All Forum Posts by: Mike Lambert

@Nicholas DuLong you're very welcome. As you and I mentioned, it's normal for investors and agents to have different perspectives given our very different "roles" and objectives. Also, nobody has a crystal bowl.

When it comes to Tulum real estate, there's the bust camp and then there's the "other camp". I'm calling it the "other"camp because I don't know if we should call it the "boom camp" or merely the "no bust" camp or maybe the "neither bust nor boom camp".

In think that both cases have already been laid out in this thread so I'm going to focus on your reasoning and question, as well as a more qualitative perspective.

You start in the bust camp and then you're talking about buying there because you seem to think the bust is going to be followed by a boom I was stunned by the reversal. Two questions to ask yourself:

1. If you're right about that, why don't you wait for the bust to happen to buy? You'll get a better price and you'll take less risks.

2. Why would that sequence happen? It makes no sense to me. If the bust is caused by a huge oversupply of properties, that oversupply has to disappear to solve the bust. How's that going to happen is the question.

What you need to do is figure out how big the oversupply is and how much increase in tourism will be needed overt the next 10 years to absorb it. I have figured that out for myself but you it's not going to have the same effect on you unless you do your own calculation. That's just to absorb the supply and you'll need even more growth to create a boom!

You also have to ask yourself why would all those people go to Tulum, when what made Tulum special and attractive has disappeared. The early Tulum lovers have moved on to other places, where the municipality doesn't deliver building permits to anyone and their mother. When I was traveling through Mexico last year the expression I heard most from the mouth of real estate professionals is "We don't want to become another Tulum". As a result, permitting is being restricted so that's where the supply/demand imbalance is going to increase in values. Do you really think people will go to Mexico to find themselves into another condo jungle?

Do you think there's gonna be enough beach space for all these people if there's gonna be enough of them to fill all these properties? How much more do you gonna have to pay to get into a beach club after hopefully getting a parking space? Traffic jams, overcrowded areas. Do you think it'd look like anything you saw? Also, do you know how much sargassum is going to cover the beach in 10 years? We've hardly had a winter here in Canada so I'm not sure that the culprits, believed to be global warming and pollution, are receding any time soon.

If you buy for lifestyle, it's another story in that you could cover your costs. I'm not sure about your travel, as it'd depend on the frequency and price of it. The question though is whether you'll like the lifestyle there, in relation to my comments above. Be careful what you wish for. Also, I'm not sure staying one week for the first time would let you determine that but you know better.

But then, as you suggest yourself, there's gonna be plenty of empty properties generating little rental income. In that kind of a scenario, Wouldn't you want to be the guest, not the host or the renter, not the owner? Your holidays would be much cheaper,  you'd stay in different places (more variety) and you could stay in much nicer places for the same budget.

I understand the reason you'd want to buy is to be able to capture a potential capital gain. But where is the increase in value going to come from? It's a beach town market. There are so many second homes and then, when it comes to rental properties, no occupancy = no value.

An investment is about numbers. Make sure that your judgement isn't clouded by "My family and I just returned from a lovely week in Tulum." I'm not sure you want to be one of the many who went there, bought impulsively and regretted it after and can't sell without taking a loss. Maybe you should let time pass a bit and the fever retreat and the right decision might become obvious to you.

If you do decide to buy, yes, you'd need to be as competition proof as possible (which will probably mean paying and rising more). Bear in mind though that inferior properties renting for close to nothing because they're empty will still be competition.

Hope this helps!

@Zeek Collins

First of all, my apologies for misspelling of your name. I guess a good location could help and it's likely that some buildings in downtown Tokyo maintain their value better. However, I'm not sure why you'd want to partake in a system of value/wealth destruction rather than value/wealth building. It's also unlikely you'd get financing and, isn't taking debt on a depreciating assets one of the big no-nos?

@Matthew Kwan I'm a Canadian international investor and there are so many better choices that Vancouver and Singapore would be some of the last places where I'd invest. Actually people who do don't invest there, they park their (substantial amount of) money. Let's focus on Vancouver, which I know better and I suspect Singapore is a similar story for what I know about it.

I don't know any Canadian investor in wealth building mode who'd want to invest in Vancouver, including those who live there. As a Canadian, I can invest there but wouldn't with a 10-foot pole. And there are good reasons why we wouldn't:

1. You can't get any cash flow, regardless of how high the interest rates are. Also, the law favours the tenant and so many owners have no incentives to sell and you have all these empty properties that have been bought by foreigners to park their money in a safe place. It's therefore a pure capital gain and therefore speculative market.

2. The Vancouver market is already one of the if not the most unaffordable in the world, which reflects the fact that prices are in bubble territory whichever measure you use. All levels of governments are doing their best to stop prices going up, decrease them and getting more revenue by taxing foreign owners. Not only you'd be against the government's interests but they've already proven they won't hesitate to arbitrarily infringe on your property rights.

Why anyone would want to invest in a market where cash flow is deeply negative, the laws favor tenants  and the government does anything they can to prevent you from getting capital gains of taxing them mightily if you do get them is beyond my understanding.

While it might make sense for a wealthy Chinese to park their money safely in a Vancouver property and not care about making money with it, it won't make sense for the average BP member who's in wealth creation mode. And I'm not sure how it'd apply to someone like Zeek, who isn't even legally allowed to buy now and wouldn't have access to the money anyway.

Hi Zak, there is nothing wrong in being a newbie but, when you buy overseas, you really need to know what you’re doing, Things are different and you can’t just apply what works in the US, especially in Japan, where the market behaves in a unique fashion.

If I were you, I’d stay away from Japanese real estate and especially apartment buildings. It works differently there. Their value goes to 0 over time. Generally speaking, nobody wants to live in older buildings there so they get empty and then get demolished.

Airdna

I thought the same about Engelo after just seeing the topic but I guess we're increasing the exposure of this thread by adding comments :)

I haven't been there. These kind of places are bets on the future that might take forever to materialize, if they ever do. I focus on proven and branded cities and areas. There's enough money to be made there no need to have your money sitting somewhere doing nothing for years. That's a bit akin to a lottery ticket if you ask me.

That hotel is permanently closed after they tried to sell it (for a lot of money) but no buyer. It might be because of the amount of money needed to renovate and/or the style of the building.

Jay I've never paid attention to these agricultural investments as it's never interested me. Mind you, we have our own version of these scams here in Canada but they're most often mining related and much bigger in scope.

As to your friends, I assume you're talking about Cerritos. I hope they know what they're doing. While buying existing property or pre-construction is a pretty safe bet (assuming the developer is honest and properly financed like everywhere else of course), developing is another story. You really need to know what you're doing. Pretty much all the condo buildings there have been built illegally. That area is part of the municipality of La Paz and they have been granting construction permits even though the PDU doesn't allow that kind of construction there. There's huge pressure from the locals to stop unbridled development and the municipality has been changing its tune of late. The largest high profile project on the beach was stopped and is in legal limbo. People paid for large beachfront lots and all that they can do is build a villa. Mind you, this is positive for Mexico as it shows that you cannot just pay and do anything as you please.

As to La Paz, it's great indeed. You know, until a few years ago it was crime ridden. They completely turned it around and now its crime rate is even lower than Cabo's, which is already very low. They've redone the Malecon (beach promenade). The thing about it its that its airport is domestic only but it is about to change as Volaris has announced upcoming direct flights to and from LA.

@George Carter You're welcome. Don't forget the investment world is littered with bad products that are pushed through clever marketing (I don't know if those you mention are part of that). There could be interested people though, with or without the marketing.

Ultimately, getting credibility, a positive track record, the opportunities and execute on them might be all that's needed. I imagine you've already invested internationally if you want to do something like this, in which case you know it's different than in the US in many respects. Mind you, if it was easy, everybody would be doing it so that doesn't need to be an obstacle.

Bruce, Mexico's constitution prohibits land ownership by foreigners within 31 miles from its coasts and within 62 miles from its international borders. That supposedly was to prevent a foreign invasion. Because most foreigners wanted to buy property in that so-called forbidden or registered zone (by the water) and because that prohibition made no sense whatsoever, they wanted to lift it. Amending a constitution is a complicated process so, instead of doing that, they created the fideicomiso or bank trust.

Under the fideicomiso system, when you buy a property, you choose a bank that is going to hold the title in its name. You'll have exactly the same rights and obligations as if you owned in your own name and the bank cannot do anything to or with the property whatsoever. In the unlikely event that the bank goes bust, the bank's creditors won't have access to your property. The fideicomiso is for 50 years and can be renewed indefinitely. You have to pay an initial set-up fee to the bank and an annual fee but we're talking small amounts.

Some people don't like this concept and I think that it's because it's misunderstood. When you understand how it works, you actually realize that it's better than owning in your own name for asset protection purposes. Aside for diversification and getting higher returns as the case may be, another advantage of owning property overseas is when you get sued at home, as it's going to be more difficult to your creditors to get their hands on your property. Yet, if you own in your own name in say Mexico City (outside of the zone), an overzealous lawyer could find your name in the public registry. If you own through a fideicomiso in one of the main beach towns, they'll find pages of property in the name of the bank and will never find yours even though they know you have one. There might be other advantages for the residents of states and countries that have an inheritance tax.

Mind you, for those who still don't like it, they can still by through a Mexican corporation. That'll mean some reasonable additional costs when it comes to set up and maintenance but it's generally the most economical way to own if you buy multiple properties.

If that's something you want to explore one day, I have replied to hundreds of posts in the forum regarding purchasing and investing in Mexico. Or feel free to contact me directly. It'd be an honor to help you given your own huge contributions to the BP forums.

I rarely say no to a tequila invitation. Although the location isn't the most enticing, I guess there's no need to spend the night there..... :-)

Man I don't think we're all disagreeing about much here and this isn't about anybody being right or wrong. Also, I'm not trying to sugarcoat anything. Without going into the "the cartels run the country" kind of discussion, I'm the first to acknowledge that, sadly, Mexico does have a serious problem with violence. However, as I mentioned it's regional and most people are unaffected. As I mentioned, these are the same disparities as in the US but, as you mentioned and as everybody knows, the level of violence in the US is much less indeed.

Don't take my word for anything but Mexico's real estate is on fire (and American buyers are a driving force) and so is stock market. More and more Americans visit, move to and buy property there. American corporations are investing billions into the country, its real estate, tourism and manufacturing. You have to wonder why.

Some people are scared and won't go to Mexico. I totally understand and I'm not trying to convince them that they should, especially since certain areas are getting too many tourists and the infrastructure doesn't always follow. Pretty much anyone and their mother fled to Mexico to escape strict measures during the pandemic and the overall majority of them came back unscathed, loving their experience and are returning regularly. They talk to their friends and it snowballs.

Since you seem to like the country, I hope one day you're gonna love to go there again. The issues aren't easy to solve but the rise of the middle class over the last decades, record unemployment (even lower than in the US) and massive foreign investment can't hurt so who knows! In the meantime, let me reassure you, I'm not about to plan a holiday in Juarez. Like you, I'll rather roam the streets of downtown Chicago if given the choice. :)