Anyone investing(ed) in property in Central America?

Ann McRae · February 3, 2008

We are wondering whether this makes sense from an investment perspective. With the current strong Cdn dollar, offshore property has become more affordable. Rental income followed by retirement home sounds hugely appealing.

Would love to know of any personal experiences.

ann

jensen photos · February 3, 2008

In itself it is not a bad idea, I would dig back into the history of whatever countries politics happened in the past 50 years to see if it is stable or not.

For example, stay away from investing in Venezuela, the current government will have no compunctions about taking away property from foreign investors, even from "good socialists" from the likes of Canada.

Peru is pretty normal right now, the problems with the Shining Path communists seem to have subsided. I would also suggest Brazil, Chile and Uraguay.

leaforte · February 3, 2008

A few of my friends seem to have faded into early retirement in both Belize, and Costa Rica. And they're loving it. Affordable it seems.

ShepsMom · February 3, 2008

I had a friend who bought a place in Costa Rica, it was just a vacation home, he has maid living in, as he could only could come up couple times a year.
His place was trashed and burglarized, he put it on the market and it took him about 1-1.5 years to sell darn thing. So be carefull!

My other friend who lives in Europe is talking about investing in property and financially in Dominican Republic. I'll have to find out how well deal is going. I wont see him unfortunately, but i'm sure he'll keep in touch.

Ann McRae · February 3, 2008

Thanks everyone.
I don't think we are looking as far as South America.
We need to weigh the following against each other:

Established resort area (Playa del Carmen, Puerto Vallarta or Cabo) to which there are direct flights from here and stable rental markets or newly developing resort areas like Belize, parts of Honduras, Panama and Costa Rica. Harder to get to from here, likely more at risk if the global market softens lots.

Personal wish to be in a relatively undeveloped place with magnificent beach and great photo ops against real income potential.

We are in the ridiculous position of needing a capital gain for tax reasons, and the other logical places to put our money (college tuition or home renos) don't qualify!

gus · February 3, 2008

Ann McRae wrote:

Personal wish to be in a relatively undeveloped place with magnificent beach and great photo ops against real income potential.

Well Ann...here is where im going in about 10 years.

Ann McRae · February 3, 2008

gus wrote:

Well Ann...here is where im going in about 10 years.

Looks very similar, but for latitude and longitude, to this

Positively dreamy

Justiceiro · February 5, 2008

Ann,

Investing in Foreign property isn't a bad idea. My wife and I bought a seaside apartment in the Algarve back when it was cheap to do so. It's not too difficult, at least in a popular tourist place like Portugal, to get somebody to manage it (a property rental management company) for 10-15%. If you choose your location right, you can make quite a bit of money over the long term.

A couple of things to think about.

1- As mentioned before, you need to think about the stability of the regime, and their attitude towards foreigners owning property. This can be touchy in some of the countries of Latin America. Costa Rica and Brazil seem to be the best choices in this regard, to me. Possibly Panama. I would feel much better if the property was in the EU, as thier property rights protections are ironclad- but it ain't cheap. Wait until the USD really tanks, however, and you might pick up something cheap in the US!

2- Be cautious about contracting a loan in a foreign currency. We bought in cheap Euros, but now we pay our mortgage in expensive Euros. This is fine if the loan is small enough not to matter, or if you can generate income in the local currency to cover the cost of local debt. In Latin America, I don't think it is difficult get a loan in USD, but as your Canadian, this isn't really good protection for you. The dollar will likely climb again after 2011. If you can, buy the property outright.

3- Crime is important. If you can, get a place in an area without a great deal of general crime, and a strong police force. This can vary, even inside the same country (Jersey City vs. Tennesee, for example). Pick a populated, busy area. A resort is probably good. Of course, the best way to prevent crime is to insure that the property is inhabited as much as posibble. Or you can get an apartment in a building that has permanent residents (that's what we did).

Overall, Latin America makes me nervous. There is a lot of history of financial wierdness and economic populism (when the economy tanks, taking the gringos stuff is always a popular move among certain sections of the populace). This is going to sound like a wierd suggestion, but I would look at recent entrants to the European Union.

Romania and Bulgaria are both cheap right now. And with educated populaces and decent industrial bases, in 10 years they will be crazy expensive. I remember when I lvied in the Czech republic in the mid 90's you could buy things for ridiculous prices. I knew, peripherally, (and not as a client!) a small time drug dealer in Prague who bought a castle for $100,000 or so. Right now properties int he Czech republic are incredibly valuable.

Romania and Bulgaria have a fantastic Black Sea Riviera that is very popular with European tourists who want something like the French Riviera or Costa del Sol, but don't want to pay the prices.

Bulgaria has excellent skiing.

Both countries, being in the EU, have solid legal systems and property law- and no restrictions or penalties regarding foreign ownership of property.

Andy · February 5, 2008

Justiceiro wrote:

a seaside apartment in the Algarve

One of the nicest areas on the globe

Justiceiro · February 5, 2008

Andy wrote:

One of the nicest areas on the globe

Absolutely. My wife's mother's family is from that area, so we visit them every year. It's still a cheap European destination. Firendly folks, good food- and folks usually don't mind having their picture taken. Another advantage!

Ann McRae · February 5, 2008

Hi Justi

1- stability of the regime, and their attitude towards foreigners owning property. This can be touchy in some of the countries of Latin America. Costa Rica and Brazil Wait until the USD really tanks, however, and you might pick up something cheap in the US!

Agreed. And for established rental markets, I think we should be thinking Mexico - not the cheapest alternative, and probably not where I want to be in the end, but if this is investment rental then Playa del Carmen or Puerto Vallarta make a lot of sense. Alternately, we could gamble on some exotic preconstruction for flip purposes. But the idea is capital gain, not another business loss!

2- Be cautious about contracting a loan in a foreign currency. We bought in cheap Euros, but now we pay our mortgage in expensive Euros.

My friend said just that - he had a mortgage in Swiss francs and got bit big time. His current investment property is in Canada - no more mortgage uncertainty for his. I think we would use a cdn loan to buy it outright.

3- Crime is important. Pick a populated, busy area. A resort is probably good. Of course, the best way to prevent crime is to insure that the property is inhabited as much as posibble.

Agreed

Overall, Latin America makes me nervous.

But it is close, beautiful and developing.

Both countries, being in the EU, have solid legal systems and property law- and no restrictions or penalties regarding foreign ownership of property.

And the EU is far away, and something I currently don't know much about. We had a trip to Portugal all planned in 1990, but had the first born instead!

rolleyes

ShepsMom · February 5, 2008

Justiceiro wrote:

Ann,

I remember when I lvied in the Czech republic in the mid 90's you could buy things for ridiculous prices. I knew, peripherally, (and not as a client!) a small time drug dealer in Prague who bought a castle for $100,000 or so. Right now properties int he Czech republic are incredibly valuable.

We're not talking about the same guy here are we?

My guy converted castle into hotel and trying to get rid of it now. It is in Prague, I'm not sure about the drugs though....

Justiceiro · February 6, 2008

ShepsMom wrote:

We're not talking about the same guy here are we?
My guy converted castle into hotel and trying to get rid of it now. It is in Prague, I'm not sure about the drugs though....

I doubt it! This was an English woman, and it must have been around 1993. Might be the same castle, though.:D

Anyone investing(ed) in property in Central America?

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