International STR Investing
New to Real Estate · Ashburn, VA · Member since 2022 · 9 posts · 4 votes
Hi all,
We are considering shifting our focus more toward STR, like everybody else :) There are a couple of Caribbean islands that are close to our heart, and that we feel reasonably safe starting out in. Questions as a first-timer trying international STR: Anybody have experience internationally that they can share regarding safety, security, property management in Latin American Caribbean or similar locations? Also, do we generally post on both AirBnB and VRBO? If so, how does one balance those bookings, especially with instant bookings?
Thanks for any pearls of wisdom,
- Matt
I invest internationally and am at times getting so discouraged by the reaction to posts about that topic, especially those from people who don't invest internationally because of their own fears and are discouraging those who want to tempt the adventure (which might or might not be the case for those who have replied on this specific posts). That's when I some days lose faith in the BiggerPockets community. Are we really here to discourage the people who are taking bold action and/or going after their dreams because we project our own fears on them or because we don't want to see them succeed because deep inside of ourselves, we want to invest internationally but don't dare doing and so the last thing we want is to see other people successfully doing it.
I see repeated negative posts from the same people (not those who replied here thus far) from people in the international forum and I'm left wondering why they're hanging in the international forum if they're negative about international investing.
By the way, even though I totally disagree with him on this matter, I have to command @John Carbone for writing in all honesty "I haven't researched ... I think...". But then, does it make sense to give a negative advice and discourage somebody from doing something without doing any research? I invest in the Caribbean and totally disagree. Usually, I would explain in detail why but I'm short on time so I'm going to stick to the general but important topics here. Matt, please feel free to reach out by DM if you want.
@John Underwood, I love your many contributions to the forum but, as an international investor, like a large and increasing number of American and Canadians, I find myself constantly at odds with your opinions on international investing. I guess that's what makes a great forum! :)
In this case, I guess you make clear that part of your advice reflects your own personal preferences so I'm not going to argue against that. Otherwise, your advice looks nice on paper and might be the right advice for some people, but, in my opinion, not for most. International investing can be very easy or very complicated, depending on what you do and where, what you know and who you know but it can be way easier than most people think. Also, the idea of making money in the US to rent in the Caribbean sounds again nice on paper but only make senses for so-called lifestyle buyers and Matt talks about investing there, not merely visiting as far as I understand it.
Moreover, you'd need to make money in the US first and it's no secret that, in many places (including many of the most visited places by STR renters), real estate prices have been propped up to unsustainable by artificially low interest rates. The FED almost lost its credibility by keeping interest too low for too long and is probably not gonna make that mistake ever again. The 15-year period of cheap money on which every US real estate investor has surfed is over. The current 6% mortgage interest rate is actually normal in a historical perspective and a lot of US real estate isn't profitable with such a rate and it might not go back down to a real-estate friendly level anytime soon. The FED made a huge mistake by bringing interest rates too low for too long and have us risk some sort of hyperinflation and their credibility has been badly if not irreparably damaged so I don't think we'll see super low interest rates again anytime soon in the US.
As long-term rentals becomes less profitable, short-term rentals are going to be more and more popular. There is already a huge amount of them and the law of economics tell us that, eventually, there's going to be a huge oversupply which is going to result in a drastic fall in profitability and occupancy rates.
I have often wondered here why people who don't invest internationally give advice about the topic of international investing. I don't invest in US short-term rentals so I won't allow myself to give any advice about that subject. What I just wrote is just plain economics and I'm an economist and I think so many people are going to be surprised and see how I was right with this in a few years.
Whether you agree on what I just wrote or not, we know, by hanging on BiggerPockets, that investing in the US has become more challenging to many as a result of many headwinds faced by investors like very high prices and high interest rates. Contrast that with international investing, which has huge tailwinds like the resumption of explosion in international travel, which actually was already going on pre-Covid and, the emergence of the local middle classes and, most importantly the life-changing explosion of remote working is a huge.
The latter tailwind is particularly powerful and can't be overestimated. I live in beautiful Montreal which is a great place to live but the winters are very long. You'd think that the locals are used to it but they hate it and more and more so as age passes. When I talk to my friends who invest locally, I sometimes jokingly say "Do you realize that, with the normalization of remote working, there's no reason for people to stay in Montreal and live a life of stress and bad weather and have a high cost of living when you can move to Mexico, buy properties for much cheaper, have beautiful weather pretty much all year round, less stress, no traffic jam.... For them, I might be joking but I'm not. You already see the migration within the US from the North to the Sun Belt. As Florida becomes unaffordable, the next step is Mexico (where, unlike in Florida, you're guaranteed nice weather in winter). It's already happening, as shown by statistics and anecdotally the sharp increase in the number of BiggerPockets member asking for my help investing there. Once short-term rental only markets are becoming huge long-term rental markets too.
You just have to open your eyes and your world and see further than your own country and all of a sudden you see all these opportunities you had no idea about.
While I'm on BiggerPockets to contribute, I sometimes wonder why I'm not shooting myself in the foot why praising international investing. I might as well leave everyone fight and overbid for the same piece of overpriced US or Canadian property while I have no competition in scooping international bargains.
So Matt, finally, to the essence of your questions:
1. What do you mean exactly by safety and security? Is it safe for people to travel there? Can something happen to your property? What do you mean exactly?
2. Regarding Airbnb and VRBO, I don't invest in the US so I can't compare but I imagine it should be the same. And others have already replied to that anyway.
Hope this helps!
I would just keep my STR's reasonably close, at least drivable. Then use that money to visit the Caribbean.
I would not advise any international investing until you had a few successful properties states side first.
@Matt Raleigh. Hi Matt -
For calendar synchronization use a system such as syncbnb or hostfully.com. it will synchronize your openings among all the major channels: Airbnb, booking.com, VRBO, etc. if you plan on having more than 1 property I highly recommend hostfully. It is a great way to have as much automation as possible such as welcome emails, lock codes, etc.
As for purchasing something in the Caribbean we looked in Puerto Rico but never did purchase anything there. Perhaps next year as could be a decent sized project. I think a key item would be familiarity with the location and having a trusted realtor and getting a good set of goto individuals....
With the Caribbean specifically, there are a lot of issues investing there. Primarily, tourists go to these places for the all inclusive resorts/also cruise competition which both options are not too expensive in many cases. Second is political stability of your investment, there are numerous ways this can go badly from a geopolitical issue. Finding trustworthy people to manage it, and currency/language barriers. I haven’t researched, but going back to point one, I think a lot of unknowns in the Caribbean lead people to not want to book on Airbnb/vrbo in the first place. Add it all up and it would have to be a very substantial deal to even consider something like this. Best advice has already been mentioned, use profits from local rentals to fund your Caribbean vacation.
I invest internationally and am at times getting so discouraged by the reaction to posts about that topic, especially those from people who don't invest internationally because of their own fears and are discouraging those who want to tempt the adventure (which might or might not be the case for those who have replied on this specific posts). That's when I some days lose faith in the BiggerPockets community. Are we really here to discourage the people who are taking bold action and/or going after their dreams because we project our own fears on them or because we don't want to see them succeed because deep inside of ourselves, we want to invest internationally but don't dare doing and so the last thing we want is to see other people successfully doing it.
I see repeated negative posts from the same people (not those who replied here thus far) from people in the international forum and I'm left wondering why they're hanging in the international forum if they're negative about international investing.
By the way, even though I totally disagree with him on this matter, I have to command @John Carbone for writing in all honesty "I haven't researched ... I think...". But then, does it make sense to give a negative advice and discourage somebody from doing something without doing any research? I invest in the Caribbean and totally disagree. Usually, I would explain in detail why but I'm short on time so I'm going to stick to the general but important topics here. Matt, please feel free to reach out by DM if you want.
@John Underwood, I love your many contributions to the forum but, as an international investor, like a large and increasing number of American and Canadians, I find myself constantly at odds with your opinions on international investing. I guess that's what makes a great forum! :)
In this case, I guess you make clear that part of your advice reflects your own personal preferences so I'm not going to argue against that. Otherwise, your advice looks nice on paper and might be the right advice for some people, but, in my opinion, not for most. International investing can be very easy or very complicated, depending on what you do and where, what you know and who you know but it can be way easier than most people think. Also, the idea of making money in the US to rent in the Caribbean sounds again nice on paper but only make senses for so-called lifestyle buyers and Matt talks about investing there, not merely visiting as far as I understand it.
Moreover, you'd need to make money in the US first and it's no secret that, in many places (including many of the most visited places by STR renters), real estate prices have been propped up to unsustainable by artificially low interest rates. The FED almost lost its credibility by keeping interest too low for too long and is probably not gonna make that mistake ever again. The 15-year period of cheap money on which every US real estate investor has surfed is over. The current 6% mortgage interest rate is actually normal in a historical perspective and a lot of US real estate isn't profitable with such a rate and it might not go back down to a real-estate friendly level anytime soon. The FED made a huge mistake by bringing interest rates too low for too long and have us risk some sort of hyperinflation and their credibility has been badly if not irreparably damaged so I don't think we'll see super low interest rates again anytime soon in the US.
As long-term rentals becomes less profitable, short-term rentals are going to be more and more popular. There is already a huge amount of them and the law of economics tell us that, eventually, there's going to be a huge oversupply which is going to result in a drastic fall in profitability and occupancy rates.
I have often wondered here why people who don't invest internationally give advice about the topic of international investing. I don't invest in US short-term rentals so I won't allow myself to give any advice about that subject. What I just wrote is just plain economics and I'm an economist and I think so many people are going to be surprised and see how I was right with this in a few years.
Whether you agree on what I just wrote or not, we know, by hanging on BiggerPockets, that investing in the US has become more challenging to many as a result of many headwinds faced by investors like very high prices and high interest rates. Contrast that with international investing, which has huge tailwinds like the resumption of explosion in international travel, which actually was already going on pre-Covid and, the emergence of the local middle classes and, most importantly the life-changing explosion of remote working is a huge.
The latter tailwind is particularly powerful and can't be overestimated. I live in beautiful Montreal which is a great place to live but the winters are very long. You'd think that the locals are used to it but they hate it and more and more so as age passes. When I talk to my friends who invest locally, I sometimes jokingly say "Do you realize that, with the normalization of remote working, there's no reason for people to stay in Montreal and live a life of stress and bad weather and have a high cost of living when you can move to Mexico, buy properties for much cheaper, have beautiful weather pretty much all year round, less stress, no traffic jam.... For them, I might be joking but I'm not. You already see the migration within the US from the North to the Sun Belt. As Florida becomes unaffordable, the next step is Mexico (where, unlike in Florida, you're guaranteed nice weather in winter). It's already happening, as shown by statistics and anecdotally the sharp increase in the number of BiggerPockets member asking for my help investing there. Once short-term rental only markets are becoming huge long-term rental markets too.
You just have to open your eyes and your world and see further than your own country and all of a sudden you see all these opportunities you had no idea about.
While I'm on BiggerPockets to contribute, I sometimes wonder why I'm not shooting myself in the foot why praising international investing. I might as well leave everyone fight and overbid for the same piece of overpriced US or Canadian property while I have no competition in scooping international bargains.
So Matt, finally, to the essence of your questions:
1. What do you mean exactly by safety and security? Is it safe for people to travel there? Can something happen to your property? What do you mean exactly?
2. Regarding Airbnb and VRBO, I don't invest in the US so I can't compare but I imagine it should be the same. And others have already replied to that anyway.
Hope this helps!
In @John Underwood's defense, he is giving advice based on their experience in STR, which is zero. Having something more local to learn the ropes isn't a bad idea and isn't a negative to international investing.
@Mike Lambert, you have a lot of experience investing internationally and I really appreciate your posts on the topics, but the key you have experience.
I like to work on cars. I am a pretty decent mechanic. I do most of the work on my cars myself and that includes swapping engines, rebuilding transmissions etc. I in no way would feel that anyone could just jump in and tear apart a Porsche 911 engine and be successful even though I could.
Your advice isn't lost on us. It gives me information and I have looked into investing in our close international locations. But there are more inherent risks investing out of your home country. I don't think there is much of an argument there. As a non-citizen owner, you just don't have the rights that someone who is local and lives in the property. It is the same here as well.
I have researched some in investing in the Caribbean. Particularly I found a neat beach house in the Bahamas. When you hear Bahamas, what do you think of? Beaches, warm weather, tropical breezes, but violent crime is pretty high. State Dept. has a level 3 advisory on it. The place was cool and right in Nassau, but I just couldn't get over the high crime in the area.
Plus there can be some real rigamarole in buying as an out of country investor and I have found it can be quite complex to navigate. It is doable of course, but can be daunting to someone who has never done it before. Getting a local agent, possibly setting up an entity to hold the property in some cases etc.
I think it is a great idea to invest internationally and I hope we can make it work for us, but it ain't for everybody!
I don't do any developments in the Caribbean and I don't know where Matt is looking at investing. And you're actually partially right. If he was looking at investing in Haiti for example, there would be huge political risks, problems finding property managers, as well as a language issue. By contrast, none of these issues apply to a place like the British Virgin Islands. I imagine Matt is more looking at a BVI-type place but maybe not.
Mind you, all I was referring to is the fact that certain members ask for help in order to take action in a given area and other members that aren't active or don't know about that area are trying to discourage them. I just don't get that but I guess I shouldn't care that much (thank you for making me realize that by the way, sincerely!). Because I'm investing internationally, I see that in the international forum. I'm sure it happens all the time everywhere (thank you for making me realizing that too).
Finally, if you are in any way shape or form suggesting that I'm promoting investing in the Caribbean because I'm selling developments there, here's my reply. I don't do any developments in the Caribbean. Had you looked more than 30 secs at my profile, you'd realize that out of my 975 posts, 974 are replies to people's posts/questions. Are you the kind of guy who doesn't do much research and likes to draw quick conclusions?
I'm known in here for oftentimes long, detailed and informative posts, much more often based on facts than by opinion that help people. I don't sell anything in these posts and you wouldn't know what I was doing had you not read my profile or bumped into one of the few posts when I mentioned it. Finally, I started sharing my international investment knowledge and experience in the BiggerPockets forum years before I did any development work, which I ended up doing because people asked me to and I saw a win-win business opportunity.
So, I've always been on the forum to help rather than promote my business and, given the huge amount of time I've spent crafting these posts without ever make a single cent out of any of them, you'll pardon me for feeling a bit insulted when somebody suggests otherwise. Mind you, it's probably my fault.
Even after close to 1,000 posts, I'm still learning to manage people's susceptibilities here in the forum. I still don't understand why some people are seemingly having trouble having others disagree with them. Because of that, I was careful by commanding you for your honesty and admitting that you didn't do any research, such a thing many people would never write! I guess it still wasn't good enough and I should do a better job next time and you're helping me doing just that. Next time I try to be nice to you, I'll make it more obvious and there won't be any ifs or buts! Peace! :)
@Mike Lambertmy whole point was there’s more risk investing international, and it has to be a very profitable investment to make it worth it. Easier money to be made locally still. Not sure why that was interpreted as a negative post which was the premise of your reply to me.
There's no need to defend John Underwood! I wouldn't attack anybody and, if I was, he'd be the last of my list! :)
Thank you for your compliments and for your balanced post! And, you are absolutely correct, investing internationally comes with its lots of additional risks but then it can be less risky than investing in your home country in other respects, depending of where you live of course. And you are right that there are things I can do because of my knowledge, experience and connections that others can't do.
A few comments here:
a. Many (if not most) countries grant exactly the same rights to foreigners as to their foreign nationals. In the Caribbean, the Dominican Republic is a great example and I know about that one since I have connections in the ministry of tourism. This has resulted in massive foreign investments that are protected by the country's constitution.
b. I don't know much about the Bahamas. That market has never interested me. I didn't know about the violence there but I'm not surprised. Yet, speaking of violence and travel advices, I know about Mexico.
While everybody hates violence, the question is what impact would it have on your investing. Would you be concern that people would stop traveling there or would you feel unsafe to use your own property.
I believe Mexico is for many the poster child when it comes to violence, drug issues and travel advice. Here's what I replied to another comment on the forum related to the violence in Mexico. Of course, not all of it will apply to the Bahamas but you'll surely get the point. Full disclosure: I own properties in Mexico and work on developments there.
1. It's no secret that Mexico has had an issue with drug cartel violence for as much as I can remember. Yet, year after year during that period, Mexico has gone up in the ranking of the world's most visited countries and reached the 7th spot in 2019. Thanks to the pandemic, they jumped to number 2 in 2021. Now, on top of the tourists, Mexico is literally invaded by hordes of remote workers, to the point that Mexicans are starting to complain about the ensuing rise in property prices!
2. Tens of millions of foreign tourists, digital nomads, remote workers, snowbirds and business travel to Mexico each year. The number of those who get killed, injured or kidnapped is probably much lower than the crime rate in pretty much any US city. Expressed, in percentage terms, you'll need to put a lot of zeros after the comma to get to the first figure. Unsurprisingly, nobody is following these travel advisories. People go to Mexico, love it, feel safe and come back regularly.
3. The crime rate in a large city like Cancun is actually lower than that of US cities like New York City or LA. Are you not going to invest in New York City or LA.
4. More and more US and Canadians retire in Mexico. There's already two million of them. When asked whether they feel safe, their answer is invariably something like this: "Yes, I feel very safe in Mexico. I know that, if I don't get involved with drugs while, in the US, I could get shot when doing my groceries or going to a school. That will never happen in Mexico."
5. People thankfully aren't stupid and have common sense. When the State Department tells them to not travel to Colima or Guerrero, you don't do it. Mind you they'd probably not do it anyway. But, when they tell you to reconsider traveling to Baja California, give me a break. Go to Los Cabos airport and tell that to the hordes of visitors going back home. They will laugh at you.
6. Ultimately, what drives real estate values is supply and demand and the income you can derive from those properties. Not only is the growth in the amount of tourists, digital nomads, remote workers and retirees not slowing down in the face of these issues, it's actually accelerating.
7. There is a huge number of Americans and Canadians already owning and buying properties in Mexico in ever greater numbers. Do you think we're all crazy?
c. Buying overseas can indeed be more complex than buying at home but then you just need to surround yourself with the right professionals. Come on, we're BiggerPocketers! Would that stop us? There are way harder things than that! ;-)
There's no need to defend John Underwood! I wouldn't attack anybody and, if I was, he'd be the last of my list! :)
Thank you for your compliments and for your balanced post! And, you are absolutely correct, investing internationally comes with its lots of additional risks but then it can be less risky than investing in your home country in other respects, depending of where you live of course. And you are right that there are things I can do because of my knowledge, experience and connections that others can't do.
A few comments here:
a. Many (if not most) countries grant exactly the same rights to foreigners as to their foreign nationals. In the Caribbean, the Dominican Republic is a great example and I know about that one since I have connections in the ministry of tourism. This has resulted in massive foreign investments that are protected by the country's constitution.
b. I don't know much about the Bahamas. That market has never interested me. I didn't know about the violence there but I'm not surprised. Yet, speaking of violence and travel advices, I know about Mexico.
While everybody hates violence, the question is what impact would it have on your investing. Would you be concern that people would stop traveling there or would you feel unsafe to use your own property.
I believe Mexico is for many the poster child when it comes to violence, drug issues and travel advice. Here's what I replied to another comment on the forum related to the violence in Mexico. Of course, not all of it will apply to the Bahamas but you'll surely get the point. Full disclosure: I own properties in Mexico and work on developments there.
1. It's no secret that Mexico has had an issue with drug cartel violence for as much as I can remember. Yet, year after year during that period, Mexico has gone up in the ranking of the world's most visited countries and reached the 7th spot in 2019. Thanks to the pandemic, they jumped to number 2 in 2021. Now, on top of the tourists, Mexico is literally invaded by hordes of remote workers, to the point that Mexicans are starting to complain about the ensuing rise in property prices!
2. Tens of millions of foreign tourists, digital nomads, remote workers, snowbirds and business travel to Mexico each year. The number of those who get killed, injured or kidnapped is probably much lower than the crime rate in pretty much any US city. Expressed, in percentage terms, you'll need to put a lot of zeros after the comma to get to the first figure. Unsurprisingly, nobody is following these travel advisories. People go to Mexico, love it, feel safe and come back regularly.
3. The crime rate in a large city like Cancun is actually lower than that of US cities like New York City or LA. Are you not going to invest in New York City or LA.
4. More and more US and Canadians retire in Mexico. There's already two million of them. When asked whether they feel safe, their answer is invariably something like this: "Yes, I feel very safe in Mexico. I know that, if I don't get involved with drugs while, in the US, I could get shot when doing my groceries or going to a school. That will never happen in Mexico."
5. People thankfully aren't stupid and have common sense. When the State Department tells them to not travel to Colima or Guerrero, you don't do it. Mind you they'd probably not do it anyway. But, when they tell you to reconsider traveling to Baja California, give me a break. Go to Los Cabos airport and tell that to the hordes of visitors going back home. They will laugh at you.
6. Ultimately, what drives real estate values is supply and demand and the income you can derive from those properties. Not only is the growth in the amount of tourists, digital nomads, remote workers and retirees not slowing down in the face of these issues, it's actually accelerating.
7. There is a huge number of Americans and Canadians already owning and buying properties in Mexico in ever greater numbers. Do you think we're all crazy?
c. Buying overseas can indeed be more complex than buying at home but then you just need to surround yourself with the right professionals. Come on, we're BiggerPocketers! Would that stop us? There are way harder things than that! ;-)
Hey @Mike Lambert, well I have looked at Mexico as well and I found that most of the stuff I would be more interested in is too expensive. I would be all in but it has to be the right place.
Also, Cancun is now in the top most dangerous cities in the world. It has been struggling with a high murder rate for a while now.
https://thecancunsun.com/cancu...
I will say that most of the tourist areas are pretty safe according to most reports.
Out of the most dangerous cities in the world, Mexico has 7 in the top 10. Cancun is 15.
Now you have to take all the stats with a grain of salt. Much of the crime is limited to specific areas etc. but it does matter.
All I am saying is that the risk is high for the return. I wouldn't buy in either NY or LA no matter what the crime rate is, never. Ever.
So, don't feel discouraged! If I felt down about every suggestion that was put down, I just wouldn't be here. Arbitrage is an example.
I also wouldn't put people who say be cautious as not wanting people to succeed because of their own fear. Most are just trying to let new investors know the risks before they jump in. Again, arbitrage is an example.
This is great! Thank you!
Robust conversation delivers the best information sometimes. I actually will weigh every single comment in this thread. Also, I've gotta say, while @Michael Baum may post some TLDRs with content that sometimes may seem scalding, I am a "brutal honesty" guy and I don't really see it as personal. Also, to be honest, almost fact-for-fact, his post matches with everything I've found in initial research, which is very good to see!
MB yes, I am actually looking at this site as an investment, not as my own vacation spot. Plenty of reasons for picking this area for investment, which I'll go into with you.
A citizen-partner in the country is no problem, nor is a language barrier.
I agree with and truly appreciate all of the risk factors mentioned here and I am glad I'm part of a community that will both temper me and support me :)
Thanks again!
- Matt
That was supposed to be @Mike Lambert. Sorry Michael Baum!
Did you read the article you posted the link of? "Cancun joins 7 US Cities among the most dangerous in the world". If you read on, you see that the list includes investor favourites like St. Louis, New Orleans, Philadelphia and Memphis. Are we going to suggest we shouldn't invest in these cities either in their respective BiggerPockets forums or are we going to apply double standards because it's Mexico? If a crime problem becomes a real estate problem in Mexico, shouldn't it be in the US too?
The article continues. "But the fact remains that the vast majority of tourists (read those who don't get involved with drugs) who spend time in Cancun and Quintana Too are perfectly safe. Hence, Cancun is in the top 10 of the world's busiest airports in the world.
Of course, nobody likes this sort of sensational headlines but the reality is that people have been almost completely desensitized. Indeed, pretty much everybody and their mother have been to Mexico during over the last couple years and they've come back perfectly fine. So, no it hasn't mattered at all when it comes to real estate investments and I don't see why that would change anytime soon. It's been going on for decades, like the very high crime rates in large American cities have.
When you quote an article, shouldn't you quote the arguments of both sides for a healthy discussion? I'm sure some people are scared to travel to Mexico but that's a minority. The reality is that Cancun and the Riviera Maya have had hotel occupancy rates around 80% year round (for a supposedly seasonal destination!!!) that are the envy of the rest of the world so they don't mind if a few people don't dare to come.
When making a decision, make sure you get the right relevant information. I'm trying to give my little contribution towards that but there's so much I can do and write.
You are right @Mike Lambert, I also read a different article on dangerous cities. I read that article, I just figured I didn't have to quote each and every thing I have read on the topic.
Here is a WorldAtlas list - https://www.worldatlas.com/cit... Make of it what you will.
I get that you are not a fan of the US and that is fine. For anyone who wants to invest internationally, go for it. Just do your due diligence and make sure you have your ducks in a row.
I will not come back and reply so good luck with your successful strategy.
You have a few things right:
Investing internationally adds a specific sets of risks to the equation. Yet, it doesn't necessarily mean it's riskier. For example, it was much riskier to invest in the US in 2008 than pretty much anywhere in the world, even for Americans, as history shows and I suspect a similar situation, although less bad, exists today. I'll tell. A lot of smart US investors I know have liquidated the entirety of their US portfolio at the top and I'd have done the same.
Mortgages in Mexico are very expensive indeed and, as a result, Mexico is mostly a cash. While a huge part of the US real estate inventory can only be profitable with rock-bottom and abnormally low interest rates (which are a thing of the past), the good real estate in Mexico bought 100% in cash is actually more profitable than most of US properties paid for with a mortgage. You can actually sometimes find cheaper financing in Mexico (I've borrowed at 6% for example) and, when you do, you can get yourself a heck of a deal.
However, you seem ton again have done some quick and superficial research and found some cheap properties and draw conclusions, which totally misses the point:
1. The fact that few people use mortgages means that the market isn't artificially inflated by cheap debt like in the US or Canada, whereby the Mexican market isn't subject to crashes. The growth is real growth, underpinned by the rise of the middle classes and the huge and growing interest from foreigners, supported by the rise in tourism, remote working and the influx of retirees.
2. A like-for-like property that brings the same rental income than in Florida or California costs several times less.
3. The costs of operating an STR in Mexico are super low compared to the US and probably less than the property taxes in certain states. Speaking of which, property taxes are close to 0.
4. In the face of increasing STR regulations in the US, there is practically none in Mexico and the risk that there'll be any is almost non-existent.
5. I can find $100 properties anywhere but, irrespective of that, September is the worst month in Mexico when it comes to occupancy.
6. What political risk? Mexico currently has the most leftist president it's ever had and yet, he's very friendly to foreign investors. Plus, Mexico is part of the USMCA (ex-NAFTA) and its economy depends on the US so they won't do anything against American property.
7. What do you mean by increased IRS reporting means more money to file taxes?
I started by mentioning that Mexico has a well known problem with crime but, you know what? I can't do anything about it. And rest assured I won't go alone at night in certain parts of the city. But you still haven't explained why that would be a problem to invest in Mexico and not a problem in the likes of Philadelphia. But I agree with you, no point in pursuing a sterile discussion.
I'm happy that @Matt Raleigh found the discussion at least somewhat useful.
And, rest assured, I love the US, where I have a lot of very close family and friends and travel often. And, above all, I love the American people, including you. So, if you ever are in Mexico when I'm there let's have a margarita on me and we'll probably ending up having a laugh about all this. :)
That was supposed to be @Mike Lambert. Sorry Michael Baum!
For sure. Feel free to send me a DM. In any case, it's not up to me to suggest whether you should invest in the Caribbean or not (and I don't know your personal situation anyway). However, I could help you with the specific risks and opportunities I see and tell you what I'd do if I was considering making a new investment there. From my side, the idea would be to be as constructive as possible without ignoring the risks.
Also, please do not necessarily take everything that I wrote at face value as I'm not infallible and consider the points and arguments of everyone in the thread. We can at times have heated debates here but, ultimately, we're all part of the same big family who are there to help each other. :)
I was among the very first Airbnb host internationally but not in the Caribbean. It was 5-star apartment hotel. The problem with Airbnb is the same, you have a very demanding guest so you need to have local very professional property management. If you tackle this problem the rest could be easy.
You need to buy in cash. Also, second issue is currency depreciation.
About crime? haha many American cities are way more dangerous than international tourist destination.
You have a few things right:
Investing internationally adds a specific sets of risks to the equation. Yet, it doesn't necessarily mean it's riskier. For example, it was much riskier to invest in the US in 2008 than pretty much anywhere in the world, even for Americans, as history shows and I suspect a similar situation, although less bad, exists today. I'll tell. A lot of smart US investors I know have liquidated the entirety of their US portfolio at the top and I'd have done the same.
Mortgages in Mexico are very expensive indeed and, as a result, Mexico is mostly a cash. While a huge part of the US real estate inventory can only be profitable with rock-bottom and abnormally low interest rates (which are a thing of the past), the good real estate in Mexico bought 100% in cash is actually more profitable than most of US properties paid for with a mortgage. You can actually sometimes find cheaper financing in Mexico (I've borrowed at 6% for example) and, when you do, you can get yourself a heck of a deal.
However, you seem ton again have done some quick and superficial research and found some cheap properties and draw conclusions, which totally misses the point:
1. The fact that few people use mortgages means that the market isn't artificially inflated by cheap debt like in the US or Canada, whereby the Mexican market isn't subject to crashes. The growth is real growth, underpinned by the rise of the middle classes and the huge and growing interest from foreigners, supported by the rise in tourism, remote working and the influx of retirees.
2. A like-for-like property that brings the same rental income than in Florida or California costs several times less.
3. The costs of operating an STR in Mexico are super low compared to the US and probably less than the property taxes in certain states. Speaking of which, property taxes are close to 0.
4. In the face of increasing STR regulations in the US, there is practically none in Mexico and the risk that there'll be any is almost non-existent.
5. I can find $100 properties anywhere but, irrespective of that, September is the worst month in Mexico when it comes to occupancy.
6. What political risk? Mexico currently has the most leftist president it's ever had and yet, he's very friendly to foreign investors. Plus, Mexico is part of the USMCA (ex-NAFTA) and its economy depends on the US so they won't do anything against American property.
7. What do you mean by increased IRS reporting means more money to file taxes?
Ok fair points, I’ll take what you are saying at face value that September is the slowest month and I don’t have any historical data to back up that it doesn’t produce enough revenue, but everything I’ve seen seemed pretty cheap and the properties looked very high end. I agree that the rock bottom rates have artificially increased values to astronomical levels in developed countries. Home values will continue to drop as a result of the higher rates. In the states, if you earn money outside of the country, you have to do additional paperwork and tax specialists in this field can be costly. Mexico has amended their constitution 3 times in the last 100 years related to property ownership. What’s to stop them from amending it again if conditions deteriorate and they nationalize housing? Extremely unlikely? Most likely, but that risk factor has to be factored in and I have no way to quantify that.
I countries like Mexico, the Dominican Republic and some others, properties are traded in USD so you don't have any currency risk as an American. In fact, the depreciation of the local currency is in your favor because of that and because of the fact that your income is in USD and your costs are in the depreciating local currency, whereby your profit margin actually increases. Also, since them, financing opportunities have opened up, although generally not at all like in the US.
When I looking at markets in the US in the off-season, I've found nice properties at $100 too. And, when it comes to the ROI, don't forget that property prices are way cheaper in Mexico for like-for-like properties.
In past wars, Mexico lost California, Texas and I think other states in between to the US. So, for a long time, it was paranoid about being invaded by the US. Therefore, in the constitution of 1910 I believe, Mexico forbade foreign ownership of property within 31 miles of the coasts and 62 miles from the international borders. Mexico then wanted to changed that to allow for foreign investment to help develop its beach resorts. Because amending its constitution would have been a complex process, Mexico instead created the fideicomiso or bank trust that we know today. So, basically, Mexico became friendlier to foreign ownership, if anything.
We can't make money without taking a risk. We don't know what the future holds but we can quantify risk. In this regard:
1. Mexico has absolutely no interest in confiscating property as it would equate to economical suicide and therefore political suicide for the government in place. the current leftist government understands this all too well.
2. Whatever you think about it, the US and Canada strongly curtailed civil liberties during the pandemic while Mexico didn't go along. As a result, so many Americans and Canadians took refuge in Mexico and bought properties in massive amounts son they could escape lockdowns and make some great money as they discovered.
3. Whatever you think about Russia and Ukraine, it's a fact that the US and Canada have confiscated private property pretexting sanctions while Mexico refused to play along, as that would have been an infringement on property rights.
So, when looking at the past and the facts, which government is most likely to confiscate your property or curtail your civil liberties. Is it really Mexico?
I countries like Mexico, the Dominican Republic and some others, properties are traded in USD so you don't have any currency risk as an American. In fact, the depreciation of the local currency is in your favor because of that and because of the fact that your income is in USD and your costs are in the depreciating local currency, whereby your profit margin actually increases. Also, since them, financing opportunities have opened up, although generally not at all like in the US.
Wow this is news to me. If you can let me know where to browse Mexico property that can be bought with US$ (something like Zillow), please do let me know.
There isn't a Zillow-like site. I'm not big on sites because I always bought pre-construction but there are generalist-like sites but I'm not sure what you can find there. You also have the sites of realtors. You should find all of it through Google.
There are a lot of great answers here, but I actually lived on a Caribbean island, worked as a realtor, and hosted an Airbnb during the 2 years I was there. I lived and worked on Ambergris Caye, Belize. It was (still is) beautiful and had everything any tourist could possibly want or need. When looking for properties, make sure that you will hold title to the land that the home is located - this is true for Belize. I'm not familiar with other Caribbean country land laws. You'll also want to visit several times before you make a purchase. I met many expats that came down with big dreams and ended up losing their life savings because they didn't make smart decisions. Meet with both expatriate realtors and local realtors so that you can get multiple views of how things work. I wish I could offer you more information about how to handle bookings with multiple sites, but I have only ever used Airbnb. Best of luck!
Not to derail a thread on international STR, I was curious to find a source of information on STR for US Virgin Islands (USVI). I realize USVI is not really international but it also is not the states.
We currently have 4 local STRs, 2 for over 20 years. We have used professional PM for virtually the entire time.
I visited USVI in 2021 and went Scuba diving every day. It is a great SCUBA location that I could see spending time there. The island (St Croix) seems a bit rough in shape, etc. not 3rd world, but also not Southern California.
Questions: is RE ownership similar to US states RE ownership? Is Fannie/Freddie financing available? Are there STR property Managers for hire? Any of them any good? Any other info that could be valuable? Any BP users have STRs in USVI?
thanks