“Generally, I recommend you avoid real estate held through rights of possession,” Lief explained this morning.
“However, that is not to say it never makes sense to consider a piece of rights of possession property. In fact, there are times when rights of possession land can make big-time sense.
“Extending an offer, performing your due diligence, and making a safe purchase are more complicated, take more time, and can cost a little extra, but it can be worth it.
“The key is to know with certainty whether that deeply discounted ROP land, once you’ve bought it, can be titled in your name.
“‘Rights of possession,’ as the name tells you, is the right to possess a piece of property. It is not the same as title (no matter what the real estate agents in Bocas del Toro, for example, try to tell you).
“Almost without exception, you want to steer clear of land held through rights of adverse possession…but this isn’t the same as rights of possession.
“You can obtain rights of possession to a piece of land by occupying, improving, and working it. You obtain rights of adverse possession by moving onto a piece of land that is owned by someone else and occupying or working it enough years to stake a claim.
“This is the situation in much of Bocas del Toro. The original land-owners here were banana plantations. When the plantations failed, the operators abandoned them. Over the years and decades that followed, people came in and worked the land, some registering their rights of possession. However, there remains a titled owner out there somewhere.
“On the other side of the ROP story is government land that a farmer has been granted the right to work. Maybe the farmer’s family has worked that land for generations but not bothered to title it, because going through the titling process requires hiring an attorney and paying the government a fee. The farmer can sell his land even though he hasn’t titled it, and, in this case, you’re not buying titled land but ROP land.
“My point is that, if you’re shopping as an investor, this kind of ROP purchase can, in fact, be your secret to success (that is, profits). Because the farmer will have to sell for well under the going rate for comparable titled land.
“Again, the purchase process can be complicated, because you have to enlist the owner’s help in titling the property, but, bottom line, you can sometimes buy this way for 50 cents on the dollar.”