All Forum Posts by: John Carbone

@Kirsten M.

I don't see why the fact that Belize is part of CARICOM makes me incorrect. Sadly, both the country and its population are super poor. There is no middle class and practically no industry. The government has no money. If anything happens there and tourism stops, the country is bankrupt. And how long are the poor locals (the overall majority) going to tolerate to lend their country to the villas of the rich. Crime is high like in neighbouring Mexico but the difference is that, while Mexico's is drug-related and doesn't affect tourism, it's just overall crime due to poverty in Belize.

I understand you have lived and worked there and must like it and look at it from a real estate agent point of view. I look at it from an economist point of view too.

I wouldn't sweat it too much. It's your property and you are the boss of it. Not your neighbors. I'd probably wait until right before the first guest arrives. Tell the neighbor that that you qualify and vet your guests. Exchange phone numbers with your neighbors.

Hi,

I recently purchased a home with a partner to use as an STR. The neighbors have been VERY friendly, as they think I am moving in to the home, and I feel like I somehow need to break the news to them that I am not going to live in the home. I expect a lot of irritation and disappointment. Anyone with an STR or rental property have any good suggestions as to how to make neighbors friends instead of foes?

Thanks,

Shmuel

@John Carbone

You have a few things right:

Investing internationally adds a specific sets of risks to the equation. Yet, it doesn't necessarily mean it's riskier. For example, it was much riskier to invest in the US in 2008 than pretty much anywhere in the world, even for Americans, as history shows and I suspect a similar situation, although less bad, exists today. I'll tell. A lot of smart US investors I know have liquidated the entirety of their US portfolio at the top and I'd have done the same.

Mortgages in Mexico are very expensive indeed and, as a result, Mexico is mostly a cash. While a huge part of the US real estate inventory can only be profitable with rock-bottom and abnormally low interest rates (which are a thing of the past), the good real estate in Mexico bought 100% in cash is actually more profitable than most of US properties paid for with a mortgage. You can actually sometimes find cheaper financing in Mexico (I've borrowed at 6% for example) and, when you do, you can get yourself a heck of a deal.

However, you seem ton again have done some quick and superficial research and found some cheap properties and draw conclusions, which totally misses the point:

1. The fact that few people use mortgages means that the market isn't artificially inflated by cheap debt like in the US or Canada, whereby the Mexican market isn't subject to crashes. The growth is real growth, underpinned by the rise of the middle classes and the huge and growing interest from foreigners, supported by the rise in tourism, remote working and the influx of retirees.

2. A like-for-like property that brings the same rental income than in Florida or California costs several times less.

3. The costs of operating an STR in Mexico are super low compared to the US and probably less than the property taxes in certain states. Speaking of which, property taxes are close to 0.

4. In the face of increasing STR regulations in the US, there is practically none in Mexico and the risk that there'll be any is almost non-existent.

5. I can find $100 properties anywhere but, irrespective of that, September is the worst month in Mexico when it comes to occupancy.

6. What political risk? Mexico currently has the most leftist president it's ever had and yet, he's very friendly to foreign investors. Plus, Mexico is part of the USMCA (ex-NAFTA) and its economy depends on the US so they won't do anything against American property.

7. What do you mean by increased IRS reporting means more money to file taxes?

@Michael Baum

There's no need to defend John Underwood! I wouldn't attack anybody and, if I was, he'd be the last of my list! :)

Thank you for your compliments and for your balanced post! And, you are absolutely correct, investing internationally comes with its lots of additional risks but then it can be less risky than investing in your home country in other respects, depending of where you live of course. And you are right that there are things I can do because of my knowledge, experience and connections that others can't do.

A few comments here:

a. Many (if not most) countries grant exactly the same rights to foreigners as to their foreign nationals. In the Caribbean, the Dominican Republic is a great example and I know about that one since I have connections in the ministry of tourism. This has resulted in massive foreign investments that are protected by the country's constitution.

b. I don't know much about the Bahamas. That market has never interested me. I didn't know about the violence there but I'm not surprised. Yet, speaking of violence and travel advices, I know about Mexico.

While everybody hates violence, the question is what impact would it have on your investing. Would you be concern that people would stop traveling there or would you feel unsafe to use your own property.

I believe Mexico is for many the poster child when it comes to violence, drug issues and travel advice. Here's what I replied to another comment on the forum related to the violence in Mexico. Of course, not all of it will apply to the Bahamas but you'll surely get the point. Full disclosure: I own properties in Mexico and work on developments there.

1. It's no secret that Mexico has had an issue with drug cartel violence for as much as I can remember. Yet, year after year during that period, Mexico has gone up in the ranking of the world's most visited countries and reached the 7th spot in 2019. Thanks to the pandemic, they jumped to number 2 in 2021. Now, on top of the tourists, Mexico is literally invaded by hordes of remote workers, to the point that Mexicans are starting to complain about the ensuing rise in property prices!

2. Tens of millions of foreign tourists, digital nomads, remote workers, snowbirds and business travel to Mexico each year. The number of those who get killed, injured or kidnapped is probably much lower than the crime rate in pretty much any US city. Expressed, in percentage terms, you'll need to put a lot of zeros after the comma to get to the first figure. Unsurprisingly, nobody is following these travel advisories. People go to Mexico, love it, feel safe and come back regularly.

3. The crime rate in a large city like Cancun is actually lower than that of US cities like New York City or LA. Are you not going to invest in New York City or LA.

4. More and more US and Canadians retire in Mexico. There's already two million of them. When asked whether they feel safe, their answer is invariably something like this: "Yes, I feel very safe in Mexico. I know that, if I don't get involved with drugs while, in the US, I could get shot when doing my groceries or going to a school. That will never happen in Mexico."

5. People thankfully aren't stupid and have common sense. When the State Department tells them to not travel to Colima or Guerrero, you don't do it. Mind you they'd probably not do it anyway. But, when they tell you to reconsider traveling to Baja California, give me a break. Go to Los Cabos airport and tell that to the hordes of visitors going back home. They will laugh at you.

6. Ultimately, what drives real estate values is supply and demand and the income you can derive from those properties. Not only is the growth in the amount of tourists, digital nomads, remote workers and retirees not slowing down in the face of these issues, it's actually accelerating.

7. There is a huge number of Americans and Canadians already owning and buying properties in Mexico in ever greater numbers. Do you think we're all crazy?

c. Buying overseas can indeed be more complex than buying at home but then you just need to surround yourself with the right professionals. Come on, we're BiggerPocketers! Would that stop us? There are way harder things than that! ;-)

Use a 350 gallon feed trough and fabricate your own wood fired heater.  I did it with a 110 gallon trough, a water tank, black pipe, hoses and a water pump.  I might be a redneck.