One big downside with real estate is that it’s relatively illiquid.
You can sell a stock, bond, or mutual fund instantly (albeit maybe not at the price you want). Metals and coins can generally be sold within a few days.
Numismatic coins that are more niche may need to go to auction but aren’t likely to be sitting around for seven years or more once you decide to sell them.
Seven years is what a real estate agent once told me a house he listed had been on the market for. The owner had tried agent after agent, as well as listing it himself.
The house is in a remote area of Panama, and Panama is a place where even the local city agents don’t work too hard. They’re happy to take a listing, but don’t put much effort into marketing.
This house wasn’t bought as an investment property, but rather a place to live. Nevertheless, it makes the point that you must consider the sale when you’re making the purchase.
A more famous property that proved difficult to sell in the United States was Michael Jordan’s house in Highland Park, Illinois. Highland Park is an upscale town north of Chicago with plenty of multi-million-dollar houses. However, the median sale price for 2024 was just $765,000.
Jordan’s house was first listed in 2012 for $29 million.
Being the most expensive house in the neighborhood is generally a tough position when selling.
In the case of Jordan’s house, it was not only the most expensive in the area, but also highly personalized. With an indoor basketball court and gym that puts most professional gyms to shame, it’s a house that required the right buyer… And it took more than 12 years for that buyer to be found.
Finally, it sold for the knockdown price of $9.5 million. It’s now available as a rental at $150,000 a month.
It just goes to show that even at a greatly reduced price, a unique property or one in a remote area may still not sell quickly.
As an investor, you need to take resale into consideration when you’re buying.
A great rental property may become less of a good rental property over time. For a residential rental, you can always sell it to someone who just wants to live on the property if the property is in the right neighborhood.
A lot of triple net lease standalone retail properties were great investments in the States until the tenant moved out. Without a tenant, selling such a property is difficult.
Overseas, the liquidity question starts with the market and who the buyers are for the product you’re looking to invest in. You have three main categories: local buyers, international buyers, and markets with both local and international buyers.
Belize is a good example of an international-only market for most properties on Ambergris Caye. The beachfront condos on Ambergris Caye are, unfortunately, out of the reach of most locals.
Most buyers for Belize come from North America and Europe. How the local economy in Belize is doing doesn’t affect the real estate market on Ambergris Caye. As the saying goes, if the United States catches a cold, country X gets the flu.
Paris, on the other hand, has both locals who live and work there who buy and rent, as well as an international market that includes buyers from every continent. Paris apartments, even in a slow market, don’t stay on the market for years unless there is something seriously wrong with them that requires renovation and repairs.
If you’re buying for pure investment purposes for a rental yield, you can be in any of the three types of markets and expect reasonable liquidity.
Once you move on the scale away from pure investment towards personal use, even a property that you just want to use for a vacation once a year and rent out the rest of the year requires more attention to your intended hold period and exit strategy.
The more you personalize a property, like Michael Jordan did with his house north of Chicago, the harder it will be to not only sell, but to get a return on the cost of personalization.
Once you’ve decided to sell, your liquidity for an overseas property will be improved by listing with as many active real estate agents you can find in the market, as well as pricing the property correctly when you list.
The guy with the house in Panama didn’t stand a chance on selling his property quickly, but it shouldn’t be on the market seven years later. He didn’t list with multiple agents when he first listed. He relied on one local agent who wanted exclusivity.
Don’t sign an exclusivity agreement with an agent overseas. It’s as simple as that.
The agent wants exclusivity, but they aren’t going to work for it.
Stay diversified,
Lief Simon
Editor, Offshore Living Letter
