Foreign Real Estate – Speculative but Profitable
Website design By BotEap.comA prospective real estate investor at a Puerto Vallarta conference in April said he had researched the Costa Rica real estate market for five years, considering making a purchase. Meanwhile, prices appreciated maybe 200% in that period. The market became too expensive for him and he never acted.
Website design By BotEap.comAnother investor at a Real Estate Forum in Puerto Plata explained that he had been watching the market in the Caribbean island of the Dominican Republic for more than two years, but still wasn’t sure if or where to buy. He lamented the rate of appreciation of real estate values during those 24 months.
Website design By BotEap.comTwo pieces of advice: First, yes, do your homework. But second, don’t get paralyzed by analysis. Nothing is guaranteed. You will rarely identify a “perfect” time to buy. You’ll never know you’re making the right move. In any market, at any time, you could lose everything you invest.
Website design By BotEap.comIf those things bother you… you shouldn’t think about investing in international real estate. This is risky business…often speculative…in the unregulated markets of the Wild West. Dealing with people you wouldn’t do business with if you had a choice (sometimes you don’t). If something goes wrong, you probably have little to no recourse.
Website design By BotEap.comThat’s the game. Investing in real estate abroad is riskier and more complicated than investing in real estate in the United States. Acknowledge these truths. Choose your markets. Do your research and due diligence.
Website design By BotEap.comYou should have the answers to the top six factors to consider when making a real estate investment and how each affects your level of income: 1. Why you are making the investment. Do you intend to use and enjoy the property? Or are you just looking at the investment potential? That matters for your initial outlay and your long (or short) term returns. 2. What is your risk tolerance? Know your risk comfort level, is this investment within those parameters? 3. Your financing options. Cash or credit? Your answer helps determine your investment. 4. What fits well in your existing portfolio? To be well balanced, your portfolio must have a variety of assets, including real estate, and your portfolio must include a variety of properties. 5. Your level of experience in the market. Experience is the toughest teacher, because it gives the test before it gives the lesson. 6. Your desired level of participation. Your level of involvement will help determine your type of investment.
Website design By BotEap.comThen act. Take a first step. Do not invest money that you cannot afford to lose. Control circumstances as much as possible. But don’t wait for a signal from above that the time and opportunity are right. The signal will not come… and the market will not wait. For a first trade, you probably shouldn’t invest more than $50,000. Here are six purchases you could make right now (May 2006) on that budget:
Website design By BotEap.com1. A small apartment for short-term rental in Buenos Aires, Argentina. Three years ago, due to the devaluation of the peso, you could have bought a large apartment in a privileged neighborhood for less than $50,000. Values in this market, however, have more than doubled in that period. Still, you can buy a decent apartment in an attractive neighborhood for the short-term renter for about that amount today.
Website design By BotEap.com2. A colonial apartment for short-term rental in Montevideo, Uruguay. Our roving Latin America explorer, Lee Harrison, reports that Uruguay is the best real estate market to buy in the Americas right now. Real estate costs more or less the same in Montevideo as it does in Buenos Aires, except in the Old Towns. Today, you can buy an apartment in the Old Town of Montevideo, which is just beginning to be rediscovered, for as little as $540 per square meter. Compare this to $2,000 per meter or more for a similar purchase in BA
Website design By BotEap.com3. A condominium in Panama City, once again profitable in the short-term market. Here, however, to stay within budget, you will have to finance… which is possible in Panama. Put a $50,000 down payment on a $150,000 apartment…and your rental income could cover your monthly mortgage payments. At today’s values, that $150,000 could buy you a one- or two-bedroom condo in a new building, which is a good product for this rental market.
Website design By BotEap.com4. An apartment with sea views in Croatia, again for the short-term rental market. You can find a good buy for a renovation in some parts of this country for less than $50,000, but it will probably require a substantial additional investment to make it what you need for the rental… maybe as much as another $100,000. Look for new construction instead. Specifically, right now, there’s an opportunity on the island of Ciovo (note that it’s not considered an island by the locals, as it’s connected to the mainland by a bridge that you won’t even notice when driving). This is a destination for middle-class Central Europeans who easily travel from Hungary, Austria and Slovenia for vacations. It also has easy access to Split Airport, which offers daily connecting flights via Zagreb and some direct flights from outside Croatia. There is a newly built studio on this island available for $58,000. Yes, it’s a bit outside the budget parameters suggested above, but it would potentially be a good rental.
Website design By BotEap.com5. Cyprus is struggling with reunification issues. But, with some notable real estate opportunities, and the EU about to make an impact, the rewards may well be worth the risks. In the popular resort town of Kyrenia, in Northern Cyprus, you can get a three-bedroom apartment with a sea view, for just $55,000! (To put it in perspective, a similar property would cost you $110,000 in South Cyprus… $250,000 in Corsica… and $330,000 on the island of Majorca.) Property taxes are almost non-existent. Inheritance taxes have been abolished. And capital gains taxes don’t even kick in until your earnings are over $20,200.
Website design By BotEap.com6. Bulgaria is a peaceful and picturesque country, once home to world-class European ski resorts, and has become one of the fastest developing nations in Europe. It could easily become one of your fastest growing investments. Bulgaria’s mountainous countryside is dotted with old farmhouses begging for restoration. Many compare it to Tuscany in the 1970s. And if you act now, you can buy an abandoned farmhouse nestled in the rolling green hills for just $9,800!
Website design By BotEap.comBorovets is the largest and oldest ski resort in Bulgaria. It is also one of the best investment opportunities in the Alps in the world. And right now, you can get a two-story, 1,200-square-foot home. foot house located in a quiet village minutes from Borovets… with a large garden and views of the slopes– for less than $30,000!
Website design By BotEap.comGood luck.