The Secret To Timing Your Overseas Property Purchase
If I could live anywhere, where would I live?
My answer to that question has always been Paris.
And that’s where I was living 10 years ago this month when I launched the Live and Invest Overseas publishing group.
I was in Paris, but, after four years in the City of Light, my family and I were preparing to reposition ourselves to Panama.
Paris is one of the world’s best places to spend time… but one of the world’s most maddening places to try to be an entrepreneur. Basing LIOS in France would have been to stack the deck against myself… so from Paris to Panama City we were going.
That final spring in Paris before our move to Panama City a decade ago, we made an effort to take full advantage of the many delights of the city and the season… including frequent picnics on the Seine…
“Seven years ago, when we first came to Paris,” remarked a friend Sunday afternoon, “we intended to buy an apartment.”
She and I were seated on the green, grassy point of the Île de la Cité. Our husbands were off buying ice creams for the children, who were racing around the garden paths, chasing a ball and each other. It was the first officially warm, sunny springlike Sunday in Paris that season.
“I did some research and found a 100-square-meter apartment on the Rue des Archives, in the Marais, selling for the equivalent of 200,000 euros. Two-thousand euros a square meter. In the Marais. I can’t imagine what that apartment would go for today. Maybe 6,000 euros? Maybe 7,000. I try not to think about it.
“Because, in addition to the appreciation in value, there’s been the currency gain.
“We didn’t buy that apartment, because a friend told us the Paris market was at a top. Didn’t make sense to purchase, he advised. Better to rent…
“Today, we look at prices and shake our heads. Could it make any sense to buy now?”
We almost didn’t buy in Ireland 10 years ago for the same reason. The Irish property market seemed at a top. Could it go any higher?
We decided we didn’t care. We needed a place to live, and I wanted an old house to renovate and some land around for gardens and animals.
So we took the plunge, paying what we believed was far too much for a house that, it turned out, needed far more work than we’d bargained for.
Still, six years later, we sold it for three times what we had in it. And we took payment in euros.
We’ve kept those proceeds in euros ever since, investing them on this side of the Pond, meaning that, on the one hand, we’ve welcomed the long slide, during this period, of the U.S. dollar.
On the other hand, all these years we’ve been living in Euroland, we’ve been earning our living in Greenbacks. And, as the dollar shrinks in value month by month, our local expenses don’t.
Should we have fled Paris a year or 18 months ago, when it was clear that the dollar was in for a long and maybe not-so-gradual decline?
Should my friend and her husband not buy an apartment in Paris today because prices are up, in some neighborhoods, threefold from what they were when they began shopping?
I won’t try to answer those questions, because I can’t. Who knows? Surely not me.
An attendee at a conference in Panama City years ago asked me how I could be so confident in my recommendation of Panama as a good place to think about investing time and money. What if things didn’t play out as I was predicting they would, he wanted to know. What if the market turned south on me?
I couldn’t be certain that Panama would develop in the ways I was suggesting it would develop for that gentleman and his fellow conference attendees, of course. I could only detail for them what I believed and what I foresaw, given my experience, my research, and my years of scouting.
But that wasn’t the point, as I tried to explain.
“Organize your affairs so it doesn’t matter,” I told that would-be investor.
“I believe the time is ripe for a serious capital investment in Panama right now,” I explained, “and I’m investing myself.
“But I’m investing elsewhere, too, and so should you.
“Spread your time and your money around. Diversify by region, by market, by type of investment, and by currency.”
I know… talk about stating the obvious. But sometimes it doesn’t hurt to remind ourselves of the fundamentals.
Markets move up and down. So do regions and so do currencies.
When it comes to real estate investing, you can try to time short-term ins and outs. If you’ve got the inclination and the stomach to watch that closely and to administer that intensively.
But, again to state the obvious, buying and selling real estate isn’t like buying and selling stocks. You can’t call your broker and buy Uruguay while you sell Nicaragua short.
Every purchase and every sale is costly. Researching the history of ownership, determining the best way to structure ownership, covering the related holding costs, calculating an exit strategy and the related tax hits… plus, along the way, paying fees to agents, attorneys, notaries, finders, accountants…
Even a “short-term” real estate investment is a long-term commitment.
Frankly, for me, the longer term the better. I prefer to buy because I want to hold. Because I like the place. Because I believe it has some intrinsic value. And because I look forward to opportunities to make use of it.
The old farmhouse in Istria, Croatia, we bought two years ago is worth at least 50% more than what we paid. Plus, we imported dollars to make the euro purchase, so, again, we’ve got the currency gain to compound the capital appreciation. Should we sell?
If we were treating these investments like stock buys, the answer could be yes. We got in at a good time, both in terms of the asset value and of the currency. How much longer should we ride?
More to the point right now—as I believe the Croatia market still has some upside to be seen, but I’d say we’re in for a correction in Buenos Aires—should we sell our apartment in that city?
Again, if these were stock positions, it’d be time to close out in BA. Take the capital gains and put them into a euro buy.
We won’t do that, though, because I bought that little apartment overlooking the park in Barrio Norte because I liked it. Because I look forward to returning to it. Because Buenos Aires figures in our long-term plans.
The BA property market may see a fall… and two or three years from now I may have to admit that our apartment there is worth less than we paid for it. I recognize that’s a possibility. But I won’t mind. I’ll still look forward to future visits to the city of malbec and tango.
Lief takes a more cut-and-dry, bottom-line point of view. He’s happy to accommodate my long-term positions. Meantime, he’s continually placing us in and out of shorter ones.
As I said, it’s possible to be a get-in-and-get-out real estate investor. But you’ve got to pay attention, you can’t afford to overlook anything in your calculations (like transfer fees or stamp duties), and you’ve got to be forever on the move, on the ground in the markets where you’re actively invested.
No amount of internet research can substitute for it if you’re timing your plays.