This Retirement Nest Egg Has Doubled In Value In The Past Six Years…Now What?
Resident global real estate investing expert (and my husband) Lief Simon and I have been investing in global real estate for more than 17 years. We’ve bought, sold, rented, renovated, and rehabbed in 20 countries. We’ve made money…and we’ve lost some…
And here’s the best piece of advice I can offer based on all that experience.
Buy what you like.
Like all investors, our portfolios have been affected by the events of the past few years. We’re taking stock right now, as we’re preparing to make some new buys in some new markets. What has worked, we’re asking ourselves? Where and how have we made the greatest profits?
Lief and I make a good team when it comes to property investing. Lief brings a refined market-, research, numbers-based perspective to the table and stays focused on the bottom line. He wants to double his money every three to five years, and he’s able to take in all relevant data and to determine the chances of achieving that objective at any time in any market. He filters and synthesizes and comes to a clear conclusion.
Buy…don’t buy…move on…for Lief, it’s all about the numbers.
For me, it’s about the lifestyle.
When I consider a real estate purchase, I try to process how the property will fit itself into our lives, both right now and long term.
First I wonder about the property itself. Does it have good bones, some intrinsic historic or architectural value that will allow us to make a project of it?
Second, is it located in a place that we’ll look for excuses to visit? A place I can imagine Lief and I seeking out in our golden years…and the kids going out of their way to return to?
Unless the property is at least one of those things, I can’t get excited about it.
That’s not to say we haven’t bought many pieces of real estate that were neither fun renovation projects for me nor fun holiday venues for the children. Years ago, we bought a condo pre-construction on the Costa del Sol, for example. Nothing fun (in my opinion) about that. A boxy, nondescript apartment unit in a trashy tourist town.
The kids and I never saw the place, but Lief flipped it after two years for an annualized return on investment of about 35%. Had he held the place for three years, he would have doubled his money…meaning, for Lief, this was a successful buy.
However, what we’re realizing as we review all investments to date to determine our next steps is that the most successful buys so far have been those that have met both Lief and my criteria. Perhaps coincidentally, our biggest profit hits have come from properties we’ve bought together…properties that we wanted to own, profit targets notwithstanding.
One of our most successful purchases has been our apartment in Paris.
When we set out on the search for this pied-a-terre in the City of Light, Lief did his market value research as always, determined where he wanted to buy and how much he wanted to pay per square meter, taking into consideration realistic rental rates, the costs of acquisition, the ongoing expenses of owning property in this city, and historic data on property appreciation rates arrondissement by arrondissement. Then he lined up viewings.
Every apartment we saw met Lief’s criteria, more or less, and we could have bought any one of them and made money over time.
However, we weren’t buying this apartment for the profit potential. At least not entirely. We were shopping for somewhere to park some capital, in a hard asset that could reasonably be expected to grow in value over the long term, yes. And Lief was looking forward to the possibility of owning a rental in one of the world’s most active rental markets.
However, we were also buying a place where we—Lief, me, the kids, and, eventually, the grandkids—would look forward to returning at every opportunity. A place we could make our own.
We were looking to make an investment that would, quite literally, become part of our retirement plan, as it’d eventually be at least our part-time retirement home.
I knew it the instant we walked through the front door. Un coup de coeur, the French call it, a heartfelt recognition that you’ve found home.
Now, six years later, as we regroup on our global real estate investing track record and current portfolio, we realize that this little 300-year-old apartment is worth at least twice what we paid for it. Some valuations right now have it worth two-and-a-half times as much.
I’ve reluctantly passed these appraisals along to Lief…
“If that’s true, then we should sell!” he has replied. “We could buy a fixer-upper for what we paid six years ago for this place…and diversify the profits elsewhere. Or maybe buy two apartments today in Paris with the proceeds from the sale of this one!”
“Yes…yes…you’re right, dear…”
This was a team buy. What to do now that one member of the team is ready to execute an exit strategy…while the other continues to day-dream about her next return visit to the apartment that has so captured her heart and taken such a front-and-center position in her long-term retirement plan?
The debate (with my fickle teammate) continues…