Thoughts & experiences on overseas investing for new REIs?

Question

Hi everyone! I've searched the forums for this topic but haven't found anything really from more recently than about 5 years ago. I am a new investor living in the US. My ultimate goal is to own properties in the US, Europe (thinking Portugal right now because I'd like to live there someday), and probably somewhere in South America. My first thought was that it's not a good idea to invest in another country until you are much more experienced, but I'm getting antsy now and want to start sooner. I want to be able to use the properties for my own travel and make cashflow while I'm not using them.

So, I'm curious if anyone has experience doing this and what it is like for you. Looking forward to hearing it!!

Greg Scott · Answer

I love both real estate and traveling so understand your passion. I've lived abroad and looked into international investing too.

International investing has a high degree of complexity. You have to deal with very different laws, languages, and exchange rate risks. It also adds a lot of complexity to your banking and ongoing US tax returns. It is critical to have the financial wherewithal to undertake this added complexity. Do you have the resources to deal with a business crisis abroad? Can you afford a last minute ticket to Portugal or Buenos Aires and hotels to spend a week there straightening out a problem? I've had to do that in the US, but I can reach all my properties by car in a few hours.

It also seems that the laws in the US are more conducive to building wealth. I have many real-estate-investor-friends from different countries. (My wife is even Canadian) Several of these people even own property abroad but not as investments. I don't know any of them trying to make money in real estate in other countries. Most make their money here and use the money to travel.

I met one guy, once, who was doing syndications of apartments in Paris.  Sounds really cool.  I have no idea how well he survived the pandemic. Can you imagine trying to figure out all the landlord laws related to COVID?  It was confusing enough to deal with the ever-shifting legal landscape here and I'm a native speaker with a great team.

Good luck.  Hopefully we'll run into you in Lisbon some day.

Mike Lambert · Answer

@Henry Clark

Yes, I could have added Belize to the list of countries in which you'd de facto be investing in USD. I didn't because the country is small and I wouldn't invest there.

Besides the currency issue, I totally get why some people like Belize. It's English-speaking, cheap, has a beautiful coastline and rarely make the headlines. I don't like to be unnecessarily negative; you already invested there and I hope it'll turn out to be a good investment after all. Yet, all the country has going for it is international tourism. If tourists stop coming there for any reason, it'd be catastrophic for the country.

You have the same exact beautiful coastline a few hours drive up North in the Riviera Maya, which is one of the most visited places in the world. It's not only dependent on foreign tourism and it's supported by massive investment in infrastructure and marketing from the government and the private sector that a country like Belize could never afford. You can flight direct into Cancun from pretty much anywhere in the world while getting to Belize is much lengthier and more complicated.

Yes, land is much cheaper in Belize than it is in the Riviera Maya, like it is much cheaper in the middle of North Dakota than it is in New York City. However, making money is the name of the game for an investor, not buying cheaper for the sake of buying cheaper. After all, you get what you pay for.

Mike Lambert · Answer

@Julia Stroud

I love your idea. Many people are doing it and it's going to be more and more common with the unstoppable work from anywhere trend.

I'm not sure how you did your search but I answered hundreds of posts on the (related) topic. These days, everybody and their mother give advice on anything that take their fancy whether they really know what they're talking about or not. Especially when it comes to international real estate investing, my advice to you is to take your advice from people who are doing it.

This being said, @Greg Scott makes great points. I'd qualify his comment about having the financial wherewithal though. You need financial wherewithal if you invest anywhere, including in the US. If you invest 90% of your net worth in Venezuelan real estate, you risk getting in a whole lot of trouble. However, investing 200 k in a condo in Mexico is a pretty benign issue for many middle-class Americans and and they're doing just that in ever increasing numbers. Also, the fact that you'd need to buy a plane ticket and pay for an expensive hotel to visit your properties in case of problems is inaccurate. Places like Scott mentioned have well-established property management business and a whole industry catering for the growing number of international real estate investors. But you preferably do need to have a team on the ground that you trust. And I'd educated myself about the points that Scott brought.

Besides, many West Coast people invest in Florida. Guess what? It takes them almost as long if not longer to get to their property in Florida as it takes a New Yorker to get to their property in Lisbon. And I'd love to have to travel to Lisbon or Buenos Aires at the cost of (in my case) the Canadian taxpayer rather than having to travel to Suburbanville in the middle of nowhere in Canada or the US.

As mentioned by @Anthony Bellesbach, it'd be easier for you to start investing in the US, especially if you're a newbie. But you mentioned that your decision is as much lifestyle as it is investment, if not more.

So, you have two options. Start investing in the US to learn and create a war chest and invest overseas some day or find out how to live your dream right away. Who am I to tell you what to do? I don't know you and I don't know your situation. My philosophy of life is to live my life to the fullest and find a way to do it rather than wait for a someday that might never come. I'm not a newbie though so make sure you consider your own situation.

Good luck and feel free to reach out in case of need.

Joshua Flowers · Answer

I've just joined the BP forum and was running into the same issue: recent content on investing overseas. Anyhow, I am from Colorado, currently living in Berlin, Germany. I'm working on my first investment, a single-family buy & hold in Portugal, that I plan to do short-term rentals with initially. The long-term goal would be to have it as a spot to retire/get residency should I choose to do so.

Since I lived in Europe I was able to travel and see the place during the pandemic. Grateful for that opportunity. My goal for this year is to diversify into a few other markets outside of the EU. Considering Panama and Belize. Anyhow, would love to discuss this further with you since it has been tricky to find other's focused on overseas investments here.

Not sure if you have come across them but I have found lots of great info with Live and Invest Overseas. Happy to share some of the resources I've got through them.

Mike Lambert · Answer

@Alesandro Breguez

I don't agree that foreign currency is a major risk when investing in Europe or Latin America. By investing there, you're actually decreasing your risk in two ways: you invest in different markets and in different currencies. Having all your assets in one place and one currency is what is really risky. The most important rule in investing is diversification. By having all your assets in US dollars, you're at the mercy of a fall in the US dollar. By having assets in other currencies, you're actually hedging against a fall in the US dollar.

And this is exactly what's been happening. Contrary to what you mentioned, the US dollar has tanked against most currencies all other major currencies, including the Euro, The Pound Sterling, the Canadian Dollar, the Australian Dollar and the Japanese Yen. Check the charts on xe.com! And this, especially since the beginning of the pandemic. The Mexican Peso and the Colombian Peso, after falling at the start of the pandemic, have recovered most of the ground lost. The Brazilian Real is still significantly lower but the 25% - 35% fall is a wild exaggeration. Again, check xe.com or any other currency charts.

Most experts believe the US dollar has further to fall, as the FED continues to print money like a drunken sailor. And more and more people question the future of the US dollar as the world's reserve currency. If it was to lose that status, Americans sadly would become poorer in a heartbeat, as the world's central bank would dump their US dollar, which would be in freewill as a result. And this is more and more likely to happen as Asia becomes the dominant economic force in the 21st century.

Mind you, if you absolutely want to stay in the USD, properties in Mexico, the Dominican Republic, Costa Rica, Panama, Uruguay and Argentina trade in US dollars for all intents and purposes. However, most pundits agree that currencies like the Colombian Peso, the Brazilian Real and the Turkish Lira have fallen way too low in relation to their current, past or imagined economic troubles. This means that, by investing in their respective countries, you're more likely to end up with a huge currency gain than a currency loss. In the absence of hyperinflation, a currency can only go so low. As was mentioned in a BP podcast this week, the poor look for reasons not to take action where the wealthy see opportunity (I'm not suggesting that you have the mindset of a poor here by the way).

When it comes to regulations and taxes, I was born and have spent most of my life in Europe so I can agree that many jurisdictions are heavily taxed and regulated but some are not. It's like in the US, certain states are heavy on the regulations and taxes site and others aren't. In any case, you just have to take them into account in your calculations and, if the result is good, who cares?

Latin America is much less regulated than the US. This is the reason why I decided to invest in short-term rentals in Latin America rather than in North America. In North America, short-term rentals are increasingly regulated, if not downright forbidden. And, in the places where they aren't, you run the risk that regulations with tighten after you have invested. You generally don't run such risk in Latin America.

Finally, REI anywhere requires a lot of due diligence. Yes, investing overseas might require additional and/or more complicated due diligence. So I get why you suggest it's not for beginners. Personally, I don't like your generalizations, especially since I've done it as a beginner myself. If you're ready to do the work and have the necessary knowledge or connections or know people who do, you can do it. As Marie Forleo said in today's BP Podcast, everything is "figureoutable". Positivity always trumps negativity!

Mike Lambert · Answer

@Henry Clark

You almost wrote a manual! ;-)

I'm not sure how a property can get stolen, apart from somebody exercising squatting rights in case it's occupied because you haven't checked it out for many years. In any case, I don't agree that you are just "money" in Central and South America and that you have to have somebody watching your property otherwise it gets stolen or vandalized.

That might be the case in a place like Belize (again one of the reasons I'd avoid investing in that country) but it's not right to generalize it to the whole region. While it might be true in other countries as well, it's not the case in countries like Mexico, Costa Rica, Panama, the Dominican Republic, Colombia, Brazil or Uruguay for example. Blanket generalizations are rarely helpful.

Mike Lambert · Answer

@Joshua Flowers

Congratulations for starting your international real estate investing journey. It can be lucrative and fun and frankly should be! You're educating yourself from the get-go so you're on the right track. And Portugal is a beautiful country and can be a great place to invest in real estate!

Yet, before promoting Live and Invest Overseas, I'd make sure I understand what their business model is. I became a member of BiggerPockets a few years back. All I've been getting from them on a regular basis are my daily alerts and alerts about posts I've been responding to, both of which I've been requesting to receive from them. The only "unsolicited" emails I get from them is a weekly digest of interesting articles. And when, from time to time, when they publish a book, they send me a promotional email about it, which I'm happy to get.Contrast this with Live and Invest Overseas. I came across them and subscribed to their newsletter. After that, I received several unsolicited promotional emails a day trying to sell me something. They were relentless! The problem is they write articles that appear as informative about a given country and, almost invariably, you'd find out that they're promoting a project in that country a few weeks later or they'd be a conference in which they invite people who have projects to sell and for which they get commissions. You can't give objective information about a place when you've got something to sell there.

Their "brainwashing" seems to have been working on you since you mention investing in Belize and Panama, two countries they're heavily promoting.

A while back, I replied to a post about investing in Belize in which I lengthily explained in detail why I believe it's one of the worst countries for real estate investing. I'm not gonna repeat it here but you're welcome to PM me. I tried to find it quickly to post the link here but it didn't work. You could find it through my profile but there more than 500 posts there now. The only reason I'd buy something there is if I was going to retire or vacation regularly there but this ain't happen anytime soon. Since you're planning to retire in Portugal, I guess it's not your case either.

Panama is a different story. It can be a good place to invest but it's by far not the best. Panama has basically two things going for it: Panama City and the canal on the one hand and the beaches on the other hand.

Because of the Panama Canal, Panama City has been compared to a little Hong Kong and Singapore. There is a bit of truth in that but it's been wildly exaggerated because Hong Kong and Singapore are much better located and are much bigger cities. I don't know if you've been but it's quite impressive. I remember the first time I flew out of Panama City. I sat by the window and saw the skyline from myself from the sky and was very impressed. A few hours later, I landed in Miami. I'd been to Miami very often but, because I usually have an aisle seat, it was the first time I saw Miami's skyline from the air and I thought "Is that it?", after comparing with Panama City, a city much smaller. Panama City would be an ideal place for short-term rentals but they're illegal there. Long term rental yields aren't very high given the discrepancy between real estate prices and the average salary there. You can do much better with long term rentals in other countries than Panama.

Where you can do short-term rentals in Panama is at beach locations. Panama has nice beaches. Now I don't know about you but while I have a lot of friends vacation in countries like Mexico and the Dominican Republic, none go to Panama. So I rather invest in Mexico and the Dominican Republic for that and many other reasons. What my friends do is corroborated by the statistics. Why is that? Because Mexico and the Dominican Republic have done a great job promoting their beach destinations and bringing flights and infrastructure and Panama hasn't. This is supposed to be changing lately but Panama can't compete because it's too far from North America compared to Mexico and the Dominican Republic. And, then, if you're ready to travel as far as Panama, you'd probably rather go to neighboring Colombia, which has even nicer beaches and so much more to offer than Panama. And case in point, tourism in Colombia is booming.

Don't believe all that you read. Ask you what's the writer's motivation and check the statistics for yourself. They rarely lie!

Hope this helps!

Joshua Flowers · Answer

@Mike Lambert

Really appreciate the insights. I agree LAIOS can be a bit relentless with their email campaigns. I've found a way to weed through them to get the info I want, which at this point is mainly residency and tax info on living and investing in Panama. I think I have checked Belize off my list for now. Thanks to some of what you shared, I did more digging and Panama seems like a better next move for me. I will PM you though, as I am interested in hearing more on your take about Belize.

Since I am not just focusing on investment property, but also interested in getting a second and third residency, as well as have a place in two different countries to split time between during retirement, I am not just making my decisions on something that I will potentially turn around and sell in 3-5 yrs, though will stay open to that idea if it makes financial sense.

Anyhow, thanks for taking the time to respond here and to my other posts. Super helpful!

Mike Lambert · Answer

@Joshua Flowers

While I was positive about Panama City in my reply to you, I forgot to mention that there's been a large oversupply of condos there and they're continuing to build unabated. I have friends in the industry there so I know it first hand. At the same time, Live and Invest Overseas and others who follow the same model have been promoting condo deals there. Mind you, it might not be such a bad thing if you plan to hold long term.

I believe they invest there themselves so, in a way, they're eating their own cookie. Let's give them that. However, it's important to understand that, when they promote a deal, they make their money in fat commissions and have no money to lose if something goes wrong with the project or the market when it comes to that project whereas the investor, has all to lose. Therefore, they'll tell you the good but you won't hear from them that there's an oversupply of condos in the market. It's not in their interest to tell you that. So you need to find out by yourself.

James G. · Answer

Different countries have different laws and different regulations. Why not laser focus on investing in the United States, and use your cash flow to travel the world? There's no need to own property in Europe and South America when you can AirBNB them or stay in a hotel.

Thoughts & experiences on overseas investing for new REIs?

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