering an ecological preserve. The asking price is US$147,200 (1.95 million pesos).

To get to Xalapa, you can fly into the El Lencero Airport (JAL). It's about 15 minutes from town, although the only airline there is Aeromar, which you'd pick up in Mexico City. Alternatively, you could go to the Veracruz airport (VER) for better connections, if you're willing to drive around one-and-a-half hours to get into Xalapa from Veracruz.

In general, the Xalapa area is a great place to live and be a part of a thriving, energetic community with all the cultural and artistic amenities you could want. You'll find a great symphony, theater, and plenty of excellent restaurants...along with good and convenient shopping.

Prices will not rise quickly, but for a super lifestyle at an amazing price in old, non-gringo Mexico, Xalapa will be hard to beat.

Lee Harrison

Editor's Note: This article ran earlier this week in our Overseas Property Alert edited by Lee Harrison. This once-a-week free e-letter service comes straight from Lee's laptop to yours as he's on the road scouting real estate markets of opportunity. Sign up to receive Lee's weekly dispatch here now. Again, it's free.

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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.

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