Belize AirBNB - any tips?

[Candace Majedi]

Hi all,

I listened to a podcast recently where the guest mentioned investing in real estate in Belize. Pair that with my desire to start over in a tropical destination (I work in IT and can work anywhere) and I started thinking about Belize. Does anyone invest there? Do you know of a good place to buy? I'm looking buy a multi unit on some land that I can use as an Air BNB when I'm not there. Somewhere near the caribbean sea, with running water, electricity, etc. Do you know how much it is to build a couple casitas from scratch? Any insight would be helpful (cities that are cool, builders, etc.).

Thanks!

Candace

[Steve K.]

I spent part of last winter traveling around Belize and researching investment opportunities there and had such a great time. I didn't end up investing but I would go back in a heartbeat. Definitely a market worth researching in person! Very unique from the rest of Central America and a great place to explore. It's very undeveloped as a whole and feels a lot like the land that time forgot (there are very few modern amenities throughout the country which I like personally). Here are my notes from my travels and subsequent research:

Most common areas to travel to/invest in: Ambergris Caye/San Pedro/Isla Bonita (by far the most popular and most developed tourist area, made famous by Madonna with her 1987 hit "La Isla Bonita"), Caye Caulker, Placencia, Corozal, Cayo District 

Areas to avoid: Belize City (the only actual "city" in Belize, it was mostly destroyed by a hurricane in 1961 and never really got rebuilt despite still being the main population center. It was once a beautiful city supposedly but these days it's basically a shanty-town for the most part and widely considered a no-go zone for tourists to visit or expats to live in. I walked all around during the day time and didn't see a single other tourist. I was warned repeatedly not to walk around at night and headed the warning), Belmopan (the new capital since 1970, boring)

Pros:

Relatively cheap seaside property compared to other oceanfront properties (although the cherries have been picked and prices have risen dramatically in the last few years at all the areas that have existing infrastructure). Good deals can still be had through networking or creating new infrastructure.

Friendly people, interesting culturally, safe to travel in and live as a "gringo" (the murder rate is deceptively high, but only due to gangs carrying out revenge killings on each other in Belize City, not due to attacks on tourists which are rare. A special police force exists to protect tourists, and with tourism being the #1 industry nobody messes with tourists other than by trying to work some sort of hustle to separate them from their money).

Beautiful coastline, barrier reef, world-class fishing and diving, Caribbean island vibe coupled with a jungle mountain interior filled with caves, rivers, Mayan ruins, quant villages, rolling hillsides dotted with ranches/farms and sparsely populated countryside.

Increasing demand, dwindling supply. Belize tourism numbers are growing and development is limited due to the island geography. Rental rates are expected to continue their strong upward trend.

English is the official language.

No capital gains tax, no estate tax.

The income tax rate on rental income is 1.75%.

Property taxes are extremely low: typically just a few hundred dollars a year.

No short-term rental restrictions. 

Price to rent ratios are fairly high in certain areas. 

Hugely popular vacation destination and the market demand is for nightly rentals as opposed to monthly rentals. This multiplies the income potential compared to monthly rentals and gives owners much more flexibility for personal use of their island getaway. For instance, it's not uncommon to see $400+ per night rental rates on properties that would otherwise rent for $1800 per month.

Belize is governed by British Common Law, which for real estate investors means you can have full property ownership with land title (called Title Free and Clear), just as in the US and Canada (In other beach destinations such as Mexico, foreigners cannot as easily own beachfront property in their own name).

2-hour flight from Miami, 2.5 hours from Houston with direct flights available from many US cities. Most Americans live closer to Belize than Hawaii.

Time zones are convenient to North America. (Belize doesn’t observe daylight savings time, so half of the year the country is on CST, and the other half MST.) 

Growing economy: the recent expansion of the international airport in Belize City, the addition of several major airlines in 2015-2016, and the increase of current airline routes to Belize are great indicators of a growing economy and tourist industry. 

Affordable airfare: the increase in airline service to BZE (Belize’s only international airport) means more competition and a decrease in airfare prices.

Trips to check on your property could become tax write-offs.

Cons:

Mortgages from Belizean banks are scarce and very hard to get as a foreigner with interest rates at 16-18% so it's mostly a cash market. Foreigners can borrow from offshore banks at 9-12%, use money borrowed in their home country or seller financing. 

All land purchases are subject to a Government Stamp Transfer Tax which is about 5% of the purchase price.

Finding quality skilled labor to build new construction, rehab or make repairs is extremely difficult. Locals in general are on "island time" and need constant oversight to get anything done. The Americans I met there who had built their properties had imported labor from nearby Mexico. 

Guatemala Situation-- Guatemala claims about half the country is rightfully theirs and has been threatening to take it back. The issue is likely to come before the International Court of Justice in the next year or two. Guatemala claims some of the most popular areas for Americans to invest in (like Placencia). I have no idea how this will play out but it's something to consider if looking to invest there: https://en.wikipedia.org/wiki/...

There actually aren't as many natural sandy beaches in Belize as there are in the rest of the Caribean. The shoreline is mostly coral, mangrove and seagrass because the barrier reef blocks any waves that would crush the coral into sand. Almost all of the scarce natural sandy beach areas are already developed and are the most expensive locations to purchase real estate in the country. Tourist areas import sand to create the Caribbean white sand beach experience that tourists expect. 

Residents can’t afford to buy houses, making the market dependent on foreign investment. Many Belizeans live in abject poverty. If tourism declines for whatever reason, property values would revert to what locals can afford, which is nothing. 

Economy is 100% dependent on tourism.

Tourist season is short: much of the year is “wet” season and tourism dries up (forgive the pun). The season is basically December to April with the exception of diving-specific locations which have a summer season, so you will most likely need to make the bulk of your annual income in 5 months, while any fixed monthly expenses such as security are year round (your entire home could be stolen down to the foundation if left unsecured just like in all of Central America). 

Infrastructure is poor: extended electricity outages are common, roads are rough and unlit, sewers are scarce, internet access is intermittent in the few places it is available, good hospitals and shopping centers are non-existent. However if you’re okay with pit toilets, septic systems, solar panels and generators, flying to Houston or going up to Mexico for healthcare, and don’t care about shopping then these obstacles are easily overcome. If you enjoy going to the movies, the mall, having more than a handful of restaurants to eat at or having multiple choices of grocery items or beer brands, Belize is not for you. It can also be hard to get simple items you may take for granted such as name-brand clothing, outdoor gear or even hiking shoes, bags of cement, other building materials, tools, auto parts, boat motors, and any beer besides Belikin. There are no chain stores like Whole Foods, Smiths, Home Depot, Walmart, McDonalds or anything even remotely close to these places. 

It’s a hot, subtropical country with occasionally oppressively hot weather during the tourist season and seven months of consistent heavy rain outside the tourist season. It also has a large and varied population of poisonous snakes, venomous spiders, scorpions, and perhaps most nasty of all: mosquitos, sand fleas, chiggers, and gnats. There are many nasty diseases you can catch from the large populations of insects such as malaria, dengue fever, zika, typhoid, yellow fever, bacterial infections, etc. I got pretty sick with a crazy fever of 104 for about 5 weeks when I got back (pretty sure it was dengue or maybe zika) and that was a bummer. Bring DEET and use it BEFORE you get bitten!

Zoning doesn’t exist so your neighbor could turn their house into a nightclub, junk yard, pig farm, or industrial site and there's nothing you can do. Some may see this lack of rules as a pro, until it negatively effects them personally of course. If you're not cool with an "anything goes" mentality you might have a hard time in Belize. 

Escrow companies don’t exist and escrow isn’t typically included in the buying process. If you want to use escrow you will need to set it up yourself through a lawyer.

It’s very much a third-world country and has a Wild West/vigilante justice vibe. Like any developing country, residents often do desperate things to stay alive such as robbing, killing, kidnapping, scamming, fighting with machetes in the streets etc. which doesn't often involve tourists or expats directly but can be disturbing to witness. The vast majority of Belizeans are peaceful and polite which is why they're known for their hospitality, but the homicide rate is  the 3rd highest in the world, double that of Chicago and higher than any US city. Many communities are remote and police themselves, which usually isn't as fair and balanced of a justice system as we might be used to in developed countries. The big tourist areas are policed heavily by the special tourist police and are generally safe.  

Import taxes can be 60-80% on goods including building materials.