How To Pocket Global Real Estate Investment Profits In The Current Climate
“It seems the whole world is watching and waiting for the ‘best’ deal before making a real estate buy right now,” writes resident global real estate investing expert Lief Simon.
“With few exceptions, global real estate markets have slowed or stalled. The speculators are mostly out of the game. Investors and the end-users (people looking to buy a place to live) are in the market but moving slowly. They are shopping, circling like sharks in some cases, waiting out the sellers. They’re watching for absolute collapse.
“This is all healthy and part of the long-term cycles of global property markets. The trick is not to wait so long that you miss out altogether.
“A reader wrote this week to say that he likes Uruguay. He’s been shopping in this country for four years and knows it well. It’s a buyer’s market right now, he explains. Great deals everywhere for the picking. Still he isn’t buying. Still he’s watching.
“I met another reader years ago at a conference in the Dominican Republic. He was very upbeat on the real estate market potential of that country. He’d been researching the opportunities for two years, but he hadn’t yet made a move. He was waiting for ‘the’ deal and was paralyzed by the fear of making a move only to have another, better buy surface later. As we got to know each other better over the course of the conference, it came out that, before the Dominican Republic, he had been looking in Costa Rica. After four years of research on the ground in that country, he’d finally decided that the market had passed him by. Prices had risen too far.
“In both cases, had this reader bought something within the first months of his research, he could have been in and out, bought and sold, and realized healthy profits, in less time than he ultimately invested in research. In the two years from the time when the gentleman had begun scouting the Dominican Republic and our meeting, the market had risen 20% to 25% a year. He had, in fact, arrived in the country precisely at the beginning of a boom cycle, but he’d missed out entirely because he wanted the best deal.
“It’s going to be a while before most real estate markets see anything like 20% to 25% annual appreciation across the board again. That does not mean this is not a time to buy. Many good deals are currently available if you focus your search and, critically, if you’re willing to act.
“True distressed sales don’t generally make it to the Internet. This isn’t the place to shop. The real deals are circulated by word-of-mouth. You have to be in a position to get the word at the right time. You’ve got to be connected on the ground. I call it being ‘in a market’–having contacts that keep you informed of what’s really going on, well beyond the Internet or real estate agent radar.
“A colleague in Panama recently made a smokin’ distress purchase. He bought a house in an established community for a 40% discount to current market pricing. At that price, he isn’t worried about a further slide in the marketplace. He’s gotten a good enough deal that it doesn’t matter.
“And he has a plan. He intends to invest a little in rehab and believes that he’ll then be able to flip the place for as much as two times what he paid. Meantime, he plans to live in the place.
“My friend was positioned in the market and connected on the ground. As a result, he was able to be in the right place at the right time, and then, very important, he was willing to make a move.
“This is how you invest in real estate. Bouncing into a country for a whirlwind tour of a few developments isn’t going to provide you with the best investment opportunities. You can find a great second home that way, but if you’re serious about buying for investment, you’ve got to take a different approach entirely. Buying for profit and buying for personal use are two different agendas.
“If you’re buying for profit, you have to invest the time to get to know a market well enough to be able to judge when a true opportunity comes your way. You have to do your homework, and then you have to trust your judgment and let yourself take action. This is no guarantee that you’ll get the best deal, but it is a strategy for making money over the long haul.
“Generally speaking, I believe you can find worthwhile real estate investment opportunities in almost any market if you look hard enough and if you understand the market fundamentals at work. The days of abundance of opportunity are over. But that is not to say it’s not possible in the current market climate to be an active and a successful real estate investor.
“Here’s where you should be focusing your search right now:
“In Panama. Distressed sales in the city aren’t common yet, but I believe will become so over the next six months. This is the time to be positioning yourself in the market and getting comfortable with the fundamentals at work. Rental yields remain very good, so if you’re looking for cash flow rather than a buy-and-flip opportunity, investing in a well-priced apartment in a good location for rental is a great play.
“Outside Panama City, the big opportunity right now is to bank land. From mountain and river property to beachfront and lots in struggling beachfront developments, you can find land in all price ranges with medium- to long-term appreciation potential.
“In the Philippines. Here rental yields are also high. Sales slowed but may already be picking up again. Resort rentals are a great opportunity. Land speculation makes sense, as well.
“Property in the Philippines is priced for the Filipino market. Foreigners can’t hold real estate directly (with the exception of condos). However, there is talk about the government planning to change this. If that happens, beachfront property in certain areas will see a big boost. Look at Cebu and Boracay for the resort rentals. Almost everywhere you can find beachfront lots that qualify as cheap.
“In Uruguay. Another good place to shop for a rental buy. Yields are strong in Montevideo (in both the main city and the old city) and in Punta del Este. You can find distress sales, but as Uruguay, like most countries in this part of the world, is a cash market, most sellers don’t ‘need’ to sell. In other words, this isn’t a market where I’d continue to wait and watch. In Uruguay, I’d buy.”