Greatest Successes, Biggest Failures—Confessions Of Two Global Property Pros
“I just want to tell you how much I appreciate what you and Lief have done here. To pull all of this together. I went back to my room last night, and my head was swimming. So much to process. So much opportunity. And it’s all thanks to you and Lief that I now have access to it…”
–An attendee at last week’s Global Property Summit
Our first morning together for last week’s Global Property Summit in Panama City, I asked our two key panelists two pointed questions. Specifically, I wanted to know:
Q: “What’s the biggest investment success of your career to date… and what’s been your biggest failure?”
Lee Harrison: My biggest failure was the first property I bought, in Cuenca, Ecuador, about 13 years ago. I negotiated way down from the asking price and thought I was getting a great deal. I wasn’t. The country had just dollarized, and nobody on the ground knew what anything was worth. I sold three years after buying for US$25,000 less than I’d paid. I simply didn’t understand the dynamics of the market.
My best ongoing success is Medellín, where I’m seeing great net returns from two rental apartments.
The appreciation success that stands out in my mind was in Brazil, where I bought a beach house and then sold it six months later for 78% more than I’d paid. That’s exciting… to be able to pocket profits like that in less than a year.
Lief Simon: The successes tend to fade faster than the failures. When I think back over my career buying and selling, it’s the failures that come to mind first. Direct investments with developers can be risky, and I’ve had a couple of those kinds of investments go bad. However, my biggest disaster investment was a pre-construction purchase in Newcastle in 2005. The rental market there fell out completely. I made the mistake of making this investment based solely on the recommendation of a colleague. Had I looked at the market myself, I never would have invested.
My first pre-construction purchase in Spain was a textbook success. I sold the contract for the unit I’d bought 20 months after signing, before I had to take possession. I didn’t have to come up with the final balloon payment, and I banked annualized returns of 35% over the period I held the asset.
Q: “If you were starting out today,” I wondered next, “what would you buy? That is, what would you recommend to someone looking to make a first purchase in 2015?”
Lee Harrison: I’d buy a rental apartment in Cuenca. You can buy a rentable property for less than US$100,000, and you can expect a net yield of at least 10% per year. Plus you’ll see some steady appreciation in the value of the property year on year.
Lief Simon: If I were making a first buy today, I’d focus on agriculture. You can buy into a turn-key investment for less than US$50,000. The mango plantation in Panama that we’ve been speaking about has a minimum buy-in of only US$36,500. You’d begin seeing a return in year four, and over the lifetime of the investment you’re looking at an average annualized return of 17% over 20 years.
My second purchase would be a beach rental in Las Terrenas in the Dominican Republic. Because it’s possible for nonresident foreigners to borrow locally to purchase real estate in the Dominican Republic, you could get into this market with as little as US$50,000. As Lee suggests for Cuenca, you’re looking at cash flow of 10% net per year at least and steady appreciation in the value of the apartment. I’ve been watching the DR for more than 10 years. This is the year to buy here, and Las Terrenas, specifically, is the spot.
Editor’s Note: Today is your last chance to access the recordings from last week’s Global Property Summit at the 60% off, pre-release discount. After midnight tonight, you’ll pay full price.
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