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All Forum Posts by: Mike Lambert

Mike Lambert has started 2 posts and replied 1356 times.

Post: Advice on a hard decision (should I sell my STR in the Dominican Republic)

Mike Lambert
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  • The Americas and Europe
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@Dewey Paxon

You're welcome. You're mixing up ROI and ROE and it's the ROE that counts (David Greene has explained that well in several podcast episodes)!. The $950k is totally irrelevant if the property is worth $1.75 million. If you sell for $1.75 million, your buyer's ROI (and ROE) is going to be $220k / $1.75 million = 12.5%, not 23%! And that assumes the buyer can sell the same services as you do. Also, you can't take short-term rental income for granted as if it was long-term rental income. Aside from the risks I mentioned, there is the increasing competition and ST rental income is never truly turnkey or passive income, even if you use a manager.

Even for you, if you sell for $1.75 million, all you'd need is to reinvest the proceeds of the sale at a 12.5% to make $220k so the relevant return is 12.5%, not 23%. That's a trap too many investors fall into!

So I would be selling without hesitation because I can find much better uses for $1.75 million in terms of return while taking less risks. If you don't have such opportunities, it's a different story. So what I would do might not be that relevant ton you. Hopefully I gave you some food for thought.

Post: Advice on a hard decision (should I sell my STR in the Dominican Republic)

Mike Lambert
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@Dewey Paxon

Ultimately, you'd have to make that decision. If I was in your situation, I'd look et the situation based on profitability, liquidity (or rather the lack thereof) and risk.

1. Profitability. What matters is the return on equity. We're missing the net income, which is what matters. I'm going to assume that it's 50% of the gross. Being in the Dominican Republic, I imagine that it could be more but it sounds like it's a luxury property so it could actually be less. @ 50%, the net income would be $120k, which would give you an ROE of less than 7%. That's way too low for me given the high risks (see below).

2. Liquidity. Assuming it's worth 1.75 million, it might take you a very long time to sell at that price (possibly years). If you want to sell quickly, you might have to drop your price significantly. So, if you want to get you price, you could put it up for sale at that price while you earn the cash flow in the meantime but beware of the risks, as mentioned below.

3. I used to know the Dominican market quite well, as I was seriously considering investing there. That was a bit before the pandemic and I assume the country, its tourism sector and real estate market have continued to do pretty well, as the country has a lot going for it and its government is doing a lot of the right move. Yet, there's one serious issue the government can't do anything about: sargassum. This is a problem that could destroy the tourism industry of the whole Caribbean industry. There is no solution in sight. It seems to be linked to the higher sea temperatures so I fear it can only get worse. Because of that, I decided I wouldn't put any investors' money or any of my own in that region, and certainly not for a 7% ROI. A lot of people have fallen asleep at the wheel when it comes to that issue and the risk is that, once people realize how bad it is, they will stampede out of the market and there might not be buyers at any price. Mind you, it could take years before this materializes but, personally, if I have to make a 7% ROI, I rather invest in a safer situation.

Conclusion: I'd put it on the market at the price I'd want to get. If it doesn't sell and I'm motivated, I'd lower the price. While the property is on the market, you'd still make the cash flow. If ever the cash flow becomes much more attractive, you could withdraw the listing and keep the property. But beware of the risks. For me, that would be too much but everyone is different. In your case though, you have to be careful when it comes to risks as there's other people's money on the line, as well as your reputation and your ability to raise money in the future.

Hope this helps.

Post: International - Thailand condo investment

Mike Lambert
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@Tip Mallick

You're very welcome and you're correct but have to be careful when talking about "these countries".

For example, I bought multiple properties in Mexico over the years. They all were pre-construction and I wouldn't have it any other way. This is why:

1. Pre-construction are the best deals in that you can buy much cheaper if you buy early enough, which gives you a much higher ROI and give you equity from the get-go. Unlike in Thailand, you get capital gains in Mexico and they can be substantial and quick, depending on the market, specific development, market conditions, ...

2. Pre-construction has been a cornerstone of Mexico's construction industry and economy for decades. It's well organized, tried and tested. American, Canadians and other investors have invested billions of dollars that way for decades and it's only be accelerating over recent years.

3. There's no discrimination against foreign investors in Mexico's law or otherwise. There were fears when the leftist just retired president AMLO came to power a few years back that foreign investors would get hurt but he turned out to be very friendly to us and made Mexico's economy its best ever and one of the best in the world. By the way, the US dollar has crushed most other currencies but it's been itself crushed by the Mexican peso.

4. It's very easy to book a quick flight to Mexico at the taxpayer's expense and go and check on what's going on the ground. Oh and poor you, you might feel compelled to show up at the beach club and have a tequila or two ;).

Also, I understand you're a fellow Canadian. I'm not suggesting that that's what you're doing but I think that us and Americans should be careful not to be condescending about "these" countries, whether we talk about Thailand, Mexico or any other country. Did you see the report on CBC news yesterday about the thousands of empty condos in Canadian cities that were just built and find neither buyers nor renters? What an unmitigated disaster.

Finally, to be fair to Thailand, that construction license situation could happen anywhere and of course it's sad for the buyers/investors involved but I suspect they didn't do proper diligence, in which case they likely have themselves to blame too.

Indeed, the problem is that many people are too lazy too cheap and/or don't have the right knowledge or understanding to do proper due diligence. When people here send me private messages or ask me on a call, one of the many things I'd tell them if they want to buy pre-construction is to check the developer's construction license and that it complies with the zoning rules (and I'll tell them if I know what those are).

You woudn't believe the amount of people that are ready to put a sizeable amount of cash on the table but won't spend the little extras needed to make sure they don't lose it.

Post: International - Thailand condo investment

Mike Lambert
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@Andrew Bosco

Yes, the rule is that foreigners can't own land, which means that, in a condo building, foreigners can't own groundfloor condos. Also, foreigners can't own more than 49% of an entire building. So foreigners can own a condo but normally, they own a share of the land with it but, in Thailand, foreigners don't. Would anyone who know what they're doing want to own a building and having somebody else own the ground? Do you think promoters of Thai real estate to foreigners explain that to unsuspecting potential buyers?

The above rules show that Thai law discriminates against foreigners. Given that, should you ever be involved in a lawsuit in Thailand against Thai individuals or entities, how likely are you to win, even if you're right?

These are huge risks to take just to get an 8 - 12% ROI and no chance at capital gains in my humble opinion. Moreover, is the 8 - 12% ROI calculation made by the developer. That would be typical and I'd always do my own calculations.

As you mentioned, these rules are similar in most Asian countries and that's one reason enough for investors like me to stay away.

Post: International Real Estate Investing

Mike Lambert
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@Andrew Steffens

You're very welcome.

Yes, the financing conditions are often better in the US but that advantage has all but disappeared with the new normal level of US interest rates. Financing overseas has become more available and the differential in conditions is the lowest it's been ever.

Moreover, these days, you can have a higher ROI if you but a property for cash overseas compared to buying a property with a mortgage in the US. Granted, that's of little help if you don't have the cash available but you can use a HELOC on a US property and, even if you don't have access to that, the total price of a Nic property overseas can be less than the downpayment on a US property. Plus, you could buy pre-construction and pay over time.

And agreed, dealing with red tape could be frustrating. However, you have to understand that dealing with foreigners always means red tape and that's the case for foreigners too. Part of it might be cultural but, personally, I don't really mind if I can get myself a profitable deal.

Post: Airbnbs in Foreign Countries.

Mike Lambert
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Hi Jake,

A few things here:

1. Being a Portuguese citizen doesn't give you any advantage whatsoever when it comes to buying and/or operating short-term rentals in Portugal.

2. A lot of the popularity of Portugal and its real estate (prices) had to do with the golden visa, that's been abolished.

3. A ban on new ST rentals in the places where they'd be the most profitable (Lisbon, Porto, the Algarve and the coasts) was enacted by the previous government. The new government is revoking these rules but only to transfer the decision to the local authorities. Some towns will maintain the ban for sure. If you find a town where the ban is revoked, you need to understand that it could be reinstated by the town or by the country should the local or central government change (again). I'm not sure there's any end in the country's rental crisis in sight so there's a serious regulatory risk, but that's the case in the US too.

4. When it comes to taxes, it depends on the country. I'm a Canadian tax resident so I wouldn't hazard myself to give you any tax advice. What I can say though is that Portugal will tax your income first either by having the OTA withheld the tax from the money you get or by having you make a local tax return. You'll have to pay tax in the US as well. If there's a treaty for the avoidance of double taxation between the two countries, you should hopefully be able to credit your Portuguese income taxes against your US ones.

Hope this helps.

Post: International Real Estate Investing

Mike Lambert
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@Andrew Steffens

I invest internationally and I'd recommend it to anyone provided they know what they're doing or at least have people in their team that do (depending where of course, as you mentioned). There are hordes of Americans who invest overseas. I've met many of them over the the years and I haven't met any of them who regrets it and plenty of them who would recommended (with the caveat that you need to know what you're doing).

As you suggested, there are specific risks that don't exist if you invest domestically and it can mean headaches if you don't know what you're doing (but that's the case in the US too). I don't why it'd be riskier as a whole or downright dangerous. Don't we think investing in the US is risky with high interest rates, historically low affordability and cash flows and high prices inflated by 15 years of artificially free money that's gone for good? Have we forgotten the 2008 global financial crisis that wouldn't happen in foreign countries where properties are bought with cash and the risk of foreclosures is 0? Or, is it smart to have your job, all your real estate, stocks and everything in one single country and at the whim of a single government? Is that (financial) freedom? Haven't we learned from Covid that the freedoms we take for granted can be taken away from us in a heartbeat if we depend on one single country? Isn't diversification a basic principle of building and keeping wealth?

Many of the wealthiest and most successful Americans own a huge amount real estate overseas. In Mexico, a country I know particularly well, it's billions and billions of dollars. Figures I saw even surprised me. Do we think all these people are stupid?

If you buy yourself a vacation rental in the right foreign country, you'd invest much less than you'd have to in Florida to make the same rental income. You'd be surprised, it could be fun and you could be forced to take a tax-deductible trip to your property once in a while. it could be a nice lifestyle + profit combination.

In any case, I think it's great that you made those comments . They are really useful in that they help everyone thinking it through and you allow us to have an interesting and constructive discussion.

Post: International - Thailand condo investment

Mike Lambert
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@Tip Mallick

I think there is an international forum but not that many people invest internationally here and probably even less in Thailand anyway.

It depends on your objectives (we all have different ones) but didn't you already answer your own question? I invest exclusively overseas as I can get better returns than at home in the right places but I wouldn't touch Thailand with a 10-foot pole, unless it's for lifestyle. The lack of capital gain would already be a huge no no for me but so is the inferior property title (foreigners can't own land in Thailand).

There are so many better ways to make a 10 - 12% ROI, which by the way you're not guaranteed to get (which would be ok if you could get capital gains)! I don't know if you're aware but luxury hotel rooms are often super cheap in that country so I'm not sure how you'd compete and make any decent income. I'd never trust the figures of a promoter and do my own calculations.

Post: International Real Estate Investing

Mike Lambert
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@Atlas Blake - You're welcome, Atlas.

In Europe, you have islands mostly in the Mediterranean Sea but also in the Atlantic Ocean. I'm not sure what your definition of an island is but, if I had to guess, I'd think it's related to a tropical vibe, which you generally don't have in Europe. A place in Europe that is on an island will generally not going to be that much different than a place in the same country on the continent in terms of vibe.

Back to the Americas, I mentioned the Caribbean because I was referring to "island". However, you can find the same kind of vibe on the Atlantic and Pacific coasts of Mexico and Central America.

Post: International Real Estate Investing

Mike Lambert
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@Atlas Blake I'll add my two cents given that I've been investing for a many years in the region:

1. @John Underwood what you wrote makes total sense but, as you know better than me, finding a great ROI property in the US ain't easy anymore with the new normal when it comes to interest rates. Because of that, you could get a much more profitable investment overseas if you know where to look. But if you find high ROI properties in the US, it's absolutely an option so read you mentioned it.

2. The biggest mistake people make when attempting to invest overseas is trying to apply US strategies overseas. Turnkey generally don't exist and value add generally makes no sense from a business and financing overview.

3. The issue with islands is that it means Caribbean. That means more expensive and less profitable and, personally, I wouldn't invest there because of the sargassum issue but you might care less about it because of the lifestyle component in your case.

4. Costa Rica is expensive and it generally doesn't work from a pure investment point of view, unless you're not very demanding from an ROI point of view. It's a good location for lifestyle buyer but, again, you're part lifestyle so it could work for you.

5. As to buying land and build from scratch, make sure you understand what you're getting into, especially if you don't reside on the ground. Mexico is by far the main market for the whole area and  one of the main agents in Puerto Vallarta, one of the main markets, recently told me that every American he knows who is a pro rehabber in the US who's done a rehab there has hated it and said they'd never do it again.

Hope this helps. It's an exciting adventure but won't be easy so don't get discouraged. Just make sure you understand what you're getting into, which is exactly what you're doing by posting on the forum so kudos to you you're on the right path.