International STR Investing
New to Real Estate · Ashburn, VA · Member since 2022 · 9 posts · 4 votes
International STR Investing
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Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votesI 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!
62 Replies
- 4yMike LambertPro MemberInvestor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
You brought some additional great answers to the conversation. I've never been in Belize but I know people who have, I've seen pictures and it's next to the beautiful Riviera Maya so I have a bit of an idea of how beautiful it is.
Yet, I'd never ever ever invest there. Part of the reasons is what you mentioned but there are many more. I detailed the reasons why in a post a long time ago and won't do it again because I don't like to be negative and I don't have since Belize is part of Central America, not the Caribbean so it's probably not where Matt is considering investing.
- 4yJosh GreenBusiness MemberRealtor · Tampa/St Pete/Clearwater/Bradenton · Member since 2020 · 397 posts · 353 votes
@Mike Lambert
Love this insight. Sent you a connection request!
Impact Realty Tampa Bay.4.962 Reviews
Suncoast Vacation Homes4.959 Reviews - Realtor · Albuquerque, NM · Member since 2017 · 121 posts · 68 votes4y
Quote from @Mike Lambert:
You brought some additional great answers to the conversation. I've never been in Belize but I know people who have, I've seen pictures and it's next to the beautiful Riviera Maya so I have a bit of an idea of how beautiful it is.
Yet, I'd never ever ever invest there. Part of the reasons is what you mentioned but there are many more. I detailed the reasons why in a post a long time ago and won't do it again because I don't like to be negative and I don't have since Belize is part of Central America, not the Caribbean so it's probably not where Matt is considering investing.
Thank you for your thoughtful response, however, you are incorrect. Belize is part of CARICOM. Take a look for yourself: https://caricom.org
- 4yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
My topic alert pulled in Belize mentioned above. We are not STR. Self-Storage, subdivision development and Teak plantations in Belize.
Here are a couple items to look at:
A. Determine your decision points.
B. Are you looking for income or appreciation; or both. I'm an Accountant by trade, so personally I would start there first. Just because one area has the highest rental rate, doesn't mean it has the highest rental income return or appreciation potential.
C. Are you looking for lifestyle, so you can enjoy the location also? Easiest access. Same or close time zone. Health care needs. etc.
D. Your points:
1. Safety- Safety and security are kind of the same thing, so I will go with Property and Value safety with this topic. Really look at number of airflights/accesses; limited expansion; cost of living; If you have these covered, then your asset's long-term value and projections should be safe.
2. Security- In Belize, there tend to be a couple types of risk. a. Drugs- localized, same as any city in the world, b. Wealth- don't flaunt it. If you're into flaunting it live in a higher standard of living area, c. Wealth- again, pick your standard cost of living areas. If you're in a Third or lower second world country and you have a backpack and are a tourist, your Wealthy., d. Property- again, pick your cost of living, in lower income areas, you have to have an onsite groundskeeper, even if the property is managed. Or buy in a gated Condo community., e. Petty theft- a way of life in a third/second world country. Could be a shovel, fruit on your tree, clothes left out to dry, etc. Only allow people you know onto your property.
3. Property Management- as noted above, I would look at a gated condo/community, if security is a concern of yours. Along with the onsite management. Use their rental service or yours.
Side topic. Just got back from a two-week road trip and stay going through Mexico to Belize. My brother and I took a different route this time, since I wanted to see Veracruz. This is probably too much of a hands-on investment for you. Between Tampico and Veracruz, the mountains come down to the ocean. This is Hawaii, in our time zone. Beautiful. At the Neuvo Laredo border crossing had a chance to talk with a guy from North Carolina. Him and his wife are doing a Bed and breakfast for Mexican tourists, not overseas people. They bought a mountain side resort and are fixing it up. Look up Pico De Orizaba, west of Veracruz. He said it is the third tallest peak in all of North America. Snow covered mountain/volcano top. You might also check out San Luis Potosi and their waterfalls and Old World European sections.
There are a lot of options out there. Set your parameters first. Financial, safety, security, ease of access, management, etc. Then go looking. For example, if management is your number one parameter, identify the management company first, then ask them about where you might buy properties.
Have fun.
- 4yMike LambertPro MemberInvestor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
I don't see why the fact that Belize is part of CARICOM makes me incorrect. Sadly, both the country and its population are super poor. There is no middle class and practically no industry. The government has no money. If anything happens there and tourism stops, the country is bankrupt. And how long are the poor locals (the overall majority) going to tolerate to lend their country to be some sort of playground for middle-class foreigners? Crime is high like in neighbouring Mexico but the difference is that, while Mexico's is drug-related and doesn't affect tourism, it's just overall crime due to poverty in Belize.
I understand you have lived and worked there and must like it and look at it from a real estate agent point of view. I look at it from an economist point of view.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes4yYour view towards Belize is how many people also view Mexico from an economic standpoint.
Quote from @Mike Lambert:
I don't see why the fact that Belize is part of CARICOM makes me incorrect. Sadly, both the country and its population are super poor. There is no middle class and practically no industry. The government has no money. If anything happens there and tourism stops, the country is bankrupt. And how long are the poor locals (the overall majority) going to tolerate to lend their country to the villas of the rich. Crime is high like in neighbouring Mexico but the difference is that, while Mexico's is drug-related and doesn't affect tourism, it's just overall crime due to poverty in Belize.
I understand you have lived and worked there and must like it and look at it from a real estate agent point of view. I look at it from an economist point of view too.
- 4yMike LambertPro MemberInvestor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
Are you kidding me? Mexico's economy is precisely 722 times the size of Belize's. Anyway, I don't think so although there might be some people who think that. Negative opinions about Mexico aren't generally about its economy and for good reason. Mexico is currently the world's 16th largest economy and is going to climb to # 7 by 2050 surpassing Italy, the UK, France and Germany. It's no joke.
Mexico is generating a huge amount of money that it reinvests in its infrastructure and tourism industries. 50 years ago, Cancun was just a coconut plantation. Today, the Riviera Maya is one of the top tourist destinations in the world and trillions of dollars of real estate value have been created there. Only Mexico has been able to put off something like that at that breakneck speed.
Mexico has a huge and fast growing middle class. I recently say these figures about the top international tourism destination of Puerto Vallarta. 65% of the high-end real estate is owned by Mexicans vs 35% by foreigners. In Belize, it's pretty much 0% owned by Belizeans and 100% by foreigners.
I guess the silver lining to these discussions is that the information I take the time to share about Mexico (some of which I thought was general knowledge) is useful.
- Realtor · Albuquerque, NM · Member since 2017 · 121 posts · 68 votes4y
Quote from @Mike Lambert:
I don't see why the fact that Belize is part of CARICOM makes me incorrect. Sadly, both the country and its population are super poor. There is no middle class and practically no industry. The government has no money. If anything happens there and tourism stops, the country is bankrupt. And how long are the poor locals (the overall majority) going to tolerate to lend their country to the villas of the rich. Crime is high like in neighbouring Mexico but the difference is that, while Mexico's is drug-related and doesn't affect tourism, it's just overall crime due to poverty in Belize.
I understand you have lived and worked there and must like it and look at it from a real estate agent point of view. I look at it from an economist point of view too.
You stated that Belize is not part of the Caribbean, however, it is part of the Caribbean which makes you incorrect. I've lived in both Mexico (5 years) and Belize (2 years). Yes, Belize is heavily reliant on tourism, but it does have some industry. You are also incorrect to state that there is no middle class. That is very much a wrong statement. I taught Financial Management and Business Management at the college on Ambergris Caye. I was also very engaged in the community. There is a growing middle class due in part from the growing emphasis on education and more job opportunities. Their industries include tourism (which we know), agriculture, and fishing. During the pandemic, when tourism was absent, Belizians worked together to assist each other. Was it easy, no, but they made it happen. Belize also has a lot going for it - protected natural resources, law and property ownership similar to England (as it was once an English colony), and English as the national language. These things open it up to so much opportunity.
As for crime in Belize, a lot of it is petty theft and drug related. You act like you know the country without ever having visited or spoken to a Belizian. Mexico's drug problem does affect tourism. Many of the once popular destinations ie: Mazatlan, Aculpoco, and Cabo have been overrun by cartels. Many Mexicans that I have met, who either grew up in those cities, or worked in them, no longer visit because they too are worried. The now popular cities: Tulum and Puerto Vallarta have made deals with the cartel to keep their business to a minimum.
Economically speaking, I think both countries are wonderful in their own right and can provide a great return on investment if done correctly. Personally, I wouldn't invest in either of them even though I understand both markets better than most.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes4y
Quote from @Mike Lambert:
Are you kidding me? Mexico's economy is precisely 722 times the size of Belize's. Anyway, I don't think so although there might be some people who think that. Negative opinions about Mexico aren't generally about its economy and for good reason. Mexico is currently the world's 16th largest economy and is going to climb to # 7 by 2050 surpassing Italy, the UK, France and Germany. It's no joke.
Mexico is generating a huge amount of money that it reinvests in its infrastructure and tourism industries. 50 years ago, Cancun was just a coconut plantation. Today, the Riviera Maya is one of the top tourist destinations in the world and trillions of dollars of real estate value have been created there. Only Mexico has been able to put off something like that at that breakneck speed.
Mexico has a huge and fast growing middle class. I recently say these figures about the top international tourism destination of Puerto Vallarta. 65% of the high-end real estate is owned by Mexicans vs 35% by foreigners. In Belize, it's pretty much 0% owned by Belizeans and 100% by foreigners.
I guess the silver lining to these discussions is that the information I take the time to share about Mexico (some of which I thought was general knowledge) is useful.
Belize- A small, upper-middle income country with a population of about 359 000 and a per capita income of US$5,880” Mexico is at $18,170 and usa is at $66,060. “ Mexico's poverty rate grew to nearly 44% at the end of last year,” this seems to be on par with Belize. Median income seems to be around 12k a year. $100 a night actually seems high if targeting this group. I don’t see how investing in Mexico is anything other than a pure international tourist play, and with an ever increasing supply of new construction without a strong middle class to support domestic travel I don’t see how it works in the long run. Projections 30 years from now mean nothing, if I could have an even money wager on government projections being wrong 30 years out, i would never have to work a day in my life, it would be printing money.
- 4yMike LambertPro MemberInvestor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
You tell us that Mexico GDP per capita is 3 times that of Belize and there's a huge difference between $18,000 and $5,000 and, a little further, you tell us that finally they're in the same boat because Mexico's poverty rate grew by 44% last year. That latest statistic is totally useless in your comparison because you don't tell us 1) what the poverty rate is in Mexico and Belize and 2) what the increase in poverty in Belize was over last year.
Regarding the increase in poverty rate in Mexico last year, I don't know if it's 44% but I know it has increased. 44% looks like a lot but it's entirely possible because it's due to Covid, which you could have figured out. Basically, over the last few years, a lot of Mexicans have left the poverty line and were therefore slightly above it so Covid pushed them back into it. As you probably know Mexico was affected by Covid because of the decrease in tourism and the poorer people were more affected, like in the US and anywhere else.
I have to command you for doing research before giving opinions but if you want to argue with people who are taking action and know the subject inside and out, my advice to make sure your research is more in-depth before making certain affirmations. In doing so, you would have figured out that linking the average income in Mexico with the short-term rental rates makes absolutely no sense. This is because those who rent the short-term rentals are the foreigners and the Mexican wealthy and middle class people. It's kind of obvious when you think about it, isn't it? So, the average income of these are the Mexican is much higher than $18,000. That's the whole "secret" about short-term rentals in Mexico. Unless you have a bad deal, you can make way more net income by $ of property value.
You actually should care about the next 30 years if you take 30-year mortgages. But yes, like you, I'm not overthinking the next 30 years. Didn't you figure out I was just illustrating the fact that the Mexican economy is not insignificant.
I hope that this "conversation" is useful to you and others. And, maybe, little by little, you might start to understand why some people invest in real estate in Mexico when maybe you didn't see the point at the beginning.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes4yMexicos poverty rate is 44 percent of the whole population, as I initially mentioned (not a 44 percent increase in a year due to Covid). It’s around 10 percent in the USA. Belize isn’t much worse than Mexico. In a previous post you said Mexico did great during Covid because of no restrictions. I pointed out the income of the “middle class” because you seem to be touting a growing middle class there as if those people will be contributing to the real estate market in a positive way (ie, renting units). it seems you are now saying that the whole model in Mexico is around international travel and the Mexican elite, which is what I was saying about five posts prior and you were refuting.
Quote from @Mike Lambert:
You tell us that Mexico GDP per capita is 3 times that of Belize and there's a huge difference between $18,000 and $5,000 and, a little further, you tell us that finally they're in the same boat because Mexico's poverty rate grew by 44% last year. That latest statistic is totally useless in your comparison because you don't tell us 1) what the poverty rate is in Mexico and Belize and 2) what the increase in poverty in Belize was over last year.
Regarding the increase in poverty rate in Mexico last year, I don't know if it's 44% but I know it has increased. 44% looks like a lot but it's entirely possible because it's due to Covid, which you could have figured out. Basically, over the last few years, a lot of Mexicans have left the poverty line and were therefore slightly above it so Covid pushed them back into it. As you probably know Mexico was affected by Covid because of the decrease in tourism and the poorer people were more affected, like in the US and anywhere else.
I have to command you for doing research before giving opinions but if you want to argue with people who are taking action and know the subject inside and out, my advice to make sure your research is more in-depth before making certain affirmations. In doing so, you would have figured out that linking the average income in Mexico with the short-term rental rates makes absolutely no sense. This is because those who rent the short-term rentals are the foreigners and the Mexican wealthy and middle class people. It's kind of obvious when you think about it, isn't it? So, the average income of these are the Mexican is much higher than $18,000. That's the whole "secret" about short-term rentals in Mexico. Unless you have a bad deal, you can make way more net income by $ of property value.
You actually should care about the next 30 years if you take 30-year mortgages. But yes, like you, I'm not overthinking the next 30 years. Didn't you figure out I was just illustrating the fact that the Mexican economy is not insignificant.
I hope that this "conversation" is useful to you and others. And, maybe, little by little, you might start to understand why some people invest in real estate in Mexico when maybe you didn't see the point at the beginning.
- 4yMike LambertPro MemberInvestor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
I'm owing you a mea culpa, which I'm actually kinda happy to do. Indeed, while many people appreciate my posts here, if I happen to reread myself, I'm at times concerned that I might sound like I'm lecturing, condescending or even borderline arrogant, which isn't the way I am. I can be so concerned about that that, at times, I'm going to apologize for things nobody thinks I'm at fault. Mea Culpas are good to deal with this and I'm not sure why not more people use them and they just feel good.
Here it is. Given your background, I should never ever ever ever have gotten myself into a discussion about Belize with you, given what I think about it. You've lived there, worked in real estate there and taught there and I didn't. Even if I'm right, it doesn't look good arguing with you on those topics. So, I'm going to try to get out of the discussion somewhat elegantly. :)
The Caribbean/CARICOM issue was a misunderstanding. I was referring of Belize being out of the Caribbean using the geographical definition which, when I was at school, referred to the Caribbean as just the Caribbean Islands so not including Belize. I therefore assume that @Matt Raleigh is looking to invest in one of the islands but, guess what, I could be wrong!
As to the rest of the discussion, I'm not sure why I got into it because I'm negative about the place and I hate to be negative. Years ago, in a certain context, I wrote a detailed post explaining my view of that country as I thought it'd be beneficial. I'm not sure how to retrieve but I had decided I wouldn't make any more comment about that topic.
Finally, instead of participating in the discussion, I should just thank you for sharing your perspective with us!
- 4yMike LambertPro MemberInvestor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
You can't hold me responsible for your misinterpretations of what I wrote. I never made any direct link between the Mexican average salary or middle class and the Airbnb rentals. You did. What the linkage is is that Mexico is becoming a wealthier country, as witnessed by the rise of its middle classes. As a result, the Mexican governments has the coffers full to create the kind of tourism infrastructure that will attract both international visitors and its own well-to-do people can rent short-term. I didn't think I should go into that level of detail. I assumed readers would figure that out by themselves. Likewise, isn't that obvious that the average Mexican who earns $18,000 a year gross cannot afford a $100 a night short-term rental?
The 44% makes more sense that way. I rather have a 44% poverty rate than a 44% increase. While this 44% is a result of an increase after Covid, what's the point of comparing with the US? The US is a developed country and Mexico is a developing country and therefore poorer. Everybody knows that and it has nothing to do with the conversation. Also do you understand that the poverty line isn't the same in the US, Mexico or Belize, whereby poor Belizeans are much poorer than poor Mexicans and poor Mexicans could as well be wealthier than wealthy Belizeans?
Finally, I mentioned that Mexican real estate benefited from the pandemic as many Americans and other foreigners bought property there. They went there, stayed for months on end and the positive effect on employment was minimal compared to the negative of almost empty hotels with occupancy restrictions that normally have an 80% occupancy rate and a huge decrease in the number of visitors at some point within the pandemic. Again, that's something you'd know only if you're in the business orb doing proper research.
I'm happy to spend time sharing my knowledge here if it benefits you and/or other people. I'm starting to wonder whether this isn't instead about your ego and you trying to show that I'm wrong somewhere. Hopefully, it's not but, please let me know if it is because then I'll immediately tell you that you're right and get out of the conversation and, this way, we'll be both happy :). I rather appear to be wrong if you and others learn something rather than be right but nobody learns anything, if that makes sense.
- Boise, ID · Member since 2018 · 203 posts · 188 votes4y
@Matt Raleigh @Mike Lambert I have owned an STR in Costa Rica near Tamarindo. I've previously owned a STR in McCall, Idaho, so I have experience both internationally and in the US. I would echo the other comments that you are much better off purchasing an STR in the US and using the profits to vacation in the Caribbean. These are the issues I've encountered with the Costa Rica STR:
1. Most counties do not any consumer protection laws when purchasing real estate. In the US, you must disclose any know defects when you sell and can be sued if you hide defects. Outside the US, it's pretty customary to hide all defects.
2. Realtor licensing is very lax in other countries, so there is much more risk that your realtor is not looking out for your best interests when purchasing a home.
3. Home inspector licensing is not existent and they are crucial since you can't trust sellers or realtors.
4. Methods of construction are vastly different than the US, so even though I'm an experienced builder in the US, I missed problems when purchasing a home in Costa Rica.
5. Very little building codes and code enforcement means there could be costly repairs on even newer homes. Our home is less that 5 years old and needs a 50k roof correction.
6. Even though wages are much lower than the US, all repairs done can cost considerably more because of lack of material and talented labor availability.
7. We have a great property management company, but if you get a bad or dishonest PM you are totally screwed. Due to language barriers and distance, you have to rely on your PM more than in the US.
I would strongly recommend against purchasing an STR in the Caribbean.
Quote from @Matt Raleigh:
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
Pearl of wisdom: Don't do it.
Especially don't do it if you are just starting out. You need deep pockets for contingencies, additional risks that you don't have when investing locally or in the U.S.
- 4yMike LambertPro MemberInvestor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
A lot of your points make total sense but, based on a single STR you have owned in one country, is it fair to generalize to a whole region?
I have been pretty negative about Costa Rica but only from a return point of view. @Shiloh Lundahl seem to have had success with it and is buying more there. Anyway, a lot of what you mentioned doesn't apply in Mexico for example, which I know very well.
What you wrote makes sense and it's awesome that you share and suggest to people that they might be careful about certain things but why should you advice us not to invest I don't get it. It's like somebody bikes and get run over by a car and tells everybody else they shouldn't bike.
I know a lot of people who bought property in these countries are they're all very happy with their purchase and you'll never hear from them. It's the same as with the people who write bad reviews for restaurants are much more susceptible to write if they're not happy.
I know Mexico isn't the Caribbean but Costa Rica isn't either so, since you seem to include the whole region, let me mention Mexico, which I know very well. Most foreigners buy pre-construction properties there because they're the best deals. By doing so, they take the risk of losing a significant amount of money, as I have explained at length in different posts. Most of the time, nothing happens but, sometimes, it does, like it would in the US or Canada by the way.
Case in point, after exchanging messages with hundreds of Bigger Pockets members over the years asking me about my opinion on development and developers, for the first time I ever I recently got messages from two people on BiggerPockets who are at risk of losing money in a project gone wrong (which I advised everybody to not buy into when asked) asking me for help in getting their money back.
These people had all the reasons in the world to post and tell everybody not to invest in Mexico yet they haven't. I assumed that it's because they realize that they just were unlucky at the lottery and that, statistically, one project had to go bad like in every other country. I'm just speculating that they don't want to rob the opportunity from others to have a chance at a successful investment in Mexico, like most investments there turn out to be.
Conclusion: Great post mentioning the issues to pay attention to but I can't agree with the negativity of your conclusion. It's BiggerPockets here. Aren't we looking at ways to do things and solve problems rather than excuses for not doing things?
Finally, if you want to buy a property in Mexico for lifestyle mainly but want it to be a good investment as well, it definitely works financially. In Costa Rica, I'm actually doubtful it would in most cases (which is why I always avoided buying there even though I love the country). If it doesn't work, it probably makes more sense to have a short-term rental in the US and rent when you go to Costa Rica indeed like you suggested, although @Matt Raleigh isn't a lifestyle buyer as far as I can tell.
This latter conclusion however assumes that you can find a profitable STR in the US, which is more and more questionable. Indeed, it looks more and more that the only way the FED can conquer the completely out-of-hand inflation is by crushing the US housing market, notwithstanding the fact that STRs are becoming less and less profitable in the US as everybody and their mother transforming LTRs unprofitable at higher interest rates into STRs, not to mention the increasing regulations that don't exist in Mexico, Central America and the Caribbean.
Some food four thought to be sure! :)
- 4yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Looking at your background doesn't look like you have started your REI investing journey.
Would repeat most of the people of above and would start local.
With that said, if your bent on investing overseas here are some thoughts to add to the comments I noted above.
Economy- this isn't a Economy discussion:
1. Stock markets dropped 4 to 5% today. Due to report on inflation. Still at high P/E ratios.
2. Feds to announce any interest rate hikes. Everyone is betting on .75%.
3. a. Strikes now or coming. Inevitable. b. Layoffs in the financial sectors starting. c. Look at price trends for Silver, Steel, Copper, and lumber. They have all hit close to 2 year lows. Basically Inflation, is done in the Industrial/Commercial sector; d. Still present in the Consumer Sector; e. starting to work its way into the Consumer Payroll sector. So, we are in Deflation on the Industrial/commercial side, but inflation is working its way through on the Consumer/retail/job side.
Overseas Tourism investment areas will drop like a rock. Look back at the Covid time period how they fared. Now come back a year later and put a need to pull cash back to the US on top of the previous Covid pressure and you will have plenty of properties for sale at bargain basement prices. You will be in a Buyers' market.
Recommend you identify your area. Develop a relationship with 1 or 2 realtors in that market now. Get your financing in order. Most places you won't get reasonable financing. Keep extra cash on the side since you will need to ride a downturn in the BNB sector.
Go after the bargain from both a Price standpoint, but also an AIRBNB quality standpoint.
Buyers market. Make a list of 5 properties in order of preference showing their asking price and your offer. Give this to your realtor and tell them to start at the top and work their way down. Give each a 3 day offer. Subject to due diligence and site review. You could have 3 offers out at the same time.
When they ask $1mm, you say $600k final offer and walk away to the next deal. Try to work with the older listings first. They will have learned their price isn't correct. The markets you are interested are probably not at the above state yet. Luckily you have a lot of homework to do in the next 3 to 4 months.
Example: While you are away, I move into your Airbnb. Can you get me out? Do your Country comparisons. You need to know these answers.
We just bought 60 more acres in Belize combined in 2 properties. Gave my realtor a list of 12 properties I was interested in. Got a bite on the 3rd on the list. $310,000 asking; negotiated $170,000. Same approach as I mentioned. But in a Buyers' market. Has both value in our Teak Plantation holdings, but also due to the location, has Appreciation value due to the development that has already occurred in that location.
Lay your groundwork and get ready when your market turns to a Buyers' market.
- 4yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Time for you to invest in your post
Need to narrow your discussion down
1. How much cash do you have to invest? $2mm, $1mm, $500k, $250k, $100k, $0? Keep in mind $850k can be a dump and fixer upper Depending on your answer you may weed out 90% of the market
2. Financing Are you thinking about financing? At 10 to 12% it's not worth doing a STR Find your market, that will dictate your financing
3. Insurance Can you self insure $300,000 of damage? That thought will narrow your market down
4. Property tax, STR income tax- find out Where I'm at $1mm property is about $250 property tax
5. Capital gain tax where I’m at its zero keep in mind your a US citizen and you still have to pay it back in the US both capital gain and personal income tax even though in another country
6. STR- what do you want special about your location? If you want ocean front with coconut trees and only have $250,000 cash to invest that helps narrow down the market
7. How do you want to manage? As I noted above you might choose not to be location specific but go with a management firm that you like and also finances back in the US
You need to narrow down the discussion Right now you have an area identified that is about 30 times the size of the US And your desires and financing are open ended and cover all potential combinations in STR
Narrow the conversation down and you will get better input Have Fun - Real Estate Broker · St. Thomas, USVI · Member since 2019 · 33 posts · 26 votes4y
Good Day from paradise.
There are many great posts in this thread and its great to see such an interest in investing outside of the mainland US.
**Disclaimer – I live, invest, and broker in the USVI.
For anyone considering investing in the Caribbean, below are a few points that led to me moving and doing business in the USVI from the mainland. I am not discounting other islands nor mainland central America, but simply sharing a few points that spurred my decision.
- We are part of the United States. We benefit from being under the US flag. Prime recent examples: 1. A natural disaster strikes – US Navy ships and FEMA are ready to swoop in and take action. Our independent neighbors down island are not so fortunate and can be devastated by natural disasters. 2. COVID – We had vaccines well before any neighbors. It was also easy for US citizens to travel here during the pandemic (no passport required), thus increasing occupancy numbers significantly and resulting in long term tourism gains from folks who visited that may not have otherwise.
- Ownership is Fee Simple with ability to purchase Title Insurance from known providers
- Residential mortgages are available and subject to same rules and regs the mainland. VA/FHA programs work here
- Real Estate transactions generally follow the same processes that I have seen in many US states.
- Mirror Tax code: Federal Income tax rules mirror IRS mainland, only the taxes stay in territory. 1031 exchanges can be done here. There is no state income nor sales tax.
- “Offshore” benefits: because we are separate from the IRS, we have some unique tax incentive programs unavailable in the mainland that are quite attractive.
- Sustainability – I personally get my energy for home and car from the sun and water from the sky
- We’re only 133 square miles – there’s a finite amount of developable land. In fact, around 2/3 of St. John is National Park and will hopefully never be developed
- We do have licensed Real Estate Brokers and Salespersons with an MLS and are part of NAR
- Easy access via air to Mainland hubs
Of course we have our negatives like any destination and share some problems that plague other Caribbean nations:
a poorly performing power grid, rough roads, and supply chain
- 4yMike LambertPro MemberInvestor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
I love your disclosure! Can I steal and adapt it? ;-)
You brought some great points. I never looked at the BVI for several reasons, the main one being I assume that the profitability isn't higher than int the US or Canada because, if I'm not mistaken, the property prices in BVI is really high and you don't mention prices and profitability. And, also, from a lifestyle point of view, I don't get it. I'd get bored after a week there and I'm generous. I'm impressed you live there. I don't know how you do it. Of course, that's a matter of personal taste.
I invest in the extended region mainly because I can get US/Canada income on much cheaper properties, with way lower operating costs, almost zero property taxes and no short-term rental restrictions. If you look at the Caribbean Islands, the Dominican Republic definitely fits the bill and doesn't have a poorly performing power grid, rough roads, and supply chain either if you're in the right spots. If you enlarge the area to include Central America as many do, I'd consider Mexico (full disclosure: I own property and now develop there) and Panama as well, which have even less grid, road and supply chain issues than the Dominican Republic.
- 4yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
USVI could you break it down compared to other Top destination Caribbean Island locations. For example leave out Haiti, Cuba, Puerto Rico, etc.
legal ownership
1031 exchange with US property 1031 sale
Property taxes
Property types as follows:
Ocean front
Ocean view- one block off
Ocean view- hill view
Next to tourist areas
Near tourist areas
Within 2 miles of tourist area within golf cart range
1st world construction
Swimming pool and veranda
Hurricane construction
Direct flights from? Versus other islands
Direct flight costs? Versus other islands
Customs- USVI do you still have to go through customs?
Benefits of citizenship in USVI
REI commission %
STR management feesAny other major costs or considerations
REI interest rates and LTV %
Thanks.
By the way where is the international post section? Looked through every drop down and didn’t find
Thanks.
- 4yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Let’s see what is possible
What is the cost?
1. Ocean front property
2. Boat dock
3. Established landscaping
4. Salt water pool
5. Outside shower
6. Veranda bar/grill overlooking or next to pool
7. Want the furniture, boat, golf cart, toys, car included
8. Marble countertops
9. Covered veranda roof
10. Facing east
11. Within golf cart ride of town. Out to 2 miles
12. Near tourist areas
13. Smallest 3 bd/3ba. Up to 5 bd/3ba
14. Minimum $5,000 per week rental property
15. Hurricane proof
16. Stainless steel fittings
17. Ceiling fans in every room
18. Either sliding or folding panels out to Veranda and Pool area
19. Isolated yet near everythimg
In Belize I can get this for $1.2mm. How much in USVI? - 4yHenry ClarkPro MemberDeveloper · Member since 2020 · 4k+ posts · 4k+ votes
Forgot.
Need a 15,000 gallon cistern.
solar off grid system.
250 gallon propane or butane powered generatorCaretaker cottage or exterior quarters
What’s the price there?
What are the finance terms? LTV, interest rate, amort term, no cliff
Thanks
- Realtor · Albuquerque, NM · Member since 2017 · 121 posts · 68 votes4y
Quote from @John Carbone:
Mexicos poverty rate is 44 percent of the whole population, as I initially mentioned (not a 44 percent increase in a year due to Covid). It’s around 10 percent in the USA. Belize isn’t much worse than Mexico. In a previous post you said Mexico did great during Covid because of no restrictions. I pointed out the income of the “middle class” because you seem to be touting a growing middle class there as if those people will be contributing to the real estate market in a positive way (ie, renting units). it seems you are now saying that the whole model in Mexico is around international travel and the Mexican elite, which is what I was saying about five posts prior and you were refuting.Quote from @Mike Lambert:
You tell us that Mexico GDP per capita is 3 times that of Belize and there's a huge difference between $18,000 and $5,000 and, a little further, you tell us that finally they're in the same boat because Mexico's poverty rate grew by 44% last year. That latest statistic is totally useless in your comparison because you don't tell us 1) what the poverty rate is in Mexico and Belize and 2) what the increase in poverty in Belize was over last year.
Regarding the increase in poverty rate in Mexico last year, I don't know if it's 44% but I know it has increased. 44% looks like a lot but it's entirely possible because it's due to Covid, which you could have figured out. Basically, over the last few years, a lot of Mexicans have left the poverty line and were therefore slightly above it so Covid pushed them back into it. As you probably know Mexico was affected by Covid because of the decrease in tourism and the poorer people were more affected, like in the US and anywhere else.
I have to command you for doing research before giving opinions but if you want to argue with people who are taking action and know the subject inside and out, my advice to make sure your research is more in-depth before making certain affirmations. In doing so, you would have figured out that linking the average income in Mexico with the short-term rental rates makes absolutely no sense. This is because those who rent the short-term rentals are the foreigners and the Mexican wealthy and middle class people. It's kind of obvious when you think about it, isn't it? So, the average income of these are the Mexican is much higher than $18,000. That's the whole "secret" about short-term rentals in Mexico. Unless you have a bad deal, you can make way more net income by $ of property value.
You actually should care about the next 30 years if you take 30-year mortgages. But yes, like you, I'm not overthinking the next 30 years. Didn't you figure out I was just illustrating the fact that the Mexican economy is not insignificant.
I hope that this "conversation" is useful to you and others. And, maybe, little by little, you might start to understand why some people invest in real estate in Mexico when maybe you didn't see the point at the beginning.
I lived in Mexico pre-COVID, during COVID, and post-COVID. Mexico was stricter than even the most strict states in the US. Mask mandates, temperature checks, only one family member could go into the grocery store at a time, shoe sanitation at the entrance of most buildings and stores, naval forces blocking access to the beach so crowds couldn't enter. With that said, Mexico remained open to tourism when other countries didn't. As restrictions lifted in the US, many Americans visited Mexico. The last two 'high seasons' have remained high with tourism continuing past April, the typical end of high season. Not only did Mexican nationals travel more after restrictions lifted, so did other Northern Americans.
The middle class in Mexico is significant. There are a lot of Mexican nationals that travel to beach/resort towns during Easter and Independence Day. In fact, many hotels and short-term rentals are booked by Mexican nationals. Upper class Mexicans also have second homes in these resort towns and visit regularly.
- Real Estate Broker · St. Thomas, USVI · Member since 2019 · 33 posts · 26 votes4y
Quote from @Henry Clark:
Forgot.
Need a 15,000 gallon cistern.
solar off grid system.
250 gallon propane or butane powered generatorCaretaker cottage or exterior quarters
What’s the price there?
What are the finance terms? LTV, interest rate, amort term, no cliff
Thanks
Hi Henry. It's apples and oranges - but I'll guess VI is more expensive. What you are describing sounds like one of the cays in Belize, which is a different vibe and terrain than in the VI - thus the considerations are different but I'll seek to come back with a thoughtful response. This hurricane has derailed the last few work days.
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