Should You Buy Real Estate Because There’s A Boom Somewhere?
We get calls, emails, blog comments, and notes on Facebook all of the time about how there is a boom going on in [insert name of international location here] and how we should be directing buyers there. Between us, we’ve often been to many of the recommended places. How should someone that doesnt know about the local market proceed with an international real estate opportunity…especially when the developer or agent explains that there is a “boom” going on.
Here are our observations from first hand experience that may help:
- A building boom doesn’t always mean a buying boom: Just because lots of units are being built, doesnt mean that anyone is actually buying them. Building booms can occur for a multitude of reasons other than demand. It may just be speculators which, unless you got in early and have impeccable timing, actually increases the chances that you’ll not do as well as hoped on your investment. Another reason is that building permits aren’t well controlled. After all, if there was a real buying boom, why would they be looking for customers so hard?
- Look carefully at the values of nearby properties: We know of places where land is marketed to international buyers at 10x the value that the same land is being sold to locals. In some cases, the local language versions of property websites have pricing that is 60%-80% of the prices for the exact same property on the English version of the site. There is no MLS or code of ethics in place in many areas. Buyer beware….
- Think about the future: How will future construction impact your investment? We know of one area where building were being built from the back of the land to the front with each new row being sold as “ocean view”. Many absentee investors might be surprised to find that their once broad ocean view is now largely blocked by construction to the front.
- Look at the past: Study the builder’s reputation for past projects. Sometimes the golf courses dont get built or people get ripped off. Dont just ask the developer - also do an online search about the developer and each of their past projects. Ask about the builder and past projects in well visited forums about international investment. Bad deals often generate quite a few unhappy customers willing to share their grief with you online. Great developers build bunches of happy customers.
- Take a trip on your own dime: As the economy slows, many developers are offering paid trips to potential buyers. I’d recommend traveling on your own dime so that you have the freedom to do some of the research above. There are great deals out there…take the time to find them.
Any real estate purchase contains risk. International investment is no different. Dont take any observation or opinion made in this article as legal or financial advice - consult your legal and financial professional. We are also available on a consulting basis to help you make the right international real estate purchase in the US or Latin America.