Stephen Gasque of Real Estate Today talk radio had me on his program last week. Topic of our discussion?
Buying property overseas.
“Who would do this?” Stephen asked.
“I mean… don’t you need a million dollars or a jet-setter’s background to get started at this?” he wondered…
I’ve told you about Lief’s first real estate investment outside the States.
In 2000, Lief drove the entire coast of Spain scouting opportunity. He identified, in Estepona, a pre-construction condo project that he believed stood out from the rest. He phoned me from Spain (I was back home in Ireland with the kids) to tell me about it…
“The numbers work,” Lief assured me during that long-ago late-night call.
“But we’ll need to act quickly. The developer launched this offer two days ago, and already more than half of the units have been sold. He’s telling me the remaining condos will go by the end of the week, and I believe him.”
I (now famously… Lief enjoys telling this story at cocktail parties) was reluctant.
“It feels like maybe we’re moving too fast,” I replied. “Maybe more due diligence is called for?”
“I have a feeling about this one,” responded my husband who is much more about data and spreadsheets than feelings.
If he had a feeling, maybe I should just go along with it, I told myself… and so I did.
Lief made that purchase with a down payment of 5,000 euro.
The structure of the pre-construction offer meant that we didn’t have to come up with anything beyond the 5,000 euros for several months. We made three more payments of 20,000 euros apiece over the coming 24 months.
Then Lief sold the property before the completion of construction… earning a return that amounted to 35% per year for his trouble.
And without having to come up with the final payment… meaning minimal out-of-pocket capital required.
Better to be lucky than good, so they say. In this case, Lief was both.
My first non-U.S. real estate purchase had been a few years earlier. In 1994, a small group of friends and I purchased a piece of land on the southern Pacific coast of Nicaragua. We put up US$50,000 apiece to buy about 2,000 acres of raw, undeveloped cattle land fronted by a long stretch of crashing surf.
For me, at the time, that US$50,000 was all I had in the world, the accumulation of years of saving.
Would I invest my only US$50,000 in a single property purchase today? No, probably not. But, fortunately, as it turns out, 23 years ago I understood way less about the importance of diversification than I do today.
Plus, I was young, enthusiastic, and optimistic. If I lost that US$50,000, I reassured myself… I’d start working to save it all over again. Ah, youth.
I can say today that my naiveté was fortunate because my early exit from that deal saw my US$50,000 turn into US$350,000… which I was able to use to invest in three other opportunities.
Like Lief, I was rewarded for being both lucky and good. Though, if I’m honest, the smarts that went into that buy were not my own but those of the older, more experienced friends with whom I made the purchase. I was able to leverage their know-how… and then we all enjoyed fortunate market timing.
“Would you say that real estate markets overseas can be counted on to go up?” Stephen Gasque asked me later in our discussion last week.
“Yes… and no,” I replied.
“Overseas property markets go up… and down,” I continued, “just like U.S. property markets. All markets cycle, some more dramatically than others…”
Lief and I both have made money on overseas property deals, including our virgin efforts… but we both have lost money investing in foreign real estate, as well. Twenty-plus years into our overseas property investment careers, we’ve both had the experience of losing everything in a deal. It happens.
No investment strategy is guaranteed successful 100% of the time.
The big-picture upside of global property investing, Lief and I have found, is that it’s not only a way to make money. It’s also a strategy for creating, organically, over time, a rich, diverse, and adventure-filled lifestyle. Buying, managing, and selling property in different countries means traveling to those countries… making connections in those places… and becoming part of the local scene in a way that you don’t otherwise.
After more than two decades pursuing this strategy, Lief and I have friends across the world who welcome us warmly every time we return… as though we were returning home.
And, in each case, in a sense, we are.