International Real Estate Market News
Retirement Realty Fiesta
Hugh Bromma, Forbes, The Entrust Group 07.24.07
We recently found that 30% of our roughly 30,000 clients who invest in real estate through self-directed IRAs were interested in investing in offshore real estate. While that might seem like a surprisingly high percentage, longtime real estate investors have been seeing the proverbial writing on the wall for some time.
Interest in offshore real estate has been slowly growing over the last few years, and real property investment opportunities for the small investor outside of the U.S. have multiplied. Add in a softening domestic real estate market, and you have the necessary ingredients for a nascent boom in real estate south of the border.
Interest in real estate in Mexico, Panama, Costa Rica, Nicaragua and other central and South American countries has risen over the last several years. The popularity of Central America appears to be related to its proximity to the U.S., a widely held perception that these locations offer good value for the money, and the notion that offshore property can be used for investment purposes or perhaps second homes or vacation homes. Panama, for example, ties its currency to the U.S. dollar, and the dollar is the medium of exchange. Costa Rica is sometimes called "the Switzerland of the Americas." Mexico is closest geographically and is seeing strong economic growth and investment opportunity.
Just as Spain became an ideal location for Germans to have a second home that could be used for retirement, some believe that Mexico and Central and South America present a similar opportunity for Americans.
But turning these aspirations into reality is definitely more complex than simply purchasing a nice property in a warm climate like Florida or California. The U.S. investor must be clear about his or her objective. You can become enamored on a vacation trip and talk yourself into a purported investment property. But vacation is often an escape from reality, and a true investment must include proper due diligence and an analysis that the investment can meet the necessary financial objectives.
In each venue, whether Mexico, Costa Rica, Panama, Nicaragua, Belize or Ecuador, for example, the language is Spanish. Therefore, even if the local seller is an Anglophone, the language of law is Spanish. Competence in the language of law and expertise in local law is essential. If the prospective investor doesn't have this type of expertise, he should make certain that he is in very close contact with people who do.
Mexico and every other country in Central and South America have different laws regarding real estate and taxes. The vesting of property varies from one country to the next, and so does the method of title transfer.
For example, recently there was a real estate developer in Panama who had begun to grade roads, subdivide property and take deposits of $6,000 per parcel, to be sold for $80,000, for single-family homes. The investors were told that development would start soon after local officials consented, which was thought to be a given.
In Panama, the legal ownership must be registered properly with a central authority. The builder had "purchased" the property from local inhabitants who farmed the land. But the title to the land had never been established by the local inhabitant who had right of possession. When the builder bought the land, he failed to follow the proper procedure of securing title. His time line for completing the process of building and selling suddenly became much longer.
The farmer continued to farm the land, and the developer continued to work with local lawyers. The builder also had to deal with cultural issues. The inhabitants are San Blas Indians, who have a culture of their own, just like many peoples in other countries.
The mayor of the village, who had veto power over most everything, was not in the right frame of mind to go along with some of the revisions to the building plan. The builder's "hill to climb" became even steeper, and the investors had all their deposits returned, without loss, thanks to the deposits remaining un-cashed, with the attorney handling the purchase.
Planning and fully understanding financial objectives, along with language, cultural and legal issues, are among the first set of issues that must be addressed by would-be investors. Then there is the question of how to insure that one's financial objectives are reasonable and sensible.
We've found that the demand for properties in some Mexican and Central American countries has driven property prices to the point where net operating income targets could not be met. In other cases, there are many properties that not only generate cash flow but also appreciate, in popular locations in every country. It is essential that the numbers support your objectives. Beach properties in Costa Rica and mountain properties in the Panamanian highlands are still available as vacation homes, second homes or income-producing properties. But investors need to do their homework and check it twice.
One of the most overlooked issues that may affect the popularity of buying investment property is taxes. Tax issues are not just local; for the U.S. taxpayer, there is the requirement to report and pay tax on worldwide income. In our experience, many investors overlook the reporting requirements to the IRS, and the ordeal of expatriating, if one wants to do that. The matter of designating beneficiaries varies from country to country. It is essential to pay attention to these details with local counsel, along with your U.S. legal counsel.
The number of real estate investors in Mexico and Central America has been increasing, and, not surprisingly, prices for the most desirable properties and locations are rising as well. Beachfront property, in particular, is very much in demand, so cash-on-cash returns should begin to moderate. The more due diligence and planning that is performed, the better. As everywhere, caveat emptor is the rule.
Hubert Bromma is CEO of the Entrust Group ( www.theentrustgroup.com) and author of How to Invest in Real Estate and Pay Little or No Taxes . His new book, How to Invest in Real Estate with Your IRA & 401(k) and Pay Little or No Taxes , is published by McGraw-Hill.
California and Florida lead the way for buyers of real estate in Central America
Most of the foreign buyers for real estate in Central America are from the US - with California and Florida leading the way. The graph adds the detail to this trend. It includes not only buyers but people researching Central American real estate markets over the internet. The last two years have seen a slight but perceptible shift with more buyers appearing from Europe and South Asia. Many of whom are likely to have business interests in, and/or spend time in, the US.
Highest, medium and lowest searches for real estate online
The results that underpin the graph above are for July 07. But the trends have stayed the same for a number of years. Perhaps we will see the numbers of searches for “Panama real estate” and “Belize real estate” catch up with “Costa Rica real estate.” At the moment though, Costa Rica is the leader for real estate searching online.
ECUADOR | Opportunity in the Land of the Sun
by Gary A. Scott, International Service Center
One of the wonderful benefits of Ecuador's agriculture is an extreme supply of excellent but low cost food.
Ecuador is a Garden of Eden and here is a fact you probably did not know. The inhabitants of this region developed more than half the agricultural products that the world eats today. Among these are more than many varieties of corn and potato. There foods also include squash, beans, peppers, peanuts, popcorn, yucca and quinoa.
They even learned to use freezing night temperatures and warm days to freeze dry potatoes and create potato flour.
Here is the market, three blocks from our hotel where we shop. Open air restaurants in the front of the market offer excellent meals, vegetarian, or chicken, steak, fish or pork for about $1. You can see pictures in the market a www.ecuadorliving.com/chapter04.html
There are enumerable fresh picked vegetables.
Offered by happy friendly people.
And every type of fruit you can imagine, from pineapple to coconut, papaya, mango, apples, pears, bananas, berries and numerous other tropical fruits all at bargains prices by Western standards and ripe all year round.
Many exotic spices at a 1/20th the cost in the US or Canada. I bought a huge bag of Star Anise probably a pound yesterday for $1.
This makes life especially wonderful and inexpensive.
Every Thursday is a day of markets for food in Ibarra, our nearest major city.
Often Merri and I hop in a taxi and ride to the fish market. This is the day that the vendors bring in wonderful fresh seafood to Ibarra market from Ecuador's Pacific coast which is a few hours drive away.
There are dozens and dozens of vendors with all types of fish.
Being coastal residents for decades, Merri and I brought our chef, Santiago, to train him how to select only the freshest fish for the Quinoa Café.
The fish at the market are wonderful. Here are fresh shrimp of all types and a great variety of fish from Red Snapper to Drum to Corvina. What's interesting is that many of the Pacific fish here are the same we had from the Gulf of Mexico. We find baskets and baskets of fish, shrimp, calamari, crab and conchs.
We bought Drum, Reds, Pompano, Calamari and many pounds of Tiger Shrimp, enough to feed 12 people four meals. The price was under $30. We helped our chef, Santiago, cook the meals and had shrimp coconut quinoa, quinoa paella, bouillabaisse and pan sautéed Red Fish with fresh organic green beans.
Today's meal was great because the seafood is so fresh.
Our Thai coconut shrimp consisted of fresh coconut (purchased at the market for 40 cents) chopped in chunks and sautéed with carrots, onions and celery. Then we lightly pan steamed red fish and the tiger shrimp. This was mixed in a bed of quinoa (the ancient grain of Ecuador) and rice. The Thai sauce (that's my job) consists of fresh squeezed limes, a hint of garlic, lots of ginger, a little panela (cane sugar), a touch of curry paste in the coconut water and then blended with pan roasted peanuts.
One guests said it was the best meal they had ever eaten. Not bad, enjoyed al fresco in the court yard under a brilliant clear sky for less than seven bucks.
One other nice ingredient is the Salinas salt we use. We bought five pounds in the market for $1.50. This is salt that's healthy not the refined stuff that Morton's passes off. Salinas parish covers a rural area of Ecuador stretching from the pastures of the 13,000 foot Andes down to tropical valleys where sugar, bananas and cocoa are grown. It has graveled roads, a school in almost every hamlet, a network of co-operative businesses and a thriving population of about 10,000 who no longer seek work in the cities. These pure salt springs near us at Salinas in Imbabura, have long been used by the natives.
Speaking of value, the Ibarra market is huge. There is the fish and seafood section. There are also separate sections for fruit, flowers, poultry, meat, vegetables, dry goods, live chickens and guinea pigs and even a section to eat and drink juices.
Those who join us for meals in the Quinoa Café courtyard say they are amazed at the low prices. We begin with a full breakfast of fresh squeezed exotic juice, fresh fruit, granola or quinoa cereal, eggs, bacon or ham, rolls, coffee, tea or hot chocolate (from the Amazon). All served here in Meson's courtyard for five bucks.
The deserts can be really special in Cotacachi as well. This is the place of the roses and one specialty served nearby is crystallized organic rose, which does melt in your mouth!
There is an added joy that comes from all these pleasures. The hotel is totally owned by a charitable foundation started by Joe Cox Esq., Joe Spano MD, Merri and myself.
In our years of making donations down here, we have learned a lot about giving. There are people here who are homeless and not totally competent. They need help and we feed them at the hotel.
Many children need help and we have organized and funded a children's lending library. We have 300 plus children, teenagers and campesinos all learning English free here weekly.
Then there are those who wish to work but cannot find employment. LOTS main goal is to create true employment. We run the hotel and an expanding real estate rental service. We also fund free English courses and computer science programs so locals can compete from Cotacachi in other markets with their computer skills.
All proceeds from the profits of the hotel go to programs such as feeding the poor, the library, teaching English and computer skills, providing scholarships and creating employment.
We also put the café to charitable use. We just started another little program here working with the museum next door. The curators of the museum are now bringing in school classes and giving them a tour and lecture about history of Cotacachi. These children get to experience all of the exhibits in the gorgeous former municipal palace. We then feed them lunch.
Many of these children have never eaten in restaurants before.) They enjoy the education and the food and they have fun.
These charitable programs put us into many inside situations where we spot special opportunities where people can earn extra income as they help the poor.
We hope to share this magical land with you and are continually sniffing out what's going on in Ecuador and report what we find with our Ecuador Living Ezine subscribers. You can enjoy Ecuador Living for less than $10 a month. When you subscribe we will send you a nine chapter, 81 page, $49 report, "Ecuador, Opportunity in Land of the Sun" FREE.
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