All Forum Posts by: George Gammon

@Priti Donnelly

Regarding bull case:  I'm not sure the neg interest rates were more than just correlated to the yen vs. other currency performance because if you look at a chart of gold yen depreciated against gold (using that as a benchmark)?  I totally agree they have no reason to lose confidence in the real estate market.  Again, a rotation into real estate seems rational if confidence on the currency/bonds goes.  

Regarding bear case:  Makes sense.  I'm not sure I'd buy the yen but that's just me.  Also, if I recall Japan imports 100% of their oil?  $30 oil has got to be a huge tail wind for the economy...big plus (maybe cheap oil has something to do with the yen appreciating?)

Regarding global real estate investors being opportunistic by nature:  Are you calling me opportunistic Priti? ;) 

Are you concerned about the population decreasing due to ageing population and putting downward pressure on rents?  Or is that isolated to certain areas only?  

 Karen if you're bullish on a currency with a 2 year time horizon what do you think about buying a rental property in the country with the currency you're bullish on and collecting rent while you wait for your currency bet to materialize?  A currency play with a 10% yield...

 Hey Russell,  I'm not sure?  I'm basing that on statistics from a few years ago, in the actual district crime was very high.  I also lived in Rockville for a while and when I went into DC there were places that you just didn't want to go (things may have changed)? 

That said, I had an office in King Farm and in Tysons Corner and both those area were awesome.  

The take away for me is whether it's the US, Colombia or xyz real estate is local, not just on a city level but a neighborhood level.

@Jay Hinrichs  Correct about the partner.

Colombia is one of the best kept secrets on earth in my opinion.  I'm in Medellin now and have been here 6 months in the last year.  People associate it with Pablo Escobar, drugs and crime, which is how it was in the late 1980's early 1990's.  But that's like currently associating Berlin with the Berlin Wall and communism.  Now, it's one of the most stable, safe markets I know of (hell of a lot safer than Chicago or D.C.) tons of foreign direct investment, very little credit in the market, massive infrastructure projects, low government debt. etc.  You should research it, you might be surprised.  And real estate in Colombia is a sensational way to go long oil because of peso's correlation and take advantage of an incredibly strong dollar (which most likely won't last forever).  I don't like having a portfolio exclusively denominated in USD.  But you're correct,  it's not right for the everyday investor.  

YES that's it! the property is in old town Kotor, that's where all the cruise ships dock.  So cool you've been there before...what a small world.   and it is a staggeringly beautiful place, thats for sure.  

Got to go meet my architect Jay, great chat.  

@Jay Hinrichsactually both.  I currently have projects mid stream in Kansas City, Medellin Colombia, coast of Ecuador and just put an offer on a property in Kotor Bay, Montenegro (south of Croatia).  

@Jay Hinrichsmakes sense, I assumed licensing would be a huge issue.

No clue what Bull mt looks like now, I'm sure it's nothing like I remember, the homes he built were back in the early 90's.  

I was fortunate enough to find a house with a 10,000 sq ft lot.  I subdivided the lot into two 5,000 sq ft lots, rehabbed the first house, sold it, then did the new build on the newly created lot.  To your point, that's almost impossible to find...that's one of the reason I'm focusing on foreign markets now, much more low lying fruit.    

@Jay HinrichsI sincerely appreciate your detailed response. I'm going to digest this a little and see what ideas maturate. Financially, pursing a hard money model like this would be feasible for me but the risk would have to be managed very carefully even with access to LOC type money. I have vast entrepreneurial experience but this is much different. I've been investing in real estate since 2012 but not on the debt side. I'm not sure I have the experience to accurately analyze all the risk, manage it and therefore minimize it? But you've given me some food for thought...thank you.

I grew up in Portland btw, I went to Sunset High School.  I did a couple flips and a new build on the east side of town last year over by Mt. Tabor.  My brother still lives in Portland and my business partner in Ecuador is from Portland and built most of the homes on Bull Mountain.  It's a gorgeous area as long as it's not raining and you don't have to deal with Multnomah County. ;) 

Thanks again for the insight and your time,

George

@Jay HinrichsOk so if I'm understanding you correctly, you're not paying for the 4 million unless you're actually using it on a deal/lend to an investor?   My concern was if it was a loan you'd be liable for the debt payments regardless of whether or not you had deals to fund.  Sounds like that's not an issue?  And the interest rate the credit facility charges you is determined at the time of the collateral assignment based on prime plus X?  

Dropping down to 50% makes sense.  Sounds like the you'd personally guarantee the 4 million from the credit facility?  

Thanks again for the clarification,  I've never considered hard money lending with leverage but maybe I should.

George

Jay, great post. Can you fix the 7% rate on the banks money? Is the banks money a loan or line of credit? With that much leverage how do you hedge a 2009 down turn?

Thanks,

George

@Dave Meyerfalling in love with Medellin is pretty easy to do isn't it? ;) If you or your friends are thinking about buying you'll want to focus in the El Poblado area.  It's the high rent district and is where most expats and wealthy colombians want to live.  

Deals here are not hard to find because remodelling/rehabbing really isn't something that's commonly done.  If you want a turn key rental you can expect an 8%-10% cash on cash return.  If you want to rehab you can increase your cash on cash return.  Appreciation, in peso terms, adjusted for inflation has been about 5% per annum for the last 10 years.  That said, if you've read any of my posts you'll know I suggest ignoring appreciation and if it happens great.  

If you're looking for flips the 70% rule type deal is easy to find.  Spend a day looking at properties  with any real estate agent and you'll find at least 1 or 2 with strong potential.   

The market is less liquid than the states, so you'll want to factor that into your numbers. As an example, in the states the last 3 flips I did sold in less than 3 days on the MLS. In Medellin the average time to sell is about 6 months. You're not able to turn your capital over as fast here but the average ROI per flip is higher.

There's very little credit in the market so it's far less susceptible to the boom bust cycle that we have in the US.  The big positives about the US market is liquidity and access to leverage.  The positives about Medellin is higher margins and low chance of credit inflated debt bubbles.  

The minutia stuff, like paper work and who pays sales commissions is different but the process (do comps, buy smart, update kitchen, baths, floors, paint, hire solid property manager, is the same.  Workers are better than what you typically find in the US.  Materials are about the same price, labor is incredibly cheap.  We're paying about $10-$15 dollars a day to get top notch workers.  I'm in the middle of a rehab with 100k budget, the same rehab in the US would cost 200k...but it all depends on the rehab.  If your rehab requires a lot of labor it'll be way less than the US, if it requires a lot of materials it'll be about the same.  

If you'd like info on specific properties I'm happy to email intro you to my real estate agent, he's american and I've been working with him for two years.  I also have bankers and lawyers I've worked with and trust that I can refer.  

Hope that helps, if you have more specific questions don't hesitate to ask, I'm happy to help any way I can.  

George