How To Avoid These 4 Mistakes International Real Estate Investors Make

Are you joining the big league of successful international real estate investors? If so, you've likely succeeded (or not) investing in North America real estate. Either way, you've got some pretty good insights about the real estate investment process. And what it takes to be successful. You're likely motivated by the potential for profit, the level of investment in infrastructure, economic developments, and a whole new lifestyle. So what's holding you back? What else do you need to know?

That's exactly how my partner, Park, and I began our international real estate investors journey. We were motivated for all the same reasons you are. We had confidence in our capabilities. And we were going to rely on our real estate investment experience in the U.S. It taught us everything we needed to know.

We knew developing real estate in remote areas of Latin America would require a ton of courage. So we kicked our fears aside and took the leap. We didn't anticipate any issues we hadn't experienced before. That was our first big mistake!

Before you leap, we can help you avoid making these top four mistakes international real estate investors make.

1. Failing to Understand the Local Market:

Forget everything you know about real estate investment in North America. International real estate is valued completely differently. It's important to understand how the locals value the land. Their use of the property (and therefore the value they place on it) is usually quite different than yours.

For example, a local farmer may use his beachfront acreage for cow grazing. Or he may use his mountain property with jungle and ocean views for growing mangoes or papaya. In this example, the land will most always be valued as agriculture land.

We use 5 market stages to evaluate properties, markets, and business plans. Each stage is characterized by types of buyers and land use. Learn the 5 stages that every emerging market goes through. This is a good tool to help understand how to value your property. What to do with it. How to identify your customers. And what drives the timing in the market.

2. Trusting the Wrong People:

Dealing with a reputable landowner is a good place to start. But you can't count on all landowners to be trustworthy. If it's obvious you know nothing about the market, big dollar signs may drive the demands and the price over the top. It's best to establish a relationship with reputable professionals in the area.

Their job is to make sure the landowner is dealing straight up. This can be a draining task because realtors and attorneys can't always be trusted either. Where you find one scammer, you'll find they're surrounded by other scammers. And many have polished, sophisticated organizations.

But, don't let this drag you down. There are plenty of honest people out there to deal with. It's just crucial to check out the credentials and reputation of everyone involved. Don't be afraid to ask for references from bankers, architects, and other local business owners.

And take the time to do a little internet research. I add "scam" or "ripoff" to the end of the company name. People who have been ripped off by someone seek revenge on the internet. If the company or person you're investigating has been involved in a bad experience, you'll find it there.

Your business transactions abroad don't have to be a nightmare. Choose the right team of professionals to guide you through the process and keep you from getting burned.

3. Not Doing Your Due Diligence:

Hire a trusted attorney to check the property records at the public registry. He'll know what to look for. Each investment market has its own set of rules. Concession properties throughout Latin America, for example, have different terms of ownership or lease. You want to make absolutely sure that you understand the terms of ownership before you purchase.

Make sure there are no liens or claims of ownership on the property that would affect your right to title. Know what squatters are and whether there are any on the property. If they've been there for awhile, they may claim a legal right of ownership. Also, the government may hold Right of Possession property. And it's sometimes difficult to determine exactly who owns rights to ROP land.

In Panama, for instance, there are a number of private islands for sale. Foreign investors can absolutely own some of these islands outright, yet others are ROP properties with ownership restrictions. ROP property can often be a good investment. Just know the difference and clearly understand your ownership rights. You can avoid any associated risks if you hire a reputable team to perform due diligence. If you take a proactive approach, this is a very manageable risk.

4. Thinking Too Short Term As an International Real Estate Investor:

You may be asking yourself, "Is now the time for international real estate investment?" That's a good question. Don't subject yourself to any "get-rich-quick schemes." In emerging markets it's imperative to think long term.

Your real estate investment returns in emerging countries can take awhile. Government plans for infrastructure (like a highway or an airport) can be slow to develop and implement. It's not uncommon for international governments to delay their infrastructure projects a year or more. So, you'll need to evaluate timing.

Can you hold the property long enough to accomplish your investor goals? Or can you hold it long enough to find another buyer if you can't wait it out?

Kenneth Rappoza, Forbes Magazine Contributor, once said that "International real estate investment requires on-the-ground expertise and digging through financials" to determine whether you're making a good long-term investment in a particular market. I agree.

Park and I scouted every country from Mexico to Ecuador searching for our Adventure Colony site. That's how we became certain that Boca Chica, Panama, is the best place to buy real estate in Central America. The healthy lifestyle, access to modern conveniences, and planned infrastructure played a huge role in our long-term investment plan.

You, too, can have a positive and rewarding international real estate investor experience. Just take the time to avoid these pitfalls and plan for long-term success.