Buy Where You Want To Be
Sometime in the middle of the Iraq war, another real estate investment writer wrote me to ask my opinion about the Kurdistan real estate market. My response was short–I hadn’t ever thought about it. He went on to quote me economic data and prices for Iraq and its Kurdistan region. He was very bullish on the market and pushed the area for a while. I don’t know if he ever invested in real estate there himself, but I didn’t give the idea a second thought, despite the compelling facts and figures the guy had sent me.
Because I had no interest in spending time in Kurdistan. Ever.
It’s never a good idea to make a real estate investment decision based purely on economic data and statistics. Neither should you, though (I’m speaking generally…there can be exceptions), make a real estate investment before scouting the location in person. It’s the scouting thing that got me when the guy suggested Kurdistan to me. Who in his right mind wanted to put boots on the ground in that part of the world at that time?
I’m writing from Medellin, Colombia, where Kathie and I have been all this week for the Live and Invest in Colombia Conference. We continue to receive e-mails from readers asking why in the world we’ve got our boots on the ground in this part of the world. Don’t we know it’s dangerous?
In fact, we know it’s not dangerous. Because we’ve spent enough time here to find out for ourselves that it’s nothing like what most of the world thinks it is. We found out by coming for a visit. And we came for a visit because we were intrigued by reports from friends and contacts whose opinions we trusted.
That’s the point. You shouldn’t invest in real estate in another country blindly (without having seen it for yourself). So you shouldn’t invest in a place where you don’t want to go. This is especially true when it comes to rental or agricultural property that requires ongoing management. Kurdistan is not and has not ever been on my Places I Want To Spend Time list.
You shouldn’t invest in a place where you don’t want to be, and you shouldn’t invest in a property you haven’t seen. I’ve broken this rule over the years. Sometimes it works out, sometimes it doesn’t. One time it didn’t work out in a big way. This was a pre-construction investment in Newcastle in the United Kingdom.
The recommendation came from a co-worker, and the numbers looked good on paper and according to his recounting. Though I never had, the guy who put me on to the idea had been to Newcastle before, and so I was acting based on his judgment. In hindsight, the timing of the purchase couldn’t have been worse. Not long after I’d bought and before the building where I’d invested had been completed, the U.K. real estate market and eventually the global real estate market turned sharply. The investment went completely south. This wasn’t 100% to do with the project. World property markets took epic shifts around this time.
However, if I had taken the time to make a trip to Newcastle and view the site, I would have passed on the deal. The location was just okay, not great. The style of the building, the quality of the finishes, and the layout of the units would have further inspired me to take a pass. Bottom line, I would have found the project mediocre at best and the city of Newcastle completely unappealing. I finally visited only after having made the buy and realized within an hour of being on the ground that this was not a place I ever wanted to return to.
That’s the story of the worst property investment I’ve ever made. Lesson learned.
Lief Simon
P.S. Back in Medellin this week, I can report that good opportunities still abound in this market. Our first investment has turned out so nicely now that the renovation is finally complete that we’ve decided not to rent it. Maybe, eventually, we’ll rent the apartment to get some cash flow out of it, but for now we’d like a chance to enjoy it. This is a place where we want to be able to spend as much time as possible.
Meantime, I’m looking for another apartment to buy as a straight rental investment. At current pricing, rental yields are still good. More important, Medellin is a place that makes sense long term.
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