All Forum Posts by: Mike Lambert

I invest internationally and I totally second @George Gammon's reply.

@Martynas Fedotovas, to answer your questions about similarities between investing in different countries, there are many, as George points out.

However, there are huge differences. For example, in North America, one of the main strategy used by investors is to buy undervalued or value-add apartment buildings, increase their net operating return and then refinance with a long-term mortgage and pull their cash invested out. This is a very powerful strategy but it doesn't work in most places in the world. There are large differences in laws and regulations, access and price of debt, economic situations and prospects. Therefore, you need to know the places where you're investing well or invest with people who do.

@Clint Harris

Great post and good for you! It seems that you're on the right track! And yes, beach properties in the right places are awesome!

@Drew Ogden

Good on you for keeping your property in the Bahamas and getting great results with it. I'm investing internationally too because the potential profit is much higher than at home (and my home city is by far not as crazy expensive as the Bay Area).

Can you tell is how much income you make on that property and what its value is? Thanks

Erik, even before the era of fake news, I learned not to trust everything I read from obscure sources, especially if I can't corroborate it with other sources (and especially some that I know to be trustworthy).

Based on my experience in investing internationally and knowing the subject pretty well, I'll make a few comments about this ranking:

1. Many if not most countries and large cities in the world are not included. So even if the data was accurate, it doesn't say that Amman has the 4th highest ROI in the world. Case in point, in all the places where I invest or am considering investing, I can get higher yields than that that yield mentioned for Amman. Almost none of these places are in the list, even though they're more popular for real estate investment than most that are in the list.

2. I only had a quick glance at the list and obviously I didn't check all the statistics but the stated yield for Istanbul is so wrong (it's several times that in reality) that it struck me. This tells me that these statistics are not reliable at all.

3. These type of comparison don't make much sense. This is because the yield depends a lot on what sort of investing you do. In certain cities, the best investment will be in long-term rentals while, in others, it'll be short term rentals. There's a huge difference between the two and so it's like comparing apples and pears.

Now it is possible that that stated yield in Amman is correct (if you're interested in investing there, you might want to investigate further). If you invest for cash flow, you want to make sure that you can get a mortgage to be able to use leverage. I doubt that most foreign investors can get a mortgage from a local bank at a decent interest rate.

Yes most megacities will be created in the East but, generally speaking, what is meant by "the East" is the Asia-Pacific region and the Indian subcontinent; it generally doesn't include the Middle East. 

One of my main criteria for investing in a foreign country is political stability. While Jordan has probably been one of the most stable countries in the Middle East lately, that region is a powder keg. I personally rather have a lower yield somewhere else.

Finally, I hate to be the party pooper. It's possible there are people who make great money investing in real estate in Jordan. You live closely and you have connections on the ground so you have an edge. Just make sure you know what you're doing, that you know and understand the legal system, how foreigners and foreign investors are treating), that you know the rules about capital flows, checkout the currency fluctuations if applicable, ... Look at that report at a start for your investigations.

And, if you end up investing there, let us know how you're doing.

@George Gammon

You are my new best friend! I've been explaining to whoever wants to hear it, including on BiggerPockets' forums, that investing in most Latin American countries actually less risky than investing in the US, Canada or Australia. So it's good not to be a lonely voice.

As you mentioned, one of the main reasons for this lower level of risk is the lack of leverage. This is the bad side of leverage. However, leverage has a good side in that it magnifies your returns. So far, I have been active in other Latin American countries where most people can't get leverage but my investors and I do have access to leverage and financing. This way, we have the good of leverage without having the bad.

I love Colombia for real estate investment and have followed the market for years now and I have access to great connections there. However, since I didn't have access to leverage there, I prioritized other countries but it looks like that is changing at last.

I have been traveling, looking at and investing in real estate in many countries as well so let me know if you want to compare notes. That could make for an interesting discussion!

@Alex Washburn

I completely forgot to mention that you can obviously invest along with private passive investors, which is what you’re trying to do and what I’m doing.

The sad reality is that many potential investors won’t be able to see the opportunities that you’ll present to them because they don’t have the knowledge, education or mindset to see it. Instead, they will invest in supposedly safe investments that will make them very little money and will sometimes be riskier than your opportunity in Costa Rica. They will trade very low returns for security, which oftentimes is a mirage.

This people do not have attitude and there is absolutely nothing wrong with them. It is incumbent to people like you and me who have deals to educate them and to show them if an opportunity could be of interest to them and why.

Mind you, I’ve never asked anybody for money or to ask to invest with me. Anybody wants to invest with me has to ask. This is because I don’t want to push them to do anything and it forces them to understand and see what the opportunity is. This way, they won’t panic at the first small obstacle.

Finally, if you have something good, don’t give up. You just need to find the people who will be receptive. It’s not everybody who will be interested and it’s absolutely normal. Generally, the more people have successful experiences in investing, the more they will “see it” if you have a really interesting opportunity.

@Alex Washburn

I'm not sure what attitude you are referring to. It's perfectly normal for a US lender not to be willing to give you a mortgage in a foreign country because it'd be very difficult for them to realize the collateral if push comes to shove , let alone if they can legally the collateral in the first place. Moreover, they have no idea about the value of the property and the risk so it's make no sense for them to lend to you. If a local bank was to give you a mortgage, there is no way they could control if you are creditworthy. And, if you default on the mortgage, there is no way they could get hold of your assets at home, should there be a shortfall after they resell the property. Moreover, the credit markets in these countries are very undeveloped so it's very difficult for the locals to get a mortgage, especially at a decent interest rate.

In the US and Canada, we have been able for years to borrow at very high LTVs and ultra-low interest rates. This is not normal and it is why the values of our properties are so disconnected with reality and with the amount of money they can generate as an investment. We shouldn't be able to borrow under those conditions so let's be grateful we can and let's not take it for granted. Let's enjoy it as long as it lasts because I probably don't need to tell you what will happen when the music stops if you were around during the last US housing meltdown.

Because of the lack of credit in those countries, most people have to pay cash, locals and foreigners alike, as you mentioned. This means that there is very little speculation and these markets don't suffer from housing crashes like they do in the US (except places like Los Cabos who are almost completely dependent on US money), because they never get upside down and forced by a lender to sell. When you think about it from this angle, investing in these countries can actually be less risky then investing in North America especially when, like now prices in North America are at all times high and completely disconnected fro the rental income in the residential market (except in some parts of the Mid West as you're alluding to).

As to what to do, I'm not going to suggest that you should invest with me because I'm in these forums to help others and get help and not to generate business. So let's concentrate on what you can do by yourself. First of all, like many others, you can pay cash and still get a right return if you invest in the right property. This is because, in these countries, you can get both high income and high capital gains because these countries are still on a path of progress and grow much quicker. It's not like in North America where you have to choose between cash flow markets like or capital gains markets; you can have both there. As an alternative, you can do the same as I did and acquire the knowledge and the connections if you have the skills and the time. You can also buy pre-construction with a deposit and flip just before delivery and closing. Some people do that and they make huge profits but of course you have to know where in what you invest. As far as I know, you can't do that in the Mid West because you won't get the capital gains.

I hope this helps and, obviously, I'm happy to get more if I can! I can do a lot but, as you will appreciate, I can't change the lender's lending rules.

@Alex Washburn

In Costa Rica and some of those countries, I have access to developer financing as part of the private deals I get access to through the developers I'm personally connected with. Banks and other lenders will generally not lend in another country since it would be very hard for them to enforce a mortgage, assuming they can take one. Local banks generally limits lending to locals. In certain countries, I get access to local bank financing because 1) I always have local partners involved in my deals and 2) as an international banker, I used to lend millions of dollars to the bank of these countries so I already have existing "positive" relationships with them.

I understand your frustration. Investing in these countries provide diversification and a high return, if you know what you're doing. However, the returns could be even higher if you could have access to leverage. My access to leverage is actually one of the reasons why investors invest with me.

Finally, I completely agree with you that you have to be comfortable with the political climate and property laws of the countries you invest in. In these respects, I'm comfortable with all the countries I have mentioned. As to Costa Rica, it definitely has opportunities but you need to know where you find them. Generally speaking, it's the most expensive country of that whole region.

@Micah Ng

The markets where I can get access to opportunities that have the highest returns, have access to leverage and have the necessary knowledge and local contacts and partners like Mexico, Costa Rica, Panama, Dominican Republic, Colombia, Brazil, Uruguay, Spain, Portugal.

@Jason Anthony

Yes you need to find your niche in the vacation rental market anywhere in the world if you want to perform better than the average.

This is interesting. The Dominican Republic doesn't have much in the way of the middle class. The wealthy generally own second or third residences where they can vacation or spend the weekend. If they want to go somewhere where they don't and have to rent, I don't think a small 2-bedroom villa would do for them and they can afford not to have to share bedrooms.

The poor don't have the means to take holidays or are you suggesting that they can afford it if they share 2 bedrooms among up to 20 people or so?

Or is your model to serve the limited middle class, which is a market big enough for you if you don't have much competition?

Are you renting mostly on weekends only? Do you have people staying for several weeks? During the whole year?

@John P.

I'm not sure what Dominican Republic tourist crash you're referring to. Tourists numbers in the Dominican Republic keep increasing year after year so much so that tourism revenue has increased 43 times between 2000 and 2017! I assume you might be referring to the recent holiday cancellations following the death of a few American tourists over the last few months. I'm not going to speculate on what happened or didn't happen but this shall too shall past as it always have when there is either no new deaths or the media stops mentioning it when it turns out that these people died from natural causes. If it was foul play, it could happen anywhere. Remember when razor blades, pins, caustic soda and slivers of glass were found in baby food. the UK.

@Jim K.

I invest in Mexico and I would never invest in short-term rentals in Cozumel and I don't know anybody who has. Cozumel is full of all-inclusive resorts. Tourists want the comfort and amenities of all-inclusive resorts and they don't need to have a kitchen. People who rent short-term rentals on the Riviera Maya do so because they want to go around and visit the area so they will never base themselves in Cozumel because it's an island.

Tulum is 2 hours away from Cancun International Airport and it is connected through a very nice highway and this is fine for most people (and there will be soon a high speed train that should reduce the connection time substantially). Tulum is where the rich and famous, the people with real money and the aspiring rich and famous go. It's become a brand. People pay up to thousands of dollars a night to stay in a cabana by the beach with no air conditioning. A Tulum-branded restaurant recently opened in New York City!

Moreover, while you can fly direct to Cancun from pretty much anywhere in the world, direct flights to Cozumel are very limited. As a result, you either have to connect to go to Cozumel or fly to Cancun, drive to Playa del Carmen and take the ferry. So, for most people, it takes much longer to get to Cozumel than Tulum.

While I wouldn't invest in short-term rentals in Tulum anymore for the time being for the reasons I mentioned in my post above (basically it has become too expensive given the risk of oversupply), I would never invest in short-term rentals in Cozumel.