All Forum Posts by: Mike Lambert

@Francesca Ciaudano

From what you’ve mentioned, I understand that you’d want to buy a property and rent it short term to tourists. First thing I’d check is whether there is any profit to be made with short-term rentals there. Can you get bank financing from a local bank or maybe financing from a developer if you want to buy pre-construction. What would be your occupancy rate? What is the market price? Are short-term rentals legal? If yes, is there a significant likelihood that it could become illegal? Are you protected enough under the local laws? Is there a lot of corruption? How politically stable is the country?

The fact that there is not much information would be a good reason for me to stay away. Scarce information means not many people invest there and there are probably reasons for that.

I limit myself to countries where investing in real estate has proven to be (very) profitable and where there is a well established tourism industry such as Mexico, the Dominican Republic, Costa Rica, Panama, Colombia, Brazil, Uruguay, Spain, Portugal, Italy or Greece.

You mentioned that tourism is booming in Georgia. Let’s compare country A where tourism grows by 100% from 100,000 to 200,000 and country B where tourism “only” grows 3% from 10,000,000 to 10,300,000. I would clearly invest in country B.

I know little about Georgia real estate but I’m happy to help you if I can.

@Francesca Ciaudano I'm not sure why you'd buy in Georgia as your first investment abroad. Is it profitable? Can you use the property as collateral to boost your returns through leverage. I've been investing internationally but I stick to the countries where profitability is proven, leverage is available and the legal system is favorable. Also, if you invest overseas, it's best to have the knowledge or be connected to people who have it. Even for me. Georgia would be way too wild! And, from what I know about it, it seems like a place with low returns and high risks, exactly the opposite of what you look as an investor. I hate to poop a party but I'd hate even more if you'd lose your money, especially if it's for a merger return. Of course, if you have personal reasons to invest there, it's another story.

@Lisette S. If you want to purchase in Mexico, it's only if you buy outside of the so-called forbidden zone (within 100 kilometres of the international borders or within 50 kilometres of the coast, you can purchase in your own name. If you are in the forbidden zone, you can use a trust or a Mexican corporation. Whichever you use, your rights and obligations are the same as if you would purchase in your own name. So the forbidden zone is not forbidden after all. :-)

@Marvin Hernandez

There are Canadian investors who invest in Canada because it's their home. Even though most Canadian markets are difficult from a cash flow and cap rate point of view, they find deals through motivated sellers through their network and by being on the field. More and more Canadians invest in the US because it's much more profitable for us, even though we're not there and it's more difficult to get financing and the necessary connections. I think that your city of Atlanta is one of the most popular destinations.

So I don't see the point for you to invest in real estate in Canada, given that it's much less profitable, more difficult to find deals and get financing, notwithstanding the fact that we don't have 30-year mortgages here (the "longest" mortgages people use here are generally the 5-year mortgages). Moreover, you have a foreign currency risk and the performance of the Canadian dollar versus the US dollar has been poor over the last few years to say the least.

It might make sense for you hold real estate out of the US for diversification and risk mitigation purposes. At first glance, it seems obvious to consider Canada because of the proximity and common rule of law, language and culture (to a certain extent). However, it's not real diversification given how the Canadian economy is dependent on the US economy. But the performance of the US economy is most of the time better.

From your message, it appears that your interest is rather about investing out of the US rather than specifically in Canada. If that's the case, you might, like I do, invest in Mexico, the Caribbean, Central America, South America or Europe. That way, you get a chance at better returns and you get a real diversification. Moreover, in countries like Mexico, the Dominican Republic, Costa Rica or Panama, you can invest in US dollar and therefore avoid the foreign currency risks.

@Kevin G Abruzino

I've been buying several properties in the Riviera Maya and am directly connected to developers and other real estate professional people in various parts of the country, including Merida and Puerto Vallarta. Happy to discuss and exchange as well.

@Aaron Logan

The fact that there are 151 projects coming up can be seen as a good thing or a bad thing. You alluded to the "bad" interpretation, as this would be pointing to an oversupply situation pushing rents down. The "good" interpretation is that the area is booming and on the up. Mind you, both interpretations can be right, even simultaneously. There is increasing supply as a result of increasing demand but the real question you're asking is whether it's going to lead to oversupply and lower rents or not. Nobody knows so what I do is making sure I'm profitable, even at rock bottom rents. Then, having covered my base, I'd try to differentiate myself, by having the best located property, the best quality property (given the price of course) and offer the best experience. So I'd be doing my best to get the highest possible rent/revenue but without needing or counting on that.

What you refer as cut-throat competition exists in every market where you have demand. It's plain economics. If a market is abnormally profitable, it's going to attract more entrants, which will push profitability back to normal levels. You can find plenty of markets where nobody builds and you won't get competition but you won't get bookings either because there's no demand.

It has been proven that, with short term rentals, it's the really professional hosts that make the bulk of the money (think the 80 - 20) rule. So what you have to do is becoming part of that club and provide an amazing experience so that you can charge well above the market rate, irrespective of what the market rate is. Let those who just buy a property and put on Airbnb without doing much effort compete on price.

Colombia (and in particular Medellin) is a fantastic place to invest provideo that you do the right kind of investment (like everywhere else for that matter). Tourism is exploding, it's one of the digital nomad hotspots in the world and more and more retirees from North America and Europe are moving there to enjoy the awesome quality of life. Moreover, the Colombian peso is at a multiyear low against the USD.

As @Larry Nectar mentioned, the problem is that long-term rentals are not profitable. Colombia's salaries are still low so the average renter cannot afford to pay much. Then, if you target the affluent, they would own their place most of the time and, if they don't, what you can charge is limited by law, as you can't charge more than 1% of the value of the property in long term rent. A 1% monthly return would actually be great if you could get financing. However, it's very hard for foreigners to get financing and, even if they could, the interest rate would be very prohibitive.

So the best play is to do short-term rentals. The problem is that, if you buy a condo, you need the approval of 70% of the co-owners to do short-term rentals, which is very difficult to get. The city has been very aggressive in eliminating illegal short-term rentals and it is working.

The play is therefore to buy and renovate a whole building and convert it into short-term rentals or build such a building with my local connections, who would become partners. This is what I'm looking at doing with my investors, as I'm already doing it in other Latin American countries. However, to make it worthwhile, I still need to find local financing, which is my biggest challenge. I managed to get local financing in other Latin American countries where foreigners normally can't get it using my personal relationships with Latin American banks so I'm hopeful I'll be able to get it done in Colombia as well. If I'm successful, I'll be able to offer a superior investment opportunity with no competition in Colombia like I've already done in other Latin American countries.

Of course, not everybody can do this by themselves without the proper knowledge and connections. However, it goes to show that there is a way to make money in pretty much any market if you know how to and BiggerPockets is a great place to learn about how to do it.

@Philippe Busque

I wouldn't mind writing a thread as you suggest but I have to make sure it's not an ad for my business, which is not allowed in the forums.

The link you mentioned is interesting, even though getting financing isn't as easy as they suggest it is, especially not when it's at 70%. Using a Panamian corporation might be good for asset protection purposes as they mention but that will make getting financing so much more difficult. You cannot borrow the funds for the down payment.

@Rob Bianco If you get offered a great return in Montreal it is another ball game. You'd just have to factor in the taxes and the foreign currency risk. What a great return is is subjective and depends on the investor. I'd personally never invest in real estate for a 10% return knowing that this is the long term average return of the stock market, which is less risky much more liquid and has more potential upside if you pick stocks yourself.

As for the political, criminal and economical state of these countries, it's much better than you think. Did you know that the murder rate in Cancun is lower than that in NYC or LA and that the murder rate for visitors is extremely low (hence the tourism has been growing by leaps and bounds over there). Personally, I feel safer shopping for my groceries in Playa del Carmen than anywhere in the US, where I could get shot by somebody mentally disturbed. The Dominican Republic and Panama have been growing at more than 5% every single year over the last 20 years, including during the Global Financial Crisis. That's several times the growth of the US and Canada year after year. Last year, the Dominican Republic's economy grew by an astounding 7.3%, well above China's growth rate. That country has been a stable democracy for 40 years with the sema political party in power since 2004 through undisputed elections without any violence. finally, I encourage you to fly to Miami from Panama City. I did it and, as I saw Miami's skyline I thought: Is that it?

I'm happy to talk to you about investing in these countries and some others. It's my passion so you might as well take advantage of it :-) So feel free to reach out in private.

I invest in the Dominican Republic but not in Punta Cana. Most people who go there go for the all-inclusive experience, the beach and the party, as there's basically nothing else to do there. A short term rental cannot compete with these resorts since they don't have what people want: the amenities and unlimited food and drink to do.

The short-term rental customers oftentimes hate Punta Cana (all those I've met at least) want a different experience. They want to explore the country, sample the delicious food and explore all the great beaches the country has to offer so they need to be at a better location for that. It therefore makes sense for you to look at the Puerto Plata area.

I was there a few weeks ago to look for opportunities for myself and my investors. After visiting Puerto Plata, I decided to go directly to Cabarete and didn't care to stop in Sosua. Sosua has a very bad reputation as the other place where sex tourists go (aside from Boca Chica). Personally I don't want to deal with that kind of customers and there are so many nicer places in that beautiful country.

@Rob Bianco I understand your reasons for investing in Montreal but it probably makes no sense financially speaking. At just above 4%, the CAP rate is super low (at a CAP rate of 4%, I rather hold real estate in NYC than in Montreal). The only way to get a decent income would be short-term rentals, who have now been made illegal in almost every place where it would be interesting to do. The taxes are the highest in the developed world and the tenant laws are probably even more unfriendly. You'd would have to compete against locals to find deals without being here and having the same access to financing. To top it off, you have a currency exchange risk. The US economy is doing better than the Canadian economy and the governor of the Bank of Canada recently made it clear that there are no interest rate hikes on the horizon so the Canadian dollar is most likely to depreciate than appreciate against the US dollar. Finally, the Canadian economy is very dependent on the US economy so investing in Canada is probably the worst diversification you can get.

Many smart investors from Montreal and elsewhere in Canada rather invest in the US because, in spite of the obstacles, it's much more profitable to do so. So it sounds crazy to us that any US investor would invest in Canada. When Montreal was cheap a few years ago, most of the foreign investors were from the US. They are less and less and they have been replaced by the Chinese, who are only interested in parking their money in a stable market and don't really care about the return they get.

So very few real estate investors in Montreal make serious money today. To do so, you have to find deals and buy them well under market value and significantly improve the property. @Guillaume D. is one of them and he might be able to get you a good deal if you still want to invest in Montreal for the other reasons you mention.

Alternatively, you might want to really diversify and do the same as I do, which is investing outside of North America in places like the Dominican Republic, Mexico, Costa Rica or Panama. The properties there are of better quality, much cheaper, you can get a much higher rental income and taxes are much lower. The local economies are growing much stronger there in the right places and you can get large capital gains by benefitting from the path of progress. So there is a legitimate reason why the prices are going up there, as opposed to places in North America where prices are fuelled by artificially low interest rates and too many investors chasing too few properties. It would be even better for you than for me because quality properties in these countries are traded in US dollars and your income would be in US dollars as well.