All Forum Posts by: Mike Lambert

@Shiloh Lundahl

Yes and what you're doing makes total sense, including the fun part of it. I think we pretty much agree on anything but we're commenting from different points of view.

If I'm not mistaken, your retreats are focused on US investing while I'm focusing on international investing. Mind you, I'm Canadian so the US is international for me and I,m having discussions with a cousin from Europe about investing in the US together so maybe.

Hi @Seth Sundberg if I were you I would try to avoid the capital mistake (no pun intended) that would-be international investors make. Many US investors pay cash for properties overseas because they have the money (like-kind properties are often much cheaper) and they can get a higher return than with most mortgaged US property if they buy the right property at the right price. Many would-be buyers/investors don't have the cash or would like to take advantage of leverage. Before wasting time looking for properties or spending a lot of time on projects, they should make sure they can get the financing because a) financing might not be available, b) they might not qualify or c) the cost of debt might be prohibitively right.

Another mistake investors make is believe that they can apply a US strategy or financing model overseas. The US multifamily model is pretty much limited to the US and Canada.

Based on the little that you mentioned, I'm not sure how you could find such financing. What would work would be using a US lender if you have US collateral to give but that would likely defeat the purpose and you probably don't need me to tell you that.

Finally, there is a lot of inaccurate information around about investing overseas. My best advice is to make sure you talk to people who know what they're talking about to corroborate crucial info.

Clearly, you have figured that much out already since you ask in the forum. Good luck!

@Shiloh Lundahl of course we don't mind you participating into the conversation and get your insights. It's not "our" conversation and I personally love your insights, whether I agree with them or not.

You know I think you've created your own mix of lifestyle/investment purchase. It works for you but one of the most important factors is that you find willing investors to participate and not everybody can do that.

I personally wouldn't invest that way either because I believe that, by trying to mix lifestyle and investment, you neither get a the best lifestyle property nor the best investment. I rather buy one of each and keep them separate.

If I want to own in Costa Rica for lifestyle purposes, I'd want to have my own property. This way, I can do what I want with it, decorate it the way I want, use it when I want and sell it when I want. None of your investors can singlehandedly exert any control on the asset they've invested in. If I mainly want to vacation in Costa Rica and stay in a nice place, I rather make more money by investing elsewhere and rent a different villa every year, which is much more exciting from a lifestyle point of view, as I'll have variety. For me, the only interest in going to the same place over and over is to own the place. Of course, this is just my opinion but I bet I'm not alone..

If I'm an investor, I think the returns you're able to achieve in Costa Rica are higher than normal because you focus on these large properties and, as @Martin D. mentioned, prices in that country are too high and returns too low. So, if your investors absolutely want to invest in Costa Rica and maybe be able to tell others that they're (part-)owner in a beautiful Costa Rican property, it might make sense for them to invest alongside you.

However, as an investor, all that matters to me are figures and there and I don't have to own properties in Costa Rica. Like Martin mentioned, I can buy my own property in other foreign countries  and make significantly higher returns (which, incidentally, is what I've been doing).

So with the same amount of money that I could invest in a shared villa, I do more profitable investments, make more money and then buy my own property in Costa Rica with the extra money I'll have made and it can be a pure lifestyle purchase.

This being said, if you put together a group of like-minded people who can put some money aside, decide to purchase a property together, don't really care about the return and love Costa Rica (otherwise you could do the same somewhere else), I agree that what you do can be a lot of fun!

@Martin D., there are a lot of places where you'd make like a bandit if you invested before the pandemic boom. I know people who've invested in Bali too but I'm staying away given the property ownership situation. Not worth the risk in my opinion. Money always go where it's treated best. I'll never invest in a country in which I'm treated differently just because I'm a foreigner. Think about what would happen if you ever have to face a lawsuit in such country against a local. Your chances of winning are close to zero.

@Martin D.

Good for you for selling out of Tulum on time. I guess you saw the writing on the wall. I started in the Riviera Maya too but I'm mostly out, with the exception of Playa del Carmen, although I wouldn't invest more then. I turned y attention to the Pacific and selected inland cities like Merida and Guadalajara. All STRs I wouldn't MTR in Mexico.

@Andrew Steffens

@Andrew SteffensWith the new normal when it comes to US interest rates, it might be more profitable to buy a property by paying cash (you're unlikely to get a mortgage in that specific country than buying something in the US with a 7% mortgage. Of course, aside from the profitability issue, you'll still need to have the cash but the price of the property there might be less than your downpayment in the US.

Foreigners can own property in Costa Rica. There might be some exceptions when it comes to oceanfront land, where you might only be able to lease but that's the exception rather than the rule. I'm not sure where you got your info from but this is an illustration of the fact that there's a huge amount of misinformation when it comes to investing overseas, here and elsewhere so be careful who you listen to. I was listening today to one of the most authoritative STR podcasts of a few months ago and the Brazilian guest mentioned that his parents, still living in Brazil, were paying 11% interest a month on their mortgage (and it wasn't a mistake, he repeated it several times). Now, I know the Brazilian market so I know that, if anything, it's 11% a year. Had I not known, common sense would have told me that 11% a month is impossible and makes no sense. Yet, both the guest and the host, considered experts, had no problem believing that.

Cuba: foreigners can'y own property there, even if they wanted.

Venezuela: the last place in the world I would invest but there's a ray of hope with the upcoming elections. Argentina: Can Millei save the country? That's the question. I wouldn't bet on either at this stage but if you like a gamble...

@Martin D., it's always difficult to answer questions of such general nature. All these metrics are different within the US so, as you can imagine, they're different between different countries and within a given country, depending on location. Also, there is the issue of the legal ST rental regulations, which can be an advantage compared with the US or not. Also, it depends how good of a deal you get and how good an operator (or the one you work with) are.

Assuming you buy the "right" property in the "right" place overseas, you'd typically have a higher unlevered ROI overseas because a) a like-kind property would be cheaper and b) the (high) season could be longer and therefore the revenue higher.

The US used to have the advantage of the financing (availability + interest rate). As interest rates in the US has skyrocketed and financing has become more available to Americans in certain locations overseas, that advantage isn't what it used to be, depending on what countries you're interested in.

So here's how I'd go about it if I were you:

1. You're looking at a mix between a lifestyle and an investment purchase. Only you know which locations will fit with the lifestyle part of your objectives so you'd select the places that work for you first.

2. Then, you'd use the data on Airman or similar services to determine whether the metrics fit with your personal investment/return objectives. It'd make little sense for me to share my metrics given that they vary, don't constitute a statistically representative sample and also my knowledge and relationships allow me to get deals that you might not be able to get/find.

Hope this is helpful.

@Angel Martinez

Congrats for getting started.

First of all, as a general comment since you're a newbie. It's great that some ST rentals have a 6-month waitlist but that's the case in many markets and these listings are in the minority and most likely run by experienced short-term operators. If you want to underwrite a deal conservatively, you should in theory look at the average short-term rental income and occupancy rather than the top, especially if you're starting out. This doesn't mean that you shouldn't be ambitious with your objectives, as long as you're realistic.

I have years of experience with short-term rentals in Mexico but I'm not sure how useful that can be to you since I invest in beach markets where there is mass tourism and visitors rent for one or multiple weeks so it's fairly different. Like many of my fellow Canadians and many Americans, when I think beach holiday, I think Mexico. But when I think wine and wine country holiday, I think France, Italy or California rather, not Mexico. Also, why most visitors will stay one or several weeks in a beach destination, they won't spend that much time in a wine destination.

Does it means that investing in Valle de Guadalupe is a bad idea? No. All it means is that you're in a niche market so one of the most important factor of success for you will be to understand your niche and do your best to satisfy their needs. Study your market and your competition and try to do as well or even better.

I hope this helps and wish you the best in this exciting adventure.

@Dewey Paxon

There's no specific website for the sale of ST rentals. I'd go with one or more agents.

@Greg Scott

It sounds like you're a shrewd real estate investor so some of my comments might apply less to you. And, yes, if you've decided to make your career in US real estate, I'm not suggesting you should necessarily abandon ship (although again some diversification might not hurt) and you might as well capitalize on all the knowledge and connections you have gained over time. The thing is, some people can make money in any market if they can find the right opportunities, you can make lots of it but those opportunities don't exist for everyone.

The reality is that, at 7% interest rates and 0 - 3% appreciation, the average investor can't become wealthy quickly with a little bit of cash flow. You can disagree all you want about my opinions but that's plain mathematics and mathematics ultimately tell the truth. Leverage is a good thing at low interest rates and I'm not sure since when merely beating inflation makes you wealthy.

I never wrote that I invest in markets in which most properties are bought in cash, merely that, without leverage, you can get higher returns outside of the US. Mind you, I do invest in such markets but I use leverage in them. In fact, I'm currently borrowing at 1%.

@Greg Scott

You're making some interesting points. Note that, if you want to invest internationally, it doesn't have to be in Latin American, although there definitely are interesting opportunities there. We're in 2024 so I'm not sure in what looking at what happened in the 1990s is that relevant, when circumstances have completely changed. Of course, almost nobody would or should invest in Venezuela or Argentina (although I know people who are bullish on Argentina following the election of president Millei) so I'm not sure how relevant they are in the conversation.

As to Mexico, its economy is performing much better than its American counterpart. Its unemployment rate is much lower. Like everywhere else, inflation is on the higher side but that's because of real economic growth, not because the Mexican central bank has artificially maintained interest rates at a low level like the FED has. Speaking of Mexico's currency, it's been one of, if not the best performing currency in the world over the last couple years and has beaten the US dollar to the punch. So much so that it's been now dubbed the super peso and it's causing headaches to Mexican developers who sell in US dollars and have their costs in pesos.

The reality is that you actually don't necessarily need to spend a ton of time understanding international real estate to invest internationally, although doing so would definitely increase your success, of course. I started sharing my experience investing overseas in the BP forums around 2017 I believe. At the time, many people were telling me that I was crazy investing in places like Mexico. But then, as short-term rentals became ever more popular, Americans tourists started thinking wait a second "We're paying so much for staying for a week at that short-term rental. How much does the property cost?" And many of them ended up buying some pre-construction condo before they even left the country. The rest is history. Most of them have made like bandits.

I see your point about diversification. And, yes, focusing on one basket could work better for building wealth but only provided that you choose the right basket. Most people can't and nobody has a crystal bowl so diversification is most often the best strategy. Tell all those who lost their shirt in US real estate in 2007 - 2008 that they shouldn't have diversified and watch their reaction. And then, ironically, you quote Warren Buffet who made his fortune in stocks, not real estate.

Like Warren Buffet, I believe that the US is the land of opportunity but I believe that, in the US, investing in the stock market is vastly superior, as history has shown. That's what I'm doing and my returns are vastly superior to those of my friends investing in Us real estate and I do much less work for it. The only periods when US real estate can beat US stocks is when money is free or close like it's been in the 15 years following the Great Recession. Why did Buffett go for stocks? When he started investing, interest rates where not artificially low so there was no contest and stocks was the better alternative. After the Great Recession, he could have moved part of his money to real estate to take advantage but he didn't because he understood that it was a temporary and abnormal situation and not a base to change his business model.

So, finally, let's see if US real estate is the right basked to invest in, if one such basket exists. The way it's marketed, you're supposed to make money in four ways: cash flow, capital gains, amortization and tax benefits. With high interest rates, you most often don't get cash flow and it can even be negative. Real estate is supposed to appreciate long term at the rate of inflation so you're not better off over time with just that. And because real estate prices have gone up so much and are properties are as unaffordable as they've ever been, there's a high downside risk and the upside is limited. So all you'd end up with just amortization and tax benefits. The stock market will get you way ahead way quicker.

Interestingly, as I was writing these lines, somebody mentioned on CNBC that the average mortgage interest rate in the US over the long term is 7%. At that rate, US real estate definitely isn't the right basket to create substantial wealth. Of course, you could invest using cash only but then you might as well do that overseas and make significantly more money.

Many are still pinning their hopes on the fact that they can buy today and refinance later at lower interest rates and hope that these rates go back to sub 3% again. But hope isn't a strategy and that's unlikely to happen.

The US has the best stock market in the world. Overseas, the stock market isn't as good and more complicated to invest in and real estate can do very well so I focus on the US stock market and international real estate. By investing and specializing only into these two asset classes, I'm diversified across four quadrants: real estate and stock market, US and international. Depending on the current market conditions, I can lean more or less to any given quadrant and I'm not being held hostage by high interest rates, which, in a historical perspective, aren't actually that high. I think that that approach is vastly superior to investing in US real estate only but, hey, different opinions make for a good market and a forum with interesting conversations. 

@Dante Anderson

Obviously it depends on your objectives, the deals on both sides, ..., which we know nothing about. When it comes to international investing, buying a villa in the Dominican Republic isn't very exotic in that many Americans have done it before. You'd still need to know what they're doing. Also, be aware and beware of the sargassum risk. It's a deal breaker for me (mind you, Florida is at risk too).

@Greg Scott

I'm not sure what you've been looking at abroad but, especially today, investing overseas is in many instances much more profitable and less risky than in the US, where you also run all the risks that you mentioned.

If the profitability and the risks would be similar, it could be argued that it's better/easier to invest in your own backyard so I totally understand where you're coming from. However, that's not the case. I could write a novel about this but let me ask you two questions instead:

1. 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? The whole financial freedom through real estate movement/model has been created on the back of artificially low interest rates following the Global Financial Crisis and that model won't work anymore for most unless interest rates or real estate prices in the US drop dramatically and most economists think they won't and for good reason. The low rates were an anomaly and totally unnecessary, as today's reality shows that the economy can boom without them and created that inflation scare that nobody wants to see again.

2. 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 alone, a country I know particularly well, it's billions and billions of dollars. Do we think all these people are stupid?

In any case, it's great that you made those comments . They are really useful in that they help everyone realize that investing internationally is a matter to be taken seriously and isn't akin to a walk on the beach. Although having to inspect beautiful beaches across the world is part of my investing routine. Poor me! ;-)

If you do invest internationally, it can be helpful to have the right team. Because, as you seem to have found out by yourself, as the best deals generally don't show up in plain sight for everyone to see, as is the often the case in the US too. So, if you still want to find something overseas that would fit within for objectives, feel free to reach out and I'll be happy to help if I can.