Curacao Investing - Good or Bad Idea?

Question

SITUATION: My husband and I have found a unit in Curacao in an up and coming neighborhood in Willemsted, Curacao. The independent developer plans seem to be well thought out and the rejuvenation of the area filled with monuments (historical and protected homes) has already seen improvements. I would say that we are entering at the 1/3 rejuvenated timeline. The property we have found is brand-new, never lived in, has parking (which is a necessity in the area and most properties do not have), but it isn't a bargain. We are getting it at fair market value, but with a tax incentive to not pay transfer taxes of 4%. We can rent it short-term and have found that we will be cash-flow positive at 64% occupancy. The average occupancy for short-term rentals on the island sits at around 65%.

This area will grow in value and you cannot build more housing in it. So, we think it might have the "San Diego" outcome of low inventory, high-demand.

BACKGROUND: As a single woman between 2005-2008 I acquired property that bankrupted me. Given, I didn't do enough research, managed the assets poorly and the market collapsed. However, I have been gun-shy since. Also, my husband is very risk-adverseBut, we really want to invest in spite of our fears.

MORE INFO: This country requires 30% down and will only mortgage for 15 years (due to our age), on a non-fixed interest rate of 5.25%. We are looking at historical changes in the rates and they are conservative changes when they occur.

ASK: Is this a wise investment? Or should we take that money and invest in a coupe of long-distance investment homes in the USA first?

Michelle Scott · Answer

Hello, and THANK YOU for very real questions. We appreciate the opportunity to chat through some of our concerns and you both have brought up very valid points to consider as well. Perhaps it would be better to build out a portfolio here first. Thanks again.

Bonnie Low · Answer

That's way too risky for me, but only you know what will work for you. You both sound pretty risk averse, though, so it doesn't really sound like it's right for you, either. You're basically counting on appreciation and I have no idea if that's a good idea or not in Curacao. You've already said that you'll begin to make money at 65% occupancy, which is the market average. So how confident are you that you can do better than seasoned properties there? Are you ok with it not making money if you can't keep it 65% occupied? Where do most of their visitors come from and are those countries also slipping into recession like the US? What happened in Curacao during COVID? We all hope that never happens again, but we've now seen what governments can do. Foreign travel was particularly hard hit. Could you weather that? What about your variable interest rate? Do you become cash flow positive at 65% occupancy only if your interest rate stays the same? It just seems like your money would be safer in the US and there are plenty of markets where you can make STR work. But, again, if you love it there, you don't need the cash flow, you are OK waiting for it to appreciate and you have enough reserves to weather any storm (including hurricanes), it might be the right investment for you.

Bruce Lynn · Answer

There is just so much added risk with distance investments and then top it off with out of country investments vs local. Never been there, but I can imagine it is a very beautiful place. Probably a better place to vacation than to invest.You have exchange rate risk, travel risk, management risk, and plenty of other risks investing in someplace like that. How many great PMs do you have to choose from? How many great housekeepers do you have to choose from? How many great handymen? How easy is it to get stuff fixed like fridges, AC units, water heaters? I would say in your budgeting you probably need to have double your normal reserves for replacement as probably everything in ABC is imported and higher priced. Do you know the local rental laws/eviction laws? If you have to hire an attoney to take care of issues there, what is the cost? What is the cost if you need to go there now and then to check on the property, interview PMs, handle legal matters, etc. To me that could kill all your profits and it will be less fun being there handing business vs being on vacation. Do you know as a foreigner if you can open a bank account there? Some countries make it tough now due to US reporting requirements. If you can't have a bank account, can you pay all you trades like PM, housekeepers, assoc dues, mortgage, handymen, etc from here? Do you have boots on the ground there when things go wrong? What is insurance situation like there? How do you go to the HOA board meetings if you're not there. What if they get the idea they don't want STR anymore? You don't even get your voice heard.There should be a ton of opportunity in Florida all around you....plus you know the lay of the land. Lots and lots and lots of choices....STR, MTR, LTR condos, houses, townhomes, beach homes, multiple cities, East Coast, Gulf Coast, 30A, Tampa, Jacksonville, Daytona, and so many more. Should be a ton of PMs, so if you find a dishonest one, or one that gets lazy, or one you just don't like, you can change easily. I would guess FL provides just as good or even better returns for you with 1/2 the risk or better. Think about for example it is day after thanksgiving. You have a one month full December rental coming in and your housekeeper quits in ABC. What does it cost you to take care of that?....$2000 if you have to hop a plane and pay for transportation, food, hotel while you clean the unit. Then think if you have a place in Naples same thing happens. Not fun, but potentially you could drive, spend the day there cleaning and do your checkin and drive back the next day for $200-$300-$400 if you had to do it to save your December rental and your five star reviews.I'd say don't over complicate investments. Don't invest because you had a fun time on vacation. It's a business.

Joalten Antonia · Answer

Hello, My name is Joalten Antonia ( new to the website), I'm born and raised in Curaçao. I normally do not write in public on matters but this is a matter that interest me and I like to give more context of the island. This is not a professional letter or nothing this is just what I see with my eyes and my root attach to this island. So bear with me ;) I'm also looking for an "hard money lender"/ "private investor" that is willing to work with me in the real estate market of curaçao. They are hardly to find on the Island. I understand a lot of the concern here and I respect a lot of them because real estate is indeed business and if the numbers does not work you have to get over it. I will say this, knowing the status quo of the Island is very important before mocking the idea of investing if you are a non-residential. The Island it self belongs to the Dutch kingdom although we partially rule our own, 50 to 80% of our constitution is based on The Netherlands Idea off constitution. This is the reason we get a lot of investment from the dutch people although we are also consider dutch because we are part of The dutch kingdom and we hold the Dutch identity on paper. The difference of the native Curaçao people and the Netherlands people is that they have 2 different economic standard. An example of this is that our money is guilders while The Netherlands in euro. So this imply that we have different economic situation where 1 euro is worth 2 guilders. This gives the Netherlands people the apprehend for investing in the wealth creation markets as soon as they have the economic incentive or a little room to do so. We can also conclude that when your money worth more then another countries money, in some aspect you have more incentive to invest in wealth creation entities such as Real Estate When the economy give the people opportunity to invest we come in a situation where the Netherlands people can easily come here and buy property and hold it for second home or rent it out with their own people that come to vacation. They do so because the island itself is well protected by The Dutch Kingdom, so are their investment. People do not usually put money where they do not see a return in. Research has been done in the real estate market for the past decade and we can see a steady growth in the last decade but an unexpected exponentially growth in the last 2/3 years. The majority home buyers in this period are people from the Netherlands. I will assume that because this gives them a good return ( The market growth is well documented (in dutch) on the CBS website : Central Bureau of statistics Curacao.) Regards to the Real estate process, from research the market to buying a home is not as easy as the market in more developed and bigger country. We have some data that is explicit for real estate agent. Even those data are not as extensive as what US offers for example but that does not throw the fact that Curaçao is a good or bad investment Island. The market has seen a overall growth of 4,9% for the last decade and the island is a tourist Island that has not develop in his full tourist potential yet. We have been relay on our port for more then 6 decades because we have a good refinery run a couple of decades by Shell a the last 4 partially by ourselves but now the time is over. We are waking up on this matter and the government start making steady steps to open our doors to the world. So now is the time One off the most relax island for a vacation. One of the Island with beaches in the top 10 best beaches in the world. One of the Island with the richest history in the Caribbean. One of the Island with the best food and street foot in Caribbean. One off the Island that speaking 4 different language is a basic must for the native. One of the most tourist friendly Island in the world. Difficult to beat that, haha. Come try it and see for yourself I rest my case here. Hope you did get just a little more information to work with if you are interested in investing in Curaçao. Joalten Antonia, If it's not possible to contact me here. you van contact me on facebook for my personal information at my name.

Michael Haynes · Answer

Hello Michelle Scott, I have properties in Brazil for forty years and everything is not "Dream Vacation in Rio time." You must understand that South of our Border, you are dealing with uneducated, poor people, who have no way to make good money working, unless they steal. 40 years ago, my retired Commisario friend in Buenos Aires, during the "Dirty War," told me not to buy an apartment because when I come back from the States there will be a General in the Army living in my property. If you look at the Property Rights Laws for each country in South and Central America, you will see restrictions on Non-Residents owning property. You will find that you really do not get Legal Title to a property. You cannot own "Queens Land" which is owned by the Navy and is the first hundred feet or so from any water source. If you have not spoken with an Attorney down there and speak the language and seen the Statutes in the Laws, you are taking the word of whom to think that you can Invest in property in that Foreign Country. I have Permanent Residency in Brazil and a daughter and I have been in Court for many years waiting for the Judge to Subpoena the Criminal who Squated in my beachhouse etc. Do you know what is takes to Evict a bad Tenant in a Foreign Country as all of them go Socialist/Marxist down there? In New York they say, "Forget About It."

January Johnson · Answer

Use the money you make off your other STRs to TRAVEL to Curacao! : )Good luck to you!

Mike Lambert · Answer

Hi Michelle,There are two issues that have been brought up here. One is about investing internationally and the other is about investing in Curacao and that deal specifically.I invest internationally and I totally disagree with some of the comments that have been made. They reflect in no way my experience and those of the many other international real estate investors I know. Clearly, investing in another country comes with its own sets of risks and rewards so, if I was in your position, I'd get advice from the people who are doing it as you'd go to see an experienced doctor if you're sick and there's even larger amount of people who do that.I don't invest in Curacao but I can tell you that I recently came back from Mexico and there is a tidal wave of smart/institutional money from around the world moving there, including some selling US properties which they deem overpriced to reinvest there. That might explain why the Mexican peso has been destroying the might US dollar as of late. They understand that buying overpriced properties at a high interest rate isn't the best way to create wealth. They understand that remote working totally change the game and that they think that investing in the US is actually riskier than investing in Mexico today.Now if you guys are extremely risk averse, this might not be for you but is investing in real estate something for you then. You can invest risk-free in treasury bonds but, if you want a higher return, you're gonna have to take some risks. This being said, you can try to take calculated risks.I don't invest in Curacao and am therefore not familiar with that market. This being said, I'd personally avoid investing in the Caribbean because of the sargassum problem, which is getting worse and for which there's no solution in sight. Speaking of which it's already started to hit Florida and that's one of the reasons I wouldn't personally invest in Florida.As to the deal, it sounds like you're counting on price appreciation as your main if not way to make money, which in itself can be considered speculative.Hope this helps.