All Forum Posts by: Mike Lambert

@Chasity Ware

In any country where I am active or I'm looking to invest (because it makes sense), anybody from any nationality is allow to rent property that they own. Personally I don't mind if foreigners can't purchase properties in Dubai as I'd never want to own property there.

As mentioned by @Ken Latchers and @Michael Baum, it's important to either know what you're doing or work with people who do. If you do, international short-term real estate investing can be much more profitable than at home.

What @Paul Sandhu mentioned makes total sense. If you're planning to do everything yourself, it's good to have experience in your home market first. Of course, if you can work overseas with people you trust and can make money there, you could invest overseas right away. And of course, never underrate education!

@Jim K. Absolutely! You brought a great point here, which I forgot to mention. Having (access to) the knowledge is important as I mentioned but so is having reliable contacts on the ground. I'd never have started to invest internationally without those. They're not absolutely necessary but I'm very risk averse and these contacts give me access to the best deals. This is the case for Greece or anywhere else for that matter!

@Tamara Deering

Investing in holiday rentals in Portugal, Italy, Greece or Spain is a great idea. There are absolutely no restrictions for anyone to invest there. I'm not sure where you got that from. You don't need to be from the EU. You can invest as a Brit whether Brexit happens or not and you can invest as an America too.

The main thing is that it's best to know what you're doing or to be connected with people who do. There are great opportunities an Italy but prices have been declining for years. I guess you heard about the situation in Greece but oftentimes trouble spell opportunities if you know where to go. Portugal and Spain are great places but you have to be careful not to overpay.

@Jillian Ez

My investors and I were lucky to invest in the last development close to the beach and Fifth Avenue in Playa del Carmen. While we're very happy with that investment, we're done for the Riviera Maya for the reasons I explained in one my previous replies in this thread.

We're moving to the Pacific side. We have opportunities in both Puerto Vallarta and Cabo and I prefer Puerto Vallarta. I'm working on an awesome development project there where we'll offer a great deal to both investors and buyers.

Puerto Vallarta is very slightly further from LAX than Cabo. I'm not sure if you're looking at a pure investment or a place you can use for yourself. If it's a place you want to use for yourself, you might love it, like I do. I love that you have the old city (Zona Romantica) and the modern city, the beaches and the hills/mountains and great food partly thanks to the many expats.

Feel free to reach out if I can help any further.

@Francisco Cimon

There is an important point that I forgot to mention in my reply to your post. In spite of the positives I mentioned about Mexico, it should be clear to everyone that investing in real estate in Mexico is riskier than investing in real estate in the US, except when the US is in the middle of the housing bubble.

Mind you, depending on your risk tolerance, this is not necessarily a bad thing because with a higher risk comes a higher return. I'm currently working on a condo development opportunity in Puerto Vallarta and the potential returns that we can pay to investors are very high (I was so surprised that I recalculated several times to make sure my numbers were high). And those who buy our condos should make a very nice rental return.

I would never invest in Mexico to get an 8% return because it is not that hard to get such a return in the US, while taking much less risk. We should always look at the risk adjusted return when judging an investment.

@Francisco Cimon

You are right in that there has been a surge in violence in Mexico over the last few years. However, there is a lot of exaggeration and disinformation about it, as can be explained. Therefore, it’s important to stick to facts and figures and reliable sources of information.

In terms of reliability, it doesn’t get any better than the US Department of State, who is responsible for the safety of American citizens abroad. They have a travel warning of Mexico. They tell you to avoid certain small areas because of the violence there. That doesn’t include Cancun, Mazatlan, Los Cabos or any other tourist area. For these area and the overall majority of the country, the travel warning is at level 2. That is the exact same level as the UK, Germany, Belgium, France, the Netherlands, Spain and Italy!

How is that possible? Because they know that the surge in violence in Mexico is the result of the infighting for supremacy between cartels as a result of the capture of El Chapo, Mexico’s most infamous drug kingpin. They know that tourists never get targeted and that those who get killed were either looking for trouble (involved with drugs) or at the wrong place at the wrong. The reality is that neither the Mexican government nor the cartels have any interest in killing the golden goose of tourism.

Yes, I know people that won’t travel to Mexico because of the violence. Yet, Mexico is the 7th most visited country in the world and keeps claiming in the rankings. More than 40 million tourists are now coming every year and that is much more than in the US per capita or square mile (I think that’s enough people to fill my short-term rentals). Cancun airport welcomed a record 26 million passengers last year. Puerto Vallarta’s airport is going to get a massive upgrade. The hotel occupancy is one of the highest in the world (which is great for short-term rentals). Airlines keep adding new routes and hotel chains keep investing billions of dollars in new facilities. Do you think they would do that if the demand wasn’t there? As I always stay, statistics don’t lie.

Granted, investing in Mexico comes with its challenges. As Brandon Turner says, when faced with a challenge, you can do like most people: give up and watch Dancing with the Stars. Or you can make some great money like @Matt Ayoub or myself and my investors. Ultimately, all those who don’t invest represent less competition for us.

@Rich Weese I made assumptions based on what you wrote and I’m still exactly not sure about what happened. Regardless, I wasn’t trying to change your opinion about Mexico or investing there. Why would I do that. Clearly, you had a bad experience there and whatever I could say wouldn’t change your opinion and that would be the case for most people who have had a problem there or in any country for had matter.

Sadly, Mexico has its fair share of big problems. Drugs, violence and corruption on top. These are highly publicized and sometimes exaggerated.

Both of us are entitled to our own opinion but we’re not entitled to our own facts. And facts don’t lie.

Statistics speak for themselves. Mexico is the 7th most visited country on earth, with more than 40 million visitors per year and has been climbing the rankings in spite of all those problems. It’s not far behind the US in numbers and Mexico’s numbers are much higher on a per capita or square mile basis.

The murder rate is higher than in many other places but the odds are that, if you don’t go to the wrong places and are not looking for drugs or trouble, you’ll be just fine. While there are incidents, this is why people keep going back and more people are going.

Did you know that Cancun’s murder rate is is lower than that of NYC and Los Angeles. Should you not visit or buy property there? No, you just avoid the bad areas, like you should do in Mexico.

Mexico has the biggest population of North American retirees and snowbirds outside of North America, with up to two million people. Many Americans and foreigners own property there and the vast majority hasn’t had issues, which is why they keep buying.

Are these millions of tourists, retirees, snowbirds and investors crazy? I don’t think so.

My point regarding your story was just that anybody can be ripped off anywhere. Mexico is different as in worse for you because that’s where you were ripped off. Somebody who got ripped off in, say, Argentina would say that is the worst country. While the probably of being ripped off in Mexico as a foreigner is probably higher than in some other countries, it’s still low in the grand scheme of things.

As sad as your story is, my point with it was that, in my personal opinion, it’s not right to suggest to others to not invest in Mexico because of what happened to you. It’d be like the victims of Morris Invest in the US suggesting that nobody should invest in turnkey properties in the US. I don’t think anybody would agree with that.

But again, my purpose is not to convince you of anything or to say that you’re wrong. It’s merely to share the facts and figures as well as my knowledge and experience in Mexico.

@Briant Patterson Based on my own investing experience in Mexican real estate, maybe it would be better for you if you offer a higher return to your potential investors. If I was offering 8% to my investors, I doubt they would invest, considering that you can easily have a higher return in the US while taking much less risk.

I imagine that your concept of container homes is new and unproven and that therefore you don't want to promise returns that are too high in case you couldn't deliver them.

Also, don't you think that there are better places in Mexico for the container homes. Cabo visitors are typically well-to-do and go there for the glamour so are they going to want to stay in containerhomes?

One last point I forgot to mention. I'm currently working with investors on a condo development project in the Dominican Republic. To protect our future buyers against what happened to Rich, they will pay their deposit into an escrow account managed by a fiduciary company belonging to the country's biggest insurance company. They will only release the funds to us once we have proved to them that we have enough financing to finish construction. Our local partners are the only ones doing that.

I'm also currently working on a development project in Puerto Vallarta, Mexico and I'm going to see if we could make the same arrangement. Let's hope this can become the new standard to protect the buyers.

@Rich Weese It was sad to read your story and it's great that you shared as it might prevent other people having the same misfortune, which I'm sure was your purpose. I however respectfully disagree with your suggestion that we should run away from buying pre-construction condos in Mexico, which I have been doing over the last few years with my investors. We just need to know what we're doing or work with people who do and whom we can trust.

Firstly, there are deals that turn sour in every country and in every sort of business. If we would use that as a reason to not do that sort of business in that country, no business would ever be done! Please don't prevent other readers to take advantage of the awesome real

Secondly, billions of dollars have been invested by foreigners in Mexican pre-construction real estate and only a tiny fraction has had issues. The proof is clearly in the pudding given the amount that keep being invested year after year. And this isn't because of ignorance at a time when everybody learns about everything about social media and when the mainstream media doesn't miss a chance to point out (and often exaggerate) all the negative news that might come out of Mexico.

Thirdly, it is not thankfully not every day that the peso devalues against the dollar at the same time as two hurricanes hit. The devaluation of the peso is a risk for the developer (but not for the buyer as he buys in dollars) and this is normal but the buyer should be aware of that. Mind, you the peso is so low and the dollar so high that the odds favour the peso going up going forward, not down. The hurricanes are part of the developer's risk as well but Florida and the Southeast of the US gets hit much more by hurricanes that Cancun, which hasn't been hit after Wilma. I don't remember what the explanation is but Cancun is actually normally protected from hurricanes.

@Bob Green @Lisa Jarboe let me explain to you how pre-construction sales work in Mexico and how what happened to @Rich Weese can be avoided.

In my home country of Canada (and I assume it's the same in the US), when you buy a pre-construction condo, you pay 5% of the price at the signing of the contract and the remaining 95% at delivery. These 5% will obviously not be enough to finance the construction but this is not an issue since developer have access to plenty of cheap bank credit to finance 75% of their costs including the land.

In Mexico and other countries in a similar situation, bank credit is very expensive, as interest rates run in the double digits. Therefore, they need the (free) money from their customers to fund the construction. When we buy in Mexico, we pay 20% at the signing of the contract and then 30% during construction. If the developer sells well under these conditions, he can pretty much finance all the construction.

Most of the construction in Mexico is in the hands of very wealthy families. I only buy from some of them, who I know personally and have special deals with. They have enough money to finance 100% of the construction if necessary. Obviously, they prefer to use leverage and they'll use their customers' money in the first place but they're dependent on it. In Canada, the bank will require that the developer sells 60% of his project before giving the financing. This ensures that the developer will be able to complete the project no matter what and therefore protects the bank and the buyers.

Since the Mexican developers don't use bank financing the same way, they don't have to abide by that 60% rule, even though it would be in everyone's interest that they do. For the wealthy families, this is not an issue. If they are confident that their project will sell, they can decide to start construction with as little sales as possible, since they have enough money to finish their projects no matter what.

As real estate in Cancun has been booming since Cancun was created 40 years ago, some people, like Rich's real estate agent and businessman, decided to become developers to share in the huge profits that the developers had been and are still making. Since they don't have the money that the rich families have and don't have access to cheap credit, they should wait that they have 50-60% of sales completed before starting construction. I assume that some, like Rich's developer, got overconfident as a result of the market getting hotter and hotter and started construction without having enough sales, figuring out that they will sell more as construction progress. The problem is that, if they don't sell enough, like in Rich's case as a result of unpredictable external events, they will have to stop construction.

I'm extremely risk averse and I will do anything to protect the interest and money from my investors. Therefore, I only buy from developers who belong to these big families but only those who I know personally. Yet, even if I didn't have those connections, I would have thought that being a real estate agent and businessman doesn't mean that you will be a good developer. Moreover, I'd always check the track record of the developer.

Now on the developer financing. Many developers pretend that they give you developer financing because they let you pay over the course of the construction between the signing of the contract and the delivery of the property. This is fake developer financing. As I explained above, it's actually you giving (0%) financing to the developer and not the other way round.

My investors and I are getting real developer financing. As I explained above, we have to pay 50% before the delivery of the property. We should normally pay the remaining 50% upon delivery but the developers give us 5 years to repay the remaining 50% of the price after delivery. This is the same deal offered to @Bob Green, except that we're getting a much lower interest rate, which is super low for Mexico. As a result, we'll never have to pay the 50% balance of the price as our renters will pay for that and we'll still be cash flow positive each month after the loan payments.

This real developer financing is very rare in Mexico as some developers don't have the means to give them and those who have the means don't need to because their projects sell easily without that. My developer doesn't normally give developer financing; we're getting it just because of my relationship with him. Bob's deal could be a red flag, as some developers could be offering such financing to the public in general because they can't sell (enough) otherwise.

To conclude don't be shy about investing in pre-construction in Mexico if the deal makes sense but make sure that you know what you're doing or that you work with people who do.