The Investment U E-Letter: Issue # 107
January 28, 2002 Central America Real Estate: Investment Opportunities and Lessons in Travel
By Dr. Steve Sjuggerud, Chairman, Investment U
I'm on a 440-foot sailboat somewhere in the Pacific. I'd wanted to check out Central America real estate and other investment opportunities first hand. And trying to do so from a sailboat off the Pacific coast of Central America was not exactly optimal. "Being unreachable is a potent status symbol in the world today. Every dateless pimple nose with a dot.com has a Lexus, a business jet, a weekend house in Phuket, and a cell phone. But you just try reaching the Queen of England on the blower. Or try finding the direct-dial number for the president of the United States - unless you're a rich campaign fund-raiser or a fat girl in saucy underwear . . . As far-too-accessible Bill Clinton has proven, out of touch is the thing to be." - P.J. O'Rourke There's more on traveling in emerging markets below, but let's first get updated on Central America real estate and its investment opportunities. Investment Opportunities Today in Central America Real Estate For those of you - like me - who are interested in Central American real estate for investment purposes, my gut instinct would have been to tell you that Costa Rica has already had its big boom, that coastal real estate prices have been driven through the roof, and that Nicaragua, which is at least four times cheaper and 10 times less developed, is probably the better buy. (Not to mention that I own property there . . .) Plus, International Living's Kathleen Peddicord gave a good speech onboard showing why Panama offers investment opportunity as well. And all of this is probably true. But it's also true that there's still plenty of oceanfront property left in Costa Rica, and the country may just be hitting that "tipping point" where an average older American can handle the travel and accommodations. The floodgates could just be opening. What's more, as we sailed along today, to the shore of southern Costa Rica, we seemed to go for miles and miles never seeing anything touched by human hand. Just miles and miles of nature. Somebody will buy and develop it someday. And, as far as Central America real estate goes, it should be cheap, as somebody would have to make a major investment into infrastructure just to get the ball rolling. You'd be starting from absolutely nothing. If you are starting to consider buying real estate property in Central America, you need to be aware that there are often serious problems with free and clear title to land. We take it for granted here in the States. But you definitely don't want to spend $100,000 on a real estate property, only to have a local prove that the guy who disappeared with your money didn't legally own the property. Yesterday, I met a woman named Turalu Murdock, who was the most knowledgeable person in this area that I've ever met. She specializes in real estate title insurance in Central America and the Caribbean. But she actually lives in the States, which is nice - she speaks our language and knows what we're looking for. She offered up the following checklist for buying real estate in Central America. It's the best advice I've seen yet, especially considering how hard this information is to come by. I highly recommend you file it away for when your curiosity gets the better of you, and you head down to Central America: Personal Protection Checklist for Investing in Central America Real Estate 1. Am I dealing with the actual owner of the land? How do I know? 2. Are there people living on the land? What rights do they have? 3. What are the boundaries of the land? How do you know? 4. Do you have a registered title or merely a possessory title? 5. Is there a confiscation, "cooperativa" or "ejido" in the chain of title? 6. Does this land have restrictions on ownership? 7. What is the access? Public or easement? 8. How did the seller obtain title? 9. What rights do others have to the land? 10. Do I need a local attorney? 11. Can the government take my property? 12. Do you mind if I get title insurance? If someone's giving you a great bargain on a piece of Central America real estate property, run it through this checklist before you do anything. Because if it seems too good to be true, it probably is. Now for Some Lessons in Travel… We left last night from Puntarenas, Costa Rica. We're sailing all day today, and we'll arrive at Coiba Island, Panama tomorrow morning. We have basically nothing for communications. And quite frankly, I don't like it. I don't drink alcohol. I don't smoke. And I've never done drugs. But I do have one addiction, apparently - and that's information. I'm an info-holic. I'm CONNECTED. Broadband, Palm Pilot, cell phone, wireless laptop, TV, telephone, Financial Times, Wall Street Journal, man, every day, I'VE GOTTA KNOW. What do I do with all this information? Less than I'd like - but a heck of a lot more than I can do right now. For me this boat is like an intervention. I'm on the good ship Betty Ford. The Real Lesson of Travel in Emerging Markets (Central America, in Particular) On my first trip to Costa Rica I learned the greatest life lesson of all. It's about the accident of birth… I was in high school at the time, and it was my first trip to a third world country. (To give you an idea about my worldly experiences at the time, this trip to Costa Rica was also my first trip without my parents). It was the first time I saw real poverty. Real "living-outside-running-around-naked-no-running-water-no-electricity" poverty. Up until then, I thought I'd lived my life as a thankful person. But I immediately realized how lucky I was to have been born a White American Male (WAM). (Insert chest thumping here.) Right out of the gate, I had a roof over my head, clothes, safe water, and electricity. When I came back to school, everything that had previously seemed important now seemed so petty. Who cares what label your jeans are - be thankful you've got them. Who cares if you're tall or short, rich or poor, fat or skinny . . . man, you're all LUCKY. You're safe. You're alive, and well, and chances are good you're going to eat tonight. The cable TV, the car, the movies to go to - they're all just icing on the cake. I've now taken three trips to Costa Rica (the most recent before this one was in 1990). I would go to Costa Rica to "get humbled" again and again. To be reminded what's important. I have been to Puntarenas, literally and figuratively the armpit of Costa Rica, on each of my previous trips. I have a friend there, "Yanko" (short for Juan Carlos) Aponte. He represents what's great about Costa Rica. He's a Tico (which means local Costa Rican) entrepreneur. He's a lawyer, a real estate broker, a tour guide, etc. He's whatever you want him to be - if there's a way for him to make money on the deal. My last trip there in 1990, I briefly visited him one morning. His family asked me to stay for breakfast. Yanko is the oldest of a dozen kids. He has a wife and a gaggle of kids himself, too. He supports all his brothers and sisters, his mother, and his own family. And they all live under the same small roof. I ate breakfast by myself at the table, but I could feel about 25 sets of eyeballs watching my every bite. Many Central American kids have probably never seen a WAM. in their house before. I must have been a real sight sipping my coffee. You see…I don't drink coffee. But my Spanish wasn't very good, and I didn't want to offend them or be misinterpreted. They might have thought I didn't want to drink THEIR coffee. So I drank it. Cautiously. This great hospitality was probably born of curiosity. "Does he look like the WAMs we've seen on Baywatch?" But that kind of curiosity may be gone now as WAMs are all over Costa Rica. Nothing Is Like You Expect It To Be Costa Rica has changed dramatically in the last 12 years. The airport used to be your typical third world dump. Now, the international terminal rivals Malaysia's in its Buck Rogers appeal (or audaciousness). Back then there was no place decent to stay. Now there's a Marriott right outside the airport and dozens of nice hotels scattered around the country. I used to think that uppity Americans wouldn't like Costa Rica. But the airport and the Marriott are now up to the highest snob standards. I guess that's progress. Progress creates its own problems, of course. Crime against tourists has been on the rise for years. The "have-nots" see easy targets in the "haves" - who are mostly WAMs. I've had my share of adventures in Central America, and if there's one piece of advice I would give it's this: nothing is like you expect it to be. Always keep this in mind if you're considering a real estate investment in Central America. And that went for Santa Catalina as well . . . It's a full daytrip from Panama City to Santa Catalina by bus. And wearrived in the pouring rain. We were told we would be greeted,but nobody was there. Typical. Finally a bunch of kids appeared, grabbed our bags, and ran into the river with the bags over their heads. Then they ran through a cow pasture, and up to a house, which, fortunately, is where we were headed. Ricardo Icaza's house is a three-story wonder on a bluff surrounded on three sides by the ocean. An amazing house . . . …An amazing house that does not have running water or electricity. But it was no problem. You got used to it quickly, just like eating dinner and playing guitar by lamplight and candlelight at night. Just like watching Ricardo and his Brazilian wife grill or cook our food on a gas stove. Just like pouring a five-gallon bucket of water into the toilet to flush it. Just like taking a shower fed by captured rainwater. And just like drinking bottled water, and brushing your teeth with it as well. It was a nice way to live - no big thing. More Surprises To Come… Heading back home, after the all-day trip from Santa Catalina to Panama City, we arrived at the airport. There must have been 800 Americans there, all booked on the same Sunday flight. All falling for the same scam . . . "You didn't reconfirm your flight within 72 hours . . . " So, there you had 500 more Americans than the plane could hold, all sweating, all livid. For us, the people who had just had an extended stay at a place with no running water or electricity in Santa Catalina, the fact that there was no phone goes without saying. So, of course there had been no call to reconfirm. We were stuck in Panama for a few more days. So, after all that 12 years ago, was there an investment lesson that I could share today? I don't know . . . probably not. But there was a bigger "life" lesson that I now appreciate: Life is better than you realize. But more uncertain than you know. All at the same time. TODAY'S IU CRIB SHEET - While Costa Rica may have seen its best days of Central America real estate prosperity, there are still miles and miles of oceanfront property that will someday be developed. For the right investor - in the right situation - this could be a very attractive investment.
- Before investing in any Central America real estate deal, remember that problems may exist that we do not typically concern ourselves with in the United States. Before investing a dime, be absolutely sure you can answer all 12 questions in the Personal Protection Checklist above.
Good investing, Steve Related Articles: Investment Opportunities in India…Why Go With India Over China: Part 1
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Nicaragua: Free at Last … And Profitable, Too! Return to Archives
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