All Forum Posts by: Mike Lambert

To everyone who want to invest in the great country of Colombia, investing internationally is not the same as investing in the US. A lot is obviously the same and you can apply some of what you learn everything, However, a lot of the investments are profitable mostly if not only because of ultra low interest rates. Interest rates in Colombia are very high and it's very difficult for a non-resident to get a bank loan there.

So here are your options to invest profitably in Colombia:

* You can invest in long term rentals for capital gains. You won't get big cash flows. There is a law in Colombia that forbids you to rent for more than 1% of the value of the property per month (12% a year). You can invest all cash but, most of the time, your gross yield will be lower anyway. If you can use leverage, you will most likely have to pay 12% if not more but most likely won't be able to finance more than 50% of the price. After deducting all the costs, you mind end up cash flow negative or slightly cash flow positive. As the middle classes expand in Colombia, you could make nice capital gains but that is of course speculation.

Bear in mind that Medellin, although still cheaper than Bogota or Cartagena, has seen its real estate prices doubled since 2011. It is still undervalued by international standards (not Colombian standards) and prices could go much higher over the long term but it might take time for the market to digest the gains of the last few years. Another important point to bear in mind is the currency fluctuations. The peso (COP) has dropped so much against the USD over the last few years and this fall in they currency has almost nullified or at least strongly reduced the COP gains when translated into USD. This so-called currency kicker one of the reasons many US investors want to invest internationally and in Colombia. Indeed, properties are very cheap when converted in USD and, as the COP recovers against the USD, this should significantly increase your capital gains. Bear in mind that the COP could deteriorate further against the USD and that the USD is extremely strong at the moment. While you don't know whether the COP will appreciate or depreciate, it is always great to have assets in different currencies and different jurisdictions from a risk point of view.

* You can flip. Colombia is a great place for that for three reasons. Firstly, Colombians and Latin Americans in general prefer shiny properties that are or look like they are brand new. Therefore, older properties sell at a big discount to the newer ones so there is room for a nice profit if you buy and older property, renovate and flip it. Secondly and, on top of the first reason, the market in Colombia is highly inefficient. There is no MLS so you can find properties that are for sale for well below market value. Thirdly, the renovation costs are much lower than in developed countries because of the low cost of labor. The issue here of, course, is finding and flipping properties in a foreign country.

* You can remodel and, instead of flipping, you can keep the property. Since you bought at a lower price, your cash flow yield will be higher and you might end up financing at a higher LTV if you use financing.

* You can do short-term rentals. This is potentially very profitable given the high potential profit vs the low cost of the real estate (and this is a way to escape the 1% rental cap rate mentioned above). This strategy is especially great considering that tourism is exploding in Colombia and we're probably only at the beginning of this trend. However, in Medellin, you can only rent short-term if 70% of the owners in the building agree and, most of the time, they won't. The city is much more aggressive about enforcing the rules than in many other countries and they are shutting down illegal Airbnbs. The solution here is to buy a whole building.

* You can be invest passively (with people like me). For example, I invest internationally in different countries with investors. Because of my connections, knowledge and access to financing, I have access to deals most investors don't have access to so I'm able to offer higher returns to investors than if they would invest by themselves (also, since we have access to more financial resources, we can buy entire buildings and do the Airbnb strategy). Aside from getting higher returns, they have nothing to do and their risk is lower because we deal exclusively with people from my trusted network that have been vetted. Finally, they don't need to acquire the knowledge about the local market laws, regulations and tax systems, which takes time and is not easy to get if you don't know the right people.

At a time when real estate has become very expensive in the US, investing internationally is an awesome idea and makes total sense. You can get returns that are uncorrelated to the US market, that can be potentially higher, there is less competition against other buyers and investors, the market is not overpriced as a result of a huge amount of debt in the system, the markets are generally inefficient (meaning opportunities can still be found) and it is a good way to diversify your portfolio, both in terms of markets and currencies. However, you need to know what you are doing and have the right knowledge and expertise or know people who do.

I hope this has been helpful. Don't hesitate to contact me if you think I could be of any further help.

@Nathan Williams

Regarding properties owned by the government, you need to be a multimillion dollar hedge fund to have access. There are exceptions. I have access because I know the right people but it is very rare.

When it comes to bank repossessions, there are no auctions. Again, you need to know the right people. No need to be a hedge fund but I can tell from my own experience that you need to appear as a serious party to talk to them and that is assuming that you find the right people to talk to.

Investing internationally has its own set of rules and so you can’t just blindly apply what you learn in the US or here, although many things are the same obviously.

As to flipping versus buy and hold, some people flip because they want to generate cash quickly, they like it or they think that the revenue generated by the properties is way too low compared to the price to make it work.

Also, remember that this is a US website so the number of people who invest in Spain and internationally and know about it is fairly limited. Also, the amount of people who invest in Spain here represent a tiny minority of the investors in Spanish real estate so you shouldn’t assume that what we’re doing is representative of what most investors do.

@Nathan Asher Robson

You're very welcome! This is what the forum is all about! Helping each other. Every time someone votes for one of my replies, it makes me happy because it means that I was able to help. And it encourages me to continue replying when I have the time and the knowledge.

As I mentioned in other posts, banks will never finance a property in a foreign country because they don't have the necessary means, knowledge and willingness to go through a foreign legal system to repossess the property should the borrower default on his mortgage.

If you hear or read that somebody got a property financed by a local bank in a foreign country, this is because that bank took some local assets as collateral or gave an unsecured loan. Obviously, this is not a financing specifically for the overseas property and the borrower could use the money to do anything they want.

If you have local partners, you can access the local banking system like I do or otherwise US HMLs might be a solution, as indicated by @Jose Batista Abikarram

Foreigners can own property in the coastal areas provided they do it through a fideicomiso (bank trust) or Mexican corporation.

There is no MLS in Mexico, except in the Puerto Vallarta area and it's not mls.net

There are two markets in Mexico. The properties that have North American standards are traded and rented (oftentimes short term) in USD and that is the market for foreigners and wealthy Mexicans.

Then, you have the property for locals, traded and rented in MXN (pesos). I’d never buy in that market and so I don’t know it; I’m only active in the first one.

This would be a long term rental (or at least by the month) $850 seems huge for that market; it's a lot of money for these folks. The CAP rate, although very high, could in theory be possible. Maybe the vendor is motivated. Or maybe it's a high crime area.

These markets are completely separated. You cannot buy in the second, renovate and rent or sell in the first market. Indeed, you’re never gonna be able to renovate to a standard high enough and, even if you could, if wouldn’t work because the locations are different.

There could be an exception. Adventurous young people staying temporarily or foreign retirees who don’t have the budget for a better property could in theory be renting such a place for that price.

Yet, even if that was the case, how would you manage the property? What would you do if the long term tenants don’t pay?

In any case, I’d never buy such a property sight unseen and without proper due diligence. When I vesting internationally, I t’s important to either know what you’re doing or know somebody who does and who you can trust.

Mexico can be a great place to invest and you can get rental yields even higher than that but you need to buy the right properties in the right place. To me, it means buying nice properties to operate as short-term rentals.

@Account Closed

Yes Spain is a great place to invest (as for living, it's a question of tastes and personal objectives). I'm not sure why you're posting that here since banks in Spain generally do not do refinancing.

Be careful of cheap properties though. Spain had a huge real estate bust as its real estate bubble (much bigger than the US one) deflated during the financial crisis. As a result, you could buy quality properties at bargain basement prices starting in 2013. This game is pretty much over, as prices have had a strong recovery since.

You can't just buy indiscriminately anymore. You have to find deals and know what you're doing. Most of the foreclosures were taken over by the specially created bad bank SAREB and they still have a huge inventory. To have access to those, you normally need to be a hedge fun. My investors and I get access to their inventory to one of my local connections. Some banks still have foreclosures of their own and we get access to date through my contact as well. The thing is you have to be able to find the jewels there. There is a huge amount of cheap properties but most of it is junk. However, if you find the right ones, you can make a lot of money. It takes the right knowledge and connection.

So yes, Spain is a great place to invest but know what you do, and if you don't, associate with people who do. And beware of the cheap junk!

@Dieggo Goncalves

The North East between Jericocoara and Joao Pessoa for short-term rentals and land. It's the domestic main tourist destination and there are more and more foreigners coming. There is a path of progress barrelling along the coast and the area was still thriving when the country (and especially the South) was in recession.

Gentrifying areas of Sao Paulo for micro condos. The young and well paid locals want to live downtown close to their work and the action without having to spend hours commuting but they normally cannot afford living there. However, they can afford a micro condo that is perfectly located and has full amenities, in which they won't spend much time regardless.

Personally, one of my main reasons to invest there is my local connections which gives me the local market knowledge and gives my investors and I access to deals. However, these are the areas I'd invest in anyway if I didn't have those.

@Danielle Thomas

I'm looking at things from a pure investment point of few because my purpose is to provide the highest possible returns to my investors and myself (I get paid after them). In your case though, there seems to be a big lifestyle component so you need to bear that in mind.

Lucky you to live in beautiful Atlanta! You have direct flights to pretty much anywhere in the world!

Colombia is an awesome place to invest in real estate (and to live if it is up to me) and the three cities you mention (plus Cali) definitely present opportunities.

Medellin has tourism, expats and digital nomads and it is a big center for commerce and industry, being the country's second city. It has a European feel and it has the best public transport in Latin America. It has the best weather in my opinion and its nickname is "The City of Eternal Spring", which says it all. It is the favorite of expats, except for those who want to be by the water. However, you can easily book a cheap flight to Cartagena or Santa Marta to go to the coast as often as you can. Real estate is the cheapest of the three cities there.

Cartagena is by the water and has therefore big tourism and it has its beautiful old city as well as the skyscrapers. The climate is tropical so it can be a plus of minus. It is also a big center for commerce and industry, being the country's biggest port.

Bogota is a megalopolis and the country's main center for commerce and industry and it has tourism as well. It is higher up in the mountains than in Medellin and therefore has a colder climate. Its real estate is more expensive than that of the other two cities.

You probably already know all of this but I figured out it could be helpful to other readers.

You can find deals much easier than at home because the market in Colombia is very inefficient. To do so though, you need to have the right knowledge and connections or know people who do. Indeed, like in many places, it's not that you can just by any deal and make money. If you need financing, it can be difficult to find and expensive if you don't know how to use it.

Uruguay is much more developed than Colombia and has arguably the best political system and culture of the whole Latin America. It has one of the best standard of living of the continent, if not the best. However, the capital city Montevideo has the reputation of being a boring city in the eyes of many and there are no other real big city. Punta del Este is big during the short summer season but is very expensive. What is interesting is to buy along the path of progress from Punta del Este towards the Brazilian border. You can make nice money by renting a beach home only during the summer season.

@Alex Washburn

We are all here to contribute and it would never cross my mind to discredit  anyone's comments and certainly not yours. I've indeed enjoyed interacting with you in the forums before and I always like to read your contributions and I really like what you do.

When somebody writes something that is factually incorrect or something that could be misinterpreted, it is always delicate to set the record straight without offending the person and I hate contradicting and offending. So we have to be diplomatic and tactful in our responses and, even though it's what I'm always striving for, I could have done a better job in this instance. The phrase including "fake news" was really unnecessary so please accept my apologies if you felt I was discrediting you. I guess I was just fed up of hearing that same story again that we shouldn't invest in some of the most interesting areas of Mexico because we can't own property in our own name.

I wasn't contradicting myself when answering the question of whether we can own property in Mexico in the forbidden zone as foreigners.

Literally, the answer is no because we have to use a fideicomiso, whereby the property is in the name of the bank. However, practically, the answer is yes and obviously the private aspect prevails.

Let me clarify. We don't want to own the property in our own name for the sake of it. What we want is the pros of that form of ownership, weighted against the cons. And the pros and the cons are exactly the same if we own a property through a fideicomiso. This is because we have 100% of the rights and obligations of the owner and 100% control. The bank is just lending her name to the title and cashes in the fideicomiso yearly fee and that's it. If anything, owning a property through a fideicomiso is actually better than in your own name for asset protection reasons.

Many American and other foreign investors have owned property under a fideicomiso and Mexico and there has never been any problem with that when the property was properly titled. The best lawyers in Mexico and the US (who know about Mexican law) have no issue with that structure. Many people seem to have an issue with the fideicomiso just because there is a lot of uninformed comment about it and they've never gone through the process of understanding it with lawyers.

We shouldn't always take everything that is being said or written by anyone at face value, even when mentioned in a podcast (and that includes what I'm writing). My mum used to be at the top of the knowledge in her field (artificial intelligence). Once, she told me "When you really master a subject inside and out, then you realize that 95% of what journalists and outsiders say is at least partially incorrect". Obviously we cannot check everything but let us not be credulous and use our common sense.

I listened to that same podcast and the guests are promoting investing in Belize over Mexico. This is because Belize is English-speaking and uses common law like in the US while Mexico is Spanish speaking and uses civil law (which is why it is easy for me to understand as I have civil law at home in Quebec). The problem is that investing in Belize makes no sense to me and is very risky. I explain why in the following thread: https://www.biggerpockets.com/... So I would still rather go through the work of understanding the Mexican system or working with somebody who does over investing in Belize.

Aside from that, I pretty much agree with the content of your great post. Both Costa Rica and Mexico are great places to invest and there are personal preferences and objectives playing a role here. I was just suggesting that Mexico is generally much more profitable from a pure investment standpoint. The only disagreement I would have is when you suggest that places in Mexico where most expats want to live are expensive, taking the example of San Miguel de Allende. This is an exception. What is expensive is the colonial homes because there is huge demand but no new supply. Even aside from that, some connections of mine are building a brand new condo complex in San Miguel de Allende and they're not expensive at all. If you take the Riviera Maya for example, which is in huge demand (because you have all the pure investors in tourism on top of the expats), it is very cheap compared to the equivalents in either Costa Rica and North America.

Finally, I totally understand your reluctance to invest in pre-construction. This being said, bad stories constitute the minority. However, the risks are there and not everyone has the same risk tolerance and having the right connections like I do is definitely a big plus. Mind you this is partly why investors (including Mexicans) prefer to invest with me rather than investing on their home so these risks represent an opportunity for me since I personally know the developers we are dealing with.

I am looking forward for more meaningful exchanges with yourself, whereby both of us contribute to deepen the knowledge of the members of the BiggerPockets community. :)

@Scarlett Noboa

There’s only one company in the world that track those statistics, AirDNA. According to them, the international clients way outnumber the domestic clients when it comes to Airbnb. Now the international clients include Dominican nationals living abroad and visiting their homeland. Buy if you look at official statistics from the Dominican central bank, the non-Dominican visitors far outweigh the Dominican ones. So, clearly, the numbers show that the main clientele for Airbnb is by far international.

Now you’re Dominican and so maybe you have Airbnbs there or you know people who have some. They might have told you that they mostly rent to Dominicans. Most of us would generalize and conclude from that that the Dominicans are the main clients in the absence of additional information.

I thoroughly research markets when I’m considering an investment and oftentimes I find the statistics and numbers than most people don’t know about, with or without the help of my local contacts. This is very important because figures never lie. So I hope this helps

You obviously already know a lot about the Dominican Republic. Kudos to you for sharing your knowledge on this forum and also broadening your knowledge here. By doing so, you add even more value to all of us.

Since you are Dominican, let me end this post by saying that, contrary to what some people might be saying, the Dominican Republic is a beautiful country and one of the reasons is because the Dominicans are very nice people :)