All Forum Posts by: Mike Lambert

@Zeek Collins You're very welcome! The classifieds are exactly as the name indicates. It's where you can find/post advertising/promotions for properties or services, as these aren't allowed in the forums.

@Kevin Ing one of the awesome things about BP is that there are people like you there to support our goals and provide much needed information, like you did with the financing. Even assuming that commercial financing could be gotten by a Japanese resident, his likely is it that a young newbie from the US would find a Japanese guarantor. By putting an ad in the classifieds? Assuming somebody was willing, what would they get in exchange for that risky proposition? There’s likely no growing equity to share. I hate to be a party pooper but don’t you have to be realistic at some time? 

@Zeek Collins Of course the cash flow could make up for the loss of value but what’s the point. You won’t build any wealth! I won’t know too much about Singapore except that I think it’s very expensive and a place where wealthy people park their cash flow rather than looking for yield.

Sounds that a good idea might be to review your goals and how to get there. Learn more about the power of wealth building in real estate. Then, if you want to invest internationally, you might want to avoid trying to reinvent the well. I hardly know any  Americans or Canadians who invest in Asia but I know plenty of people who invest in Latin America from Mexico to South America. Cheaper, higher yields, more favorable legal systems and available financing, as the case may be.

Hope that makes sense!

@Zeek Collins Maybe @Kevin Ing can comment on bank financing. Probably, you won't be able to get a mortgage as a foreigner. I don't even know if a Japanese resident can get a mortgage on a commercial property that's not based on his/her personal income as the value of the asset is at a high risk of depreciation and the LTV would increase over time and go over 100%. Also, refinancing isn't available in many countries and would make even less sense in Japan for that exact same reason. Also, the population decrease is a huge issue that has no solution.

All Japanese real estate investors I know invest out of their country. I totally understand that you don't want to invest in the US but there are other countries in the world that don't have those issues. That's what I'm doing with my investors and plenty of other investors Arte doing the same.

@Nicholas DuLong

You could be right about motivated sellers but how good is it to buy at a discount if prices continue to fall? Also, bear in mind that, overall, properties have been paid for in cash so there are no mortgages on them and the maintenance expenses are low so, while owners might be disappointed by the lack of rental income, they generally won't be in a distressed situation.

Ultimately it all comes down to supply and demand. Even things like sargassum or $100 taxi rides are only a problem as long as they affect demand (aside from the important environmental issues for the sargassum of course). I was talking to a friend developer in PDC the other day. According to him, there would already be 4,000 too many units in Tulum. I'm not sure where that figure is coming from but if you want to get a scientific estimate, you could try to make a calculation using the following:

1. The number of properties currently on the rental market and the occupancy rate will give you an idea of the current demand (Airdna).

2. Find out how many units are in the process of being built and  what permits have been granted to estimate further building activity and monitor land sales for more projects in the future. Add all of this to the number of existing properties and that'll give you an estimate for the number of future properties. Apply the kind of occupancy you'd like to see in the overall market to have a good investment (a too low figure will be bad for your occupancy but, the worst effect will be its depressing effect on the average daily rate). So that'll give you the future demand you'd like to see.

3. Compare the future demand (say in 10 years) you'd need vs the current demand and you'll get the needed tourism growth rate and you'll know whether it's realistic.

Yes, they're improving the infrastructure. I don't know if it'll be enough or quickly enough. According to my friend, it's a total disaster.

On another note, you wrote "There are no direct flights from Boston to Cabo, but Boston to Cancun is easy." That seems to suggest that you think Cabo would be a better investment but Cancun/Tulum is easier for lifestyle. If that's the case, why don't you buy in Cabo and rent in Tulum. We're kind of in the same boat in that I'm from Montreal so we're kinda neighbors. There's a little difference in that we have direct flights to Cabo since December but it's just one airline and it's indeed easier, quicker and cheaper to get to Cancun, PDC or Tulum. So much so that, even though Tulum isn't necessarily my favorite place in Mexico to spend time, I'm thinking of going on a regular basis with a group of friends and renting a luxury villa for very little money rather than spending time in one of my properties.

@Nicholas DuLong you're very welcome. As you and I mentioned, it's normal for investors and agents to have different perspectives given our very different "roles" and objectives. Also, nobody has a crystal bowl.

When it comes to Tulum real estate, there's the bust camp and then there's the "other camp". I'm calling it the "other"camp because I don't know if we should call it the "boom camp" or merely the "no bust" camp or maybe the "neither bust nor boom camp".

In think that both cases have already been laid out in this thread so I'm going to focus on your reasoning and question, as well as a more qualitative perspective.

You start in the bust camp and then you're talking about buying there because you seem to think the bust is going to be followed by a boom I was stunned by the reversal. Two questions to ask yourself:

1. If you're right about that, why don't you wait for the bust to happen to buy? You'll get a better price and you'll take less risks.

2. Why would that sequence happen? It makes no sense to me. If the bust is caused by a huge oversupply of properties, that oversupply has to disappear to solve the bust. How's that going to happen is the question.

What you need to do is figure out how big the oversupply is and how much increase in tourism will be needed overt the next 10 years to absorb it. I have figured that out for myself but you it's not going to have the same effect on you unless you do your own calculation. That's just to absorb the supply and you'll need even more growth to create a boom!

You also have to ask yourself why would all those people go to Tulum, when what made Tulum special and attractive has disappeared. The early Tulum lovers have moved on to other places, where the municipality doesn't deliver building permits to anyone and their mother. When I was traveling through Mexico last year the expression I heard most from the mouth of real estate professionals is "We don't want to become another Tulum". As a result, permitting is being restricted so that's where the supply/demand imbalance is going to increase in values. Do you really think people will go to Mexico to find themselves into another condo jungle?

Do you think there's gonna be enough beach space for all these people if there's gonna be enough of them to fill all these properties? How much more do you gonna have to pay to get into a beach club after hopefully getting a parking space? Traffic jams, overcrowded areas. Do you think it'd look like anything you saw? Also, do you know how much sargassum is going to cover the beach in 10 years? We've hardly had a winter here in Canada so I'm not sure that the culprits, believed to be global warming and pollution, are receding any time soon.

If you buy for lifestyle, it's another story in that you could cover your costs. I'm not sure about your travel, as it'd depend on the frequency and price of it. The question though is whether you'll like the lifestyle there, in relation to my comments above. Be careful what you wish for. Also, I'm not sure staying one week for the first time would let you determine that but you know better.

But then, as you suggest yourself, there's gonna be plenty of empty properties generating little rental income. In that kind of a scenario, Wouldn't you want to be the guest, not the host or the renter, not the owner? Your holidays would be much cheaper,  you'd stay in different places (more variety) and you could stay in much nicer places for the same budget.

I understand the reason you'd want to buy is to be able to capture a potential capital gain. But where is the increase in value going to come from? It's a beach town market. There are so many second homes and then, when it comes to rental properties, no occupancy = no value.

An investment is about numbers. Make sure that your judgement isn't clouded by "My family and I just returned from a lovely week in Tulum." I'm not sure you want to be one of the many who went there, bought impulsively and regretted it after and can't sell without taking a loss. Maybe you should let time pass a bit and the fever retreat and the right decision might become obvious to you.

If you do decide to buy, yes, you'd need to be as competition proof as possible (which will probably mean paying and rising more). Bear in mind though that inferior properties renting for close to nothing because they're empty will still be competition.

Hope this helps!

@Zeek Collins

First of all, my apologies for misspelling of your name. I guess a good location could help and it's likely that some buildings in downtown Tokyo maintain their value better. However, I'm not sure why you'd want to partake in a system of value/wealth destruction rather than value/wealth building. It's also unlikely you'd get financing and, isn't taking debt on a depreciating assets one of the big no-nos?

@Matthew Kwan I'm a Canadian international investor and there are so many better choices that Vancouver and Singapore would be some of the last places where I'd invest. Actually people who do don't invest there, they park their (substantial amount of) money. Let's focus on Vancouver, which I know better and I suspect Singapore is a similar story for what I know about it.

I don't know any Canadian investor in wealth building mode who'd want to invest in Vancouver, including those who live there. As a Canadian, I can invest there but wouldn't with a 10-foot pole. And there are good reasons why we wouldn't:

1. You can't get any cash flow, regardless of how high the interest rates are. Also, the law favours the tenant and so many owners have no incentives to sell and you have all these empty properties that have been bought by foreigners to park their money in a safe place. It's therefore a pure capital gain and therefore speculative market.

2. The Vancouver market is already one of the if not the most unaffordable in the world, which reflects the fact that prices are in bubble territory whichever measure you use. All levels of governments are doing their best to stop prices going up, decrease them and getting more revenue by taxing foreign owners. Not only you'd be against the government's interests but they've already proven they won't hesitate to arbitrarily infringe on your property rights.

Why anyone would want to invest in a market where cash flow is deeply negative, the laws favor tenants  and the government does anything they can to prevent you from getting capital gains of taxing them mightily if you do get them is beyond my understanding.

While it might make sense for a wealthy Chinese to park their money safely in a Vancouver property and not care about making money with it, it won't make sense for the average BP member who's in wealth creation mode. And I'm not sure how it'd apply to someone like Zeek, who isn't even legally allowed to buy now and wouldn't have access to the money anyway.

Hi Zak, there is nothing wrong in being a newbie but, when you buy overseas, you really need to know what you’re doing, Things are different and you can’t just apply what works in the US, especially in Japan, where the market behaves in a unique fashion.

If I were you, I’d stay away from Japanese real estate and especially apartment buildings. It works differently there. Their value goes to 0 over time. Generally speaking, nobody wants to live in older buildings there so they get empty and then get demolished.

Airdna

I thought the same about Engelo after just seeing the topic but I guess we're increasing the exposure of this thread by adding comments :)

I haven't been there. These kind of places are bets on the future that might take forever to materialize, if they ever do. I focus on proven and branded cities and areas. There's enough money to be made there no need to have your money sitting somewhere doing nothing for years. That's a bit akin to a lottery ticket if you ask me.