Any places I might be missing?

Question

Hello, I just happened upon this forum. Because International travel and real estate investing is a great interest to me, I thought I would introduce myself and hope to start a conversation on options for the favorite places to purchase real estate for like-minded people.  My current properties in Medellin and France have been a mixed bag, but I am happy I made them.  I currently have both on short term rental platforms and have been doing reasonably well the past 5 years.

I only purchase on areas I would like to spend time and possibly live in the future.  I also decided only to purchase places where historical currency valuations for the USD are to my advantage.  So Thailand, where I have been the past year for Covid, is not an option because of the strong Baht.  I also am concerned with SouthEast Asia's tendencies to disallow foreign freehold ownership of land and strong laws against short term rentals, even if not mostly enforced.

I am currently in contact with and purchasing real estate in Cape Town, South Africa, Marrackech Morroco, and Rio de Janeiro, Brazil.  I have spent time in the past in all of these places and would like to return, I'm rambling here, but my question would be, are there any areas that people would recommend for a USD currency advantage and a nice lifestyle?

Regards

Fletcher Wheaton · Answer

I am based in Cabo San Lucas, MX and we have properties all over Mexico.  I have relationships with large developers and have a few condo projects dropping in Los Cabos.  I also have a podcast on international real estate.  I don't spend much time on Bigger Pockets, but shoot me a message if you would like info about the podcast or investing in Mexico.

Waylon L. · Answer

Yes, I agree.  Thailand is a complicated place to own property.  What I meant was I will be purchasing a property in the countries I mentioned without visiting the properties as I plan to stay in Thailand until a better idea of international travel emerges.  I do not want to leave a Covid free country for a country with high rates of Covid like Brazil so I more than likely will be purchasing through photos, video, and google maps.  Have you made purchases in this fashion before?

Mike Lambert · Answer

Personally I’d never buy property in Thailand for two main reasons:

Firstly, even short term is super cheap so I rather rent for my own usage and I can’t make serious money as an owner.

Secondly, Thailand treats foreigners as second class property owners and you can’t hold freehold. And buying a condo on superior floors isn’t really buying freehold since you can’t own your part of the ground.

Mike Lambert · Answer

I'm not sure what your definition of a nice lifestyle is. Only you know. So, you could select all the places that fit your good lifestyle definition and check where the currency is at. An easy place to check that is trading economics.com.

Two caveats. In some countries, all or some of the properties are traded in USD or sometimes in euros. Nobody knows where currencies are headed (against) the USD. Some falls in currencies against the USD are deserved while others are not. The ones that are deserved might not reverse.

Also, if you want some nice rental income, the place must be desirable. And there are also the legal and ownership aspects, as you mentioned.

Some usual suspects are Colombia, Brazil and Turkey. In Brazil, I'd go for Fortaleza and the North-East coast within Ceara rather than Rio de Janeiro.

Waylon L. · Answer

Hey Brandon.  I have experience in Colombia as I bought my apartment in Medellin in 2012 and lived there on and off until 2017.  I still have my property there, but I could not justify living there even though it really is a great city with friendly people and excellent amenities because of the security concerns and pollution.

In 1997 I lived in Mazatlan, Mexico, for a year, and while I have not been back, I have fond memories of the friendships I made and the great cuisine.  I haven't visited the Cancun area yet, but I am considering it my next move if and when I decide to leave Thailand.

Andreas Fischer · Answer

Have you ever thought of Tbilisi (Georgia)? No. 1  destination for digitial nomads, houses are purchased in USD, super low costs of living,  very safe country, open to foreign investors, high degree of digitalization and you get super deals there at the moment. And its a great and vibrant city with a great international community too. I love the place, just bought a lovely apartment there this August in the midst of the crisis.

Waylon L. · Answer

Hello Basit.  The COP was strong when I purchased in 2012 nearly double what it is today so while property values have more than double in the past 9 years I still own property for around the same value I paid for it which was 250k USD.  The area was in a Poblado neighborhood named Catropol.  Really a nice apartment.  2 story Penthouse.  I enjoyed living there very much.  Towards the end, the pollution was bothering me so I bought an apartment in the South of France and have only been back to my home in Colombia briefly.

I Airbnb my property with a 1 month minimum as per Colombian law.  There are a few buildings that have licenses to rent the properties for less than a month so good to look into that.

I pay a Colombia accountant to file taxes on my rental income and I have a friend manage the property for me and pay her 10%.  My gross income has been anywhere from 28-19k a year and Net around 75% of that.

Colombia is a great lifestyle play.  As far as income-producing property I am sure people do it much better than I but it's not easy necessarily and I speak Spanish as a second language.

Basit Siddiqi · Answer

@Waylon L.I recently visited Medellin last month for the first time and I love the city. I stayed near Parque Lleras.Can you share your experience with buying a property in the city? What was the price, location. What are the tax ramifications as well. Are you required to file an annual return with Colombia reporting your income?Is the ease of buying a property easy for foreigners?

Andreas Fischer · Answer

So, to come back to your questions. First of all, I am only taking about apartments here, not about other real estate, especially not hotels, where I have no experience.

1. Type of apartment: There are basically two types of apartments one can consider buying in Tbilisi.

a) New Apartment: First is a new apartment, where you have to carefully consider the building quality as you mentioned. I believe depending on the builder, you can rely on the quality more or less.

b) Old Apartment: You can (and should!) buy old apartments. With old apartments, I am talking about an historic apartment in the old town of Tbilisi, ideally that is a national monument. You can check the monument status easily in the land register excerpt. Many of the old apartments in the old town have monument status. It comes with advantages and disadavantages. Advantage is that the government will take care of it, and, according to my information i verified with plenty sources, you will not be asked to contribute to the renovation costs. But your apartment will shoot up in value after the apartment has been renovated. There is a big governmental renovation plan in place for the old town, also against the background of the hope that the old town may become UNESCO world heritage. You can check in public registers the estimated point in time when your building is scheduled for renovation. Prices for old apartments and new apartments are comparable, but the chance for price increases in value is much more on the old apartments.

Disadvantage of the old apartments is that they have often defect and stability issues, but again, therefore, it is so important to buy a national monument protected building. I had my apartment reviewed by a building engineer before purchasing the property. Such buildings are protected by the government and should building issues occur, government gives priority to such apartments and will not allow those to fall apart. Further disadvantage is that you need approval for many measures, like changing windows, putting air con, etc. Many people, expecially locals, do it anyway, and rarely something happens. But especially as a foreigner I would adhere to the rules.

2. Investment Strategy

You are correct that the local population should not be your target group due to lack of financial resources. Target group should be tourists via AirBNB rental or westerners who want a top historic apartment in the old city to experience the true Tbilisi style for mid term rents (like 1 year or so as posted employees).

If you rent via AirBNB, there is an agency, we host ge. https://www.wehost.ge/en/home/

They will rent your apartment for 25% fee, which is very reasonable, considering this includes advertisement of apartment, cleaning, 24/7 availability for tenants, etc. I know the guys and they are good and honest people.

You need to know that there are approx. 25 to 30k apartments for AirBNB in Tbilisi. So there is a huge supply, every one wants to get part of the cake of the increasing touristic destination Tbilisi. So you need a top apartment in a good location. According to Wehost guys, despite crisis, they have currently a 70% occupancy of their apartments despite lock down, which is unbelievable. Its mainly local tourists and foreignis stuck in Tbilisi. However, prices are obviously very low. For my apartment, top location, top building, I would currently not get more than 25 to 30 USD/day.

My original plan was to go in the apartment over christmas/NY, and start renting next season, season goes from March/April to October, July and August are the top months. For my apartment, I could expect up to 100 USD/day in the top months, approx. 3k/months, and something between 1 and 2k in the other months, subject always to 25% fee for Wehost.

As now, there is uncertainty about the lock down and whether tourist season 2021 will kick-off or not, I decided to rent out "mid-term", rented to a French lady working for the EU and I got a top price, 700 EUR/months. This is extraordinary, most apartments of the size of mine go for less than half of this at the moment. But its all about flair and location, location. I think I was lucky also, however, her condition was that she can stay at least one year. So I agreed, with the disadvantage I cannot come into my own apartment this summer :-(

By the way, there is a 5% tax on rental income in Georgia. People tell me almost no one is paying it, but I will. Most countries have double taxation treaties with Georgia, and so does my country of residence have. There will be a small additional tax in my home country then.

My apartment:

Some key figures about my apartment:

Size. 80 sqm

Location: Very central, 150m from Marjanishvili Metro

Apartment: Beautiful old apartment, monument protected, floor 2/2, ceiling 4.70 high, 2 bedrooms

Purchase price 105 USD, including all furnishings and equipment as seen on the pictures, no side costs (no notary fee, no RETT, nothing, no brokers fee (pays the seller), but I paid something to my friend and the broker who helped me to find the apartment. Was completely voluntarily and out of gratitude. And I paid a lawyer (500 USD only). But I admit the apartment was an excellent price, I would say if the tourists come back after Covid, I could sell it as is for 130k directly (original asking price was 140k USD). I went there during covid when only Germans and French citizens could go there without quarantine and had a seller who needed to sell urgently.

I attach some pictures:

Prospects:

In my opinion excellent, Prices are low, country is relatively stable and tourism is increasing in huge % rates every year (with an obvious drop due to Corona now, thats why apartment prices went also down and one should buy now!). If Georgia getting closer to EU and Nato, which they want, prices could go up significantly. Plus my apartment is scheduled for renovation according to national plan in 2024. After that, price will increase 50% until double directly based on previous experiences.

It will never be a problem to sell a good apartment in Tbilisi, but your buyers will be foreigners always.

Rent yields: Looking at 8 to 13 % annum, currently, I make around 8.5% after all costs now with this long term rent for one year.

The risks:

Earthquakes (insurance does not cover that risk)

Political risk (Russia); my opinion, yes, it is a moderate risk, but even lets say Russia should invade Georgia (which I do not consider a likely scenario), would not necessarily mean that your apartments will be taken from you.

I personally consider the political risk of western left wing socialism governments dictating you prices and super friendly tenant laws and increasing property taxes and taxing the "bad rich capitalist people" much higher than this risk! I have several apartments in the leading country in Europe, and I will not invest more and even consider devesting in favor of other countries.

Fee pictures attached.

The country is beautiful, super cheap, super digitalized, investors friendly, considered among the top 5 safest countries in the world!

Andreas Fischer · Answer

Sorry, proper response will follow shortly tonight my time when I have sufficient time.

Any places I might be missing?

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