This crisis is unprecedented. Nothing like it has come along before. And no one, no matter what they say, knows for sure where it’s headed…
If you feel powerless in the face of this chaos, well, that’s natural.But I’m certain that if you play this crisis right you can thrive and prosper regardless of the outcome.
This will be a time of great change. This change will create great opportunity. The world looks upside down and I fear for many people’s economic security…but there is a solution…
In the midst of all of this will be the real estate buying opportunity of a lifetime…
And buying the right kind of undervalued real estate now sets you up for the recovery and a lifetime of income.
It’s the perfect path to freedom, both financial and personal. The freedom to go where you want, when you want. Freedom from worry and stress…to not to care what happens in the stock market…nor about job losses…nor politics.
We can take strong U.S. dollars from a stagnant domestic market and put them to work in vibrant overseas markets by buying undervalued assets and locking in super-strong income and appreciation potential.
And we can do it borrowing money at historically low rates. We are in an unprecedented zero interest rate environment. We can use incredibly cheap money to buy high-yielding undervalued real estate.
This crisis is a hydra-headed shutdown of the global economy. In some places it will be a sharp, short shock and then back to the races. In others it will spell carnage.
I see big opportunities falling into three categories.
1. Crisis in places on a downtrend… By places on a downtrend I mean locales that have passed their peak. Populations are old, innovation is limited, and bureaucracy is high. For example, think of parts of Europe.
2. Crisis in places on an uptrend… Places on an uptrend have potentially bright futures. And maybe a dark or at least underperforming past. They have young populations, decent standards of education, often natural resources. Their cities and new middle classes are exploding. Think Brazil and Colombia.
3. A buying moment in places undergoing big multi-decade transformations…in the medium term, this crisis will be good for internationalized places at, or near, the ground floor of major transformation. Places like Mexico’s Riviera Maya or Panama.
Here are five places where I see the most compelling opportunities right now…
Medellín, Colombia – Luxe Condos for Less
Colombia has been squarely on my RETA beat for nearly a decade. Colombia has solid fundamentals. It’s emerged from its troubled past to become a major regional player, building off its steadying political environment, market-friendly policies, rich natural resources, strengthening trade ties, and modernizing economy.
But its currency has tanked as big money has been pulled back into places perceived to be safer havens…like the U.S. dollar.
And, like everywhere else in the world, the real estate market has stalled because of lock down and the current crisis.
This means we can buy cheap in a place with big upside potential because its currency is depressed and motivated sellers have to drop their prices to attract buyers.
Buyers call the shots and can play sellers off against each other. Today big luxury condos in Medellin’s best neighborhoods can list for $100 per square foot. Find a motivated seller and you could pay less than $80. How do you find a motivated seller? Cast a wide net and let potential sellers compete for the sale.
To give you an example, in the city’s premium neighborhood one of my researchers found a nice-looking three-bedroom apartment with an asking price of $178,392.
Around Christmas, the price was $221,875.Now here’s the thing…that’s just the effect of falling currency. But as the crisis bites you’ll find more motivated sellers. Granted not everyone will be in a rush to sell, but some folks will…
The way I’d play a market like Medellin is find eight to 10 properties I would be willing to buy for the right price. Show each seller that I’m ready to go. Show them proof of funds. Then offer everyone 30% below asking. I’d be completely transparent. Tell each seller what you are doing. Straight away more than 50% will dismiss you. Then let the remaining sellers compete with each other to offer the best deal.
Medellín sits high on my global shortlist of incredible cities—one reason I keep such a close eye on opportunities there. Medellín is a hip, “must visit” city. Before the current crisis tourism was on a huge tear in Colombia. There’s no reason it won’t continue in the future.
Across the world, liveable, internationalized cities like Medellín are drawing in mobile, creative, and productive people. These people then generate economic activity. They start companies. And they need a place to live, fueling demand for real estate.
Bailout in Panama
Panama City has arrived on the world stage as a global hub city. Just like London, New York, Singapore, and Hong Kong, it’s a global center of international finance and commerce.
Land is scarce, trade is booming, and the middle class is growing fast.
The World Bank now ranks Panama as a high-income nation. Panama is a haven of safety and stability in a turbulent world…a destination for international people, multinational companies, and money.
You’ll find 78 banks in Panama City plus Panama is the biggest recipient of foreign direct investment in Central America. Panama has become the largest per capita exporter of services in Latin America. And it’s incredible to think that 5% of all global trade passes through the Canal in this tiny country…
Panama’s robust economy weathered the 2008 crisis and Panama will withstand the current global crisis just fine, too. Panama is one of those safe havens that sucks in resources when things in the world get volatile.
You’ll see BMWs, Lexus, Porsches, Ferraris, and Lamborghinis on the streets of downtown Panama City. Luxury wings in air-conditioned malls feature Chanel, Louis Vuitton, and Hermes stores. Private planes and helicopters…upscale restaurants…
It’s obvious on each trip I take that Panama is getting richer and its wealthy and middle classes are growing fast. And to the west of the city is what’s been dubbed “the Pacific Riviera,” an area of beaches where the wealthy and growing middle class escape.
Recently I was able to bring members of my Real Estate Trend Alert news of an opportunity to own beachfront condos in a stunning community close to Panama City thanks in part to a Panamanian tax “bailout” which will put $65,700 into the pockets of every RETA member.
I became aware of a proposed change in the Panamanian tax code. This meant that hotel investments offered massive tax credits, which can be sold on. As part of that condo building is earmarked to be a hotel it meant a huge saving for developer…a saving he agreed to pass on in the form of a discount of up to $65,700.
All told, the price was from $214,300. My prediction on gains? Easily six figures within five years. I reckon $135,700. And I figure on a gross rental yield of 15.7% when the community’s momentum is realized…and this is true beachfront.
The stunning amenities are going to make this community especially attractive to the vacationers flooding this Riviera.
An Unstoppable Path of Progress in Mexico
Mexico’s Riviera Maya has undergone a spectacular transformation over the last few decades. The scale of the change is such that it’s almost impossible to imagine…
Back in the late ‘60s Mexico’s tourism investment authority, FONATUR, scoured Mexico for the perfect location into which to pour funds and roll out major infrastructure, thereby creating a moneymaking tourism machine. They settled on Cancún—80 miles up the coast from what was a tiny little town called Tulum. In Cancun they built an international airport, began major highways, and gave incentives to major hotel groups.
As time passed, the progress rolled south, turning Playa del Carmen from a one-horse town where pigs roamed dirt streets into an international resort city. The changes were truly spectacular, and Tulum was beginning to tick too.
Today a modern highway brings you right to Playa. Back before the road was in, $10,000 bought you a building plot in the unpaved village center. These days a 1,000-square-foot oceanfront condo in Playa del Carmen can set you back $600,000.
Mexico’s Caribbean coast had the basics going for it, including the intrinsic value of being a Caribbean coastline with a huge potential market on its doorstep in the U.S.—only two hours away. The government’s FONATUR had the capacity to make good on its promises to deliver infrastructure and accessibility.
The best beaches in Mexico are here and the “machine” of Mexico’s tourism development has targeted Tulum as its next success story.
Add to this the cache of Hollywood A-listers and the international fashion set. Tulum has cornered the market for being “eco-chic.” It’s the kind of place where stars who fly in private jets can feel virtuous by spending a few nights off-the-grid on the beach. It’s as fashionable a destination as St. Barts, St. Tropez, and the Greek island of Mykonos…
When I last visited Tulum it had been three months since my previous visit. It felt like it had been three years. New hotels, new boutiques, new cafés…Tulum is in a constant state of evolution…each time moving higher end. Where I used to get my beachfront massages from a friendly local husband and wife team is now a super trendy beach club.
Tulum town has been transformed, unrecognizable from what I encountered when I first explored the area.
Thanks to the crisis we have a buying moment…a pause in the mammoth growth trajectory of the Riviera Maya which can be turned to our advantage.
We want to buy the right real estate ahead of this Path of Progress to set ourselves up for income and appreciation.
The Riviera Maya is in the midst of a multi-decade transformation and this current crisis is going to be a short sharp shock and then it’s back to the races and the rolling out of the juggernaut Path of Progress down the coast.
Buying pre-construction here means by the time you take delivery of your condo millions of vacationers will have long ago returned to enjoy the beaches, cenotes, international dining, and tropical weather. In fact, I believe many will seek to stay longer with the growth in remote work.
A massive transformation of how people work was already underway. The army of remote workers was rapidly growing, the number of companies pioneering remote employment and practices was shooting up…
The shutdown-lockdown, work-from-home approach to handling coronavirus is completely blowing up this trend and the world is not going back to how it used to be.
This is either scary or exhilarating…either way it’s happening. And for opportunity-focused folks it’s a gift.
Mobile professionals have flooded to the Riviera Maya and Tulum for years now. They have come in the wake of the juggernaut Path of Progress. When you don’t need to live in an expensive U.S. or Canadian city, endure cold weather, and limit your beach time to your yearly vacation, a place like Tulum starts to look like the obvious choice.
It started a decade ago with young digital nomads but these days you are more likely to meet a forty-something family man or woman who has the flexibility to spend long periods of time living in a beach paradise while tele-commuting.
It’s a no brainer. Better weather, lower costs, stunning beaches…spend your morning before work snorkeling with turtles or exploring a Maya ruin instead of sitting in health-ruining traffic or packed like a sardine onto public transport for hours.
Plus, the season is getting longer on the Riviera Maya. In fact, there isn’t really a true off-season anymore, there are always visitors here. It’s more like high, super-high and premium seasons.
Mexico was the sixth most visited country in the world last year. Close to 60% of those visiting Mexico arrived on the Riviera Maya. Cancún airport saw a record 25.5 million passengers.
Europeans come in droves during their summer, North Americans escape their winter, Latin Americans are drawn at holidays like Easter…there are direct flights from Russia, Japanese and Chinese tourists are coming…there’s always people visiting.
I recently bought two condos at discounted prices I negotiated exclusively for members of my Real Estate Trend Alert.
We had the chance to buy spacious town homes in Tulum for $149,000 that I figure will be worth $76,000 more within a year of delivery and could throw off a 13% yield or more. Thanks to the crisis I was able to get a free pool thrown in with each home. The developer’s construction costs are in pesos but we are buying in dollars so, as his costs dropped, I was able to get him to concede more.
In another deal I brought RETA members last October we could own two-bed condos just steps from the beach from $174,800. I figure these condos will be worth in the region of $260,000 within five years and already we’re seeing huge gains in value. On one penthouse for instance I saw in February that the developer was asking $125,200 more than RETA pricing.
I thought our chance had passed. But the crisis came and the developer’s retail sales stalled so I was able to go back and get another 11 condos at the exclusive discounted price.
Cheap Homes in Italy
Italy has been hit the hardest. This is catastrophic for its already fragile and debt-laden economy. Already high, unemployment is going to sky rocket. We will see mass emigration and household consolidation (kids moving back in with parents and vice versa).
We will see big falls in value of best-in-class real estate. I’m figuring on 30% in Italy on prices that have been already been falling for 15 years. The value of marginal real estate in the hills and empty villages will go to zero.
Italy has been giving away free houses for years in an effort to re-energize depopulated hill towns. These are often historic, beautiful towns in stunning places, but there’s no work for the young.
Well, you ain’t seen nothing yet. The “free house” trend will now move northward…
Tourism will bounce back…in blue chip locales. Venice will still be Venice. Rome won’t lose its appeal. But the hotel industry is going to be decimated by this crisis.
When the bounce back happens, it will clear the way for vacation rentals. How quickly this bounce back will happen remains to be seen. We need to see what’s left of the airline industry after the world comes out of lock down.
Even before the crisis I found apartments in central Florence and Venice that—with the right marketing—could throw off double-digit yields. The trick was to buy something old and unloved but in the right location, do some smart cosmetic work and market it better than any of the competition…something I think is straightforward in Italy. I came across apartments under $200,000 that fell into this category.
Safe-Haven Uruguay
In uncertain times smart investors look for a safe haven. They look to assets like real estate…in places where they can park themselves and their money.
Uruguay is one of those places. This little country rarely makes the news headlines. It’s a beacon of stability in an uncertain world. So much so, it’s almost dull.
Uruguay’s role as a safe haven was highlighted by the New York Times in a 1951 article. It described how large sums of capital were making their way to Uruguay.
This started in late 1950, as a direct response to war in Korea. The capital was in the form of gold, Swiss francs or “change of domicile” dollars, where the capital stayed in New York, but the owner transferred their account from Switzerland to Uruguay. Foreign trade in Uruguay, the article reported, was booming and the construction industry at an all-time high. Moreover, the country had a huge trade surplus with the U.S.
In the article, the New York Times dubbed Uruguay “the Switzerland of the Americas.”
It’s a title that’s still appropriate today. Uruguay is discreet, tranquil, a beacon of orderly calm. Chaos, scandals, and political corruption are things that happen in other countries. It’s the kind of place where you see hitchhikers on the side of the road…where country folks leave their doors unlocked…and where the seriously wealthy relax on beaches that are open to the public.
Its huge neighbors, Brazil and Argentina, dwarf this tiny country. But many Argentineans and Brazilians consider Uruguay a place to invest and to stash their cash, away from political upheavals and economic turbulence back home.
Freedom and privacy are respected here. More than 60% of the population is middle class. The World Bank cites its low levels of inequality and poverty. The country ranks highly in indices such as the Human Development Index, the Human Opportunity Index, and the Economic Freedom Index. In the 2019 Corruption Index, Uruguay was rated less corrupt than the U.S. It was #15 in the 2019 Democracy Index…10 spots higher than the U.S.
It’s a pragmatic country. It doesn’t have a beef with any of its neighbors. It’s progressive, too. It made headlines when it became the first country in the world to fully legalize marijuana. And 95% of its power now comes from renewable sources.
I recently brought members of my Real Estate Trend Alert the chance to buy ocean-view half-acre lots ahead of a Path of Progress along Uruguay’s stunning Atlantic coast from as low as $31,356. That’s a discount of $6,422 on retail price. Plus, we had interest-free developer finance on the table—a manageable down payment followed by 48 monthly payments of $490.
Because of the current crisis, sales have all but stopped for the developer. I approached the developer and negotiated hard…and he agreed to offer the discount on 19 hand-picked lots. I predict these lots will be worth $50,000 in the next few years as the crisis passes and the world gets on with its business.
Of course, buying in a crisis looks easy in hindsight. It looks like shooting fish in a barrel. Amid the debt crisis following the 2008/2009 financial crisis, I recommended condos in on the Costa del Sol in Spain to members of my Real Estate Trend Alert group. One member who bought there for €99,000 met me four years later. He told me his condo was then worth €210,000.
Looking back it seemed like a no-brainer. Easy to double your money with an amazing home in Southern Spain close to the Mediterranean.
But finding that opportunity had been tough. It would have been all too easy to make the wrong move. There was a lot of junk amid the firesales of Europe…in Ireland, Spain, and Portugal you needed the contacts and the context and most of all you needed a cool head…
Buying right in any crisis requires cold sober thinking. You start with your personal criteria for an investment. Then you ruthlessly adhere to those criteria. You need to be unemotional and clear-headed. Step out what you consider value and do not be fearful when you find a deal that matches your criteria. Act.
Avoid the flipside of fear. Don’t be greedy. Don’t hesitate because you think a deal might be better if you wait. If it matches your criteria, act. The best deals of the current crisis for you personally might be those we have right now—and we do have some stunning deals.
Nota original: International Living.
