How To Rent Or Buy Real Estate In Unregulated Markets Overseas

When The Rum Flows, So Do The Promises

Rum and real estate don’t mix. You want to be sober when considering property purchase options in a foreign land. Certainly, you want your wits about you when it comes time to sign on the dotted line. The trouble is, in the land of mañanas and fiestas, the rum flows.

And so do the promises.

The key to success navigating overseas, especially developing-world real estate markets, is avoiding the liquor and turning a deaf ear to the assurances.

Here’s how this will go…

You’ll arrive in the country where you’re dreaming of launching your new life. In the terminal of the airport, the lobby of your hotel, and the restaurant down the street where you go for lunch, you’ll be approached by friendly fellows with houses, condos, and beachfront lots to sell. Every taxi driver, every bar owner, every shopkeeper will have a piece of property for sale or a brother or a cousin in the real estate business.

You won’t have to seek out agents or developers to help you find your new home. They’ll find you.

Once, in Granada, Nicaragua, I was early for a lunch meeting with a friend and decided to sit on a stool at the bar of the restaurant while I waited for my friend to arrive. Two minutes later, a fellow gringo sat down beside me.

“Hello,” he offered. “Have you just gotten into town?”

“Yes,” I replied.

“Well, if you’d like a tour of the city, I’d be happy to oblige. Are you having lunch? I’d love to keep you company. I could tell you about Granada. This is a beautiful town with a long and colorful history. I’ve been living here for five years. I know the place well. Are you thinking of moving here?”

“No,” I replied.

“It’s a great place to live. And real estate is a great bargain. This is the time to buy. Do you like old buildings? The old colonial haciendas of this city are a treasure. I know of two available right now for very good prices. These are the best buys in the city. Both are owned by friends. I could take you to see them after lunch if you’d like?”

“I’m meeting a friend. I don’t think I have time for a real estate tour today,” I explained.

“Well, then, maybe tomorrow. As I said, I’ve been in this city for five years. I know it better than anyone else you’re going to find.

“In fact, I’m the local representative for Live and Invest Overseas. I’ve been working with the publisher for that organization, Kathleen Peddicord, for years. Maybe you’ve heard of her? Kathleen has been writing about investing and retiring in Nicaragua for a long while.”

I’d never seen this man before, and, clearly, he’d not met me until this chance bar encounter. I didn’t make an issue of these facts but let the fellow finish his pitch. Finally, my friend arrived, and I was able to break away.

I never ran into this particular gringo Granada property expert again, but the story of my brief exchange with him has stayed with me, because it’s a good example of the absurd lengths these guys will go to hook a buyer.

As I said, in these markets, the challenge isn’t finding a real estate agent to show you around. They pick you out by the color of your skin, your dress, and your gait and posture as you walk down the street.

The challenge isn’t finding one to take you shopping; it’s finding one you feel comfortable doing business with. The best strategy is to speak with as many as possible and to take nothing any of them tells you at face value.

Likewise property developers in these kinds of emerging Wild West markets. A good rule of thumb when touring with a developing-market developer is to buy what you see. He’ll drive you out to his beach. There, at the shore, he’ll have erected a small clubhouse. Come in, have lunch, enjoy a drink, he’ll say…

The fish is fresh. My guys caught it just offshore from our beach this morning. And the rum is local.

After you’ve eaten your fill, the developer will take you out in his 4×4 or maybe on horseback to explore the beach and the surrounding countryside. As the sun is beginning to slip behind the horizon, and the ocean’s surface is glittering and dazzling, the sky behind it turning fire red and orange, the developer will begin pointing. Over there, he’ll say, is where the new clubhouse will be constructed.

What you see today is only temporary. Down there will be the dock and, over there, the marina. On the hills all around us will be the houses. Just look ahead. Look at that sunset. This could be the view from your front porch. You could have a front-row seat for this show every evening…

Come on, he’ll urge. Let’s head back to the clubhouse. It’s time for some Sundown Rum Punch.

You’re smitten. Who wouldn’t be? Nothing wrong with appreciating what’s being put on the table in front of you. The coasts of Nicaragua, Panama, Belize, and the Dominican Republic, for example, are special and extraordinarily beautiful. Seeing them for the first time can make you weak in the knees.

The feeling can be something like falling in love. Don’t resist it. Allow yourself to savor it. But don’t so lose your balance that you marry the first beach that charms its way into your heart.

Ask yourself, is this the beach you want to grow old with?

Enjoy the developer’s hospitality, his fresh fish, even his rum cocktails. Let him make his pitch. Then take your leave. Go find out what the guy at the next beach has to offer. And the beach after that.

All the while keeping in mind the fundamental rule of purchasing real estate in a foreign country: Buy what you see.

That developer I mentioned who took you out to show you where the new clubhouse would be, then where the dock, the marina, and all the houses would be built? If you give the guy some benefit of the doubt, you can believe that he fully intends to deliver on every promise he’s suggesting.

But, remember, down here in the land of mañanas and fiestas, things don’t always go as you expect them to go.

Will there be a marina? The only thing you know for certain is that there is no marina right now. That’s the reality you should act on. Think about it this way: If the marina were never built, would you still be happy living here? If there were never a newer, bigger clubhouse, would your experience of the place diminish?

The what-ifs can be more critical. Sometimes, the stretch of beach the developer takes you to see is nothing but a stretch of beach. No roads, no electricity, not even stakes in the ground to mark off individual lots. I’ve been taken to see planned retirement communities on stretches of the coasts of Nicaragua, Mexico, and Belize, for example, where buy what you see amounted to an investment in sand, surf, and sun.

Depending on your circumstances, your level of risk tolerance, and your timeline to retirement, maybe a deeply discounted, early-in purchase of a beautiful stretch of white sand, azure sea, and tropical sunshine is just what you’re looking for.

My point is to be clear in your purchasing objectives and to pay for what you’re buying.

And don’t buy anything on a first visit. If you were moving from Chicago, Illinois, to Santa Fe, New Mexico, would you take one trip to Santa Fe, tour around for two days, then contract to buy the first house you saw available for sale? A house offered to you by a guy you met over drinks in a bar the night before? The answer is probably no.

You want to be more careful shopping for real estate in another country, where the language, the customs, the culture, the way of doing business, and the property purchase process are all foreign, than you would be back home, not more cavalier.

In the unregulated markets south of the Rio Grande, you don’t have the safety nets you count on back home. What if the guy offering to sell you a house isn’t, in fact, the owner of that house? What if you don’t discover this fact until after you’ve handed over payment? What is your recourse? In truth, you likely don’t have any.

There’s no Better Business Bureau, Department of Housing, district attorney’s office, or local congressman to contact for help, and people in the rest of the world don’t sue each other the way Americans do. You aren’t going to find an attorney in Nicaragua or Belize or anywhere else to take your case. You must protect yourself, because no one else is standing by to protect you or to help you make things right should something go wrong.

The best way to protect yourself is to engage your own attorney to represent you through the purchase process, one who works not for the seller, the agent, or the developer… but for you. You want your own independent attorney whose agenda and loyalty are clear. You also want to invest in title insurance if available.

Finally, you want to buy what you see and to make sure that your vision is clear.

I enjoy a local rum cocktail at sunset as much as the next girl, but I’ve learned to wait until the effects wear off before I begin talking business.

Kathleen Peddicord

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