JS 47: Income Property Real Estate Investing in Central America & Belize with Mike CobbApril 5th, 2013 by Jason | Comments Off on JS 47: Income Property Real Estate Investing in Central America & Belize with Mike Cobb
Jason Hartman just returned from his second real estate scouting trip to Belize and doesn’t have much to show for it in terms of cash flowing income properties. In this episode you’ll hear his discussion from the beach in Ambergris Caye, San Pedro, Belize with a developer who is active in four countries in the region.
ANNOUNCER: Welcome to the JetSetter Show, where we explore lifestyle-friendly destinations worldwide. Enjoy and learn from a variety of experts on topics ranging from upscale travel at wholesale prices, to retiring overseas, to global real estate and business opportunities, to tax havens and expatriate opportunities. You’ll get great ideas on unique cultures, causes, and cruise vacations. Whether you’re wealthy or just want to live a wealthy lifestyle, the JetSetter Show is for you. Here’s your host, Jason Hartman.
JASON HARTMAN: Welcome to the JetSetter Show! This is Jason Hartman, your host, where we explore lifestyle-friendly destinations worldwide. I think you’ll enjoy the interview we have for you today, and we will be back with that, in less than 60 seconds, here on the JetSetter Show.
JASON HARTMAN: Hey, welcome to today’s show! This is your host Jason Hartman, and I am sitting on the beach, literally, looking at the water, in Belize, here in Central America. And it’s my second trip here; I came here about a year and a half ago looking at properties and so forth. And honestly, I wasn’t that impressed when I came here before. And I’m still not that impressed [LAUGHTER]. But my guest today, sitting here on the beach with me, is a real straight shooter, and that’s what I really like about him. He’s a developer; he has properties down here, and he sits on the board for one of the banks that a lot of Americans bank with down here. And I just really liked his presentation. I’ve gotten to know him over the past few days. And we’re going to ask him some questions, learn about the economics here in Central America, and he’s an American, so, you’ll hear more. Anyway, his name is Mike Cobb, and I want to say welcome to Mike. And ask him, to start off, just telling us a little bit about his background. Mike?
MIKE COBB: Sure! Jason, thanks for having me on the program. And it is nice. I appreciate being on the program, happy to tell you a little bit about my background, but yeah, I am a straight shooter. And quite honestly, of all the countries in the region that I would want to live in, Belize would be my personal least favorite. So I understand there are different strokes for different folks, and I appreciate your candidness, and you’ll find that from me as well.
JASON HARTMAN: Now, you live in Managua, Nicaragua, which you like. And I’ve been to 64 countries, but I have not been to Nicaragua yet. And it’s funny, because the other night when I met you, you were talking about how you love the raw nature of Nicaragua, and it’s raw! But, tell people where you’re from, and your background.
MIKE COBB: Sure, yeah. No, I grew up in Western Pennsylvania about an hour north of Pittsburgh in the country, and right after—I went to college a couple hours north of Pittsburgh at a little school called Allegheny College in Meadville, Pennsylvania, and right after college said, you know what, I gotta get out of Western Pennsylvania. Actually I knew that a long time before I got out. But anyway, moved to the DC area, lived in Northern Virginia, was in the computer business for about 13 years. And it was a great time to be in the PC—I was in the PC side of things. It was the big wave of transition from mainframe over to a PC world, and it was a great time to be in the business, and got out in ’98. And it was very very good to me. I was good to the business, it was good to me, and I had a great time. But somewhere in there, ’93 or ’94, I came to Belize for the first time. Right here, Ambergris Caye, this island, and started to see—yeah, it was a fun place to come vacation. I figured alright, yeah, no shoes, no shirt, no problem. And I’m in this high-stress computer job in the DC area.
So came back a couple months later, bought a condo—two condos, me and my friend each bought a condo—and started coming down a lot. And what we saw were these incredible opportunities to serve consumers in ways that they weren’t being served in this part of the world. Banks in the US would not lend on a Belize piece of collateral, and a Belizean bank would not lend to a gringo. You had to be a resident to get a loan. And so, you had all these—a loan for real estate, that’s right. Or probably a loan of any kind, at the time. And so what we saw was this opportunity to serve consumers who wanted to own property in this part of the world, but didn’t have 150, 200 grand to buy a condo. They might have 50 grand, and they needed to borrow 100 grand, or 150 grand. And so we started working with developers and helping them to finance the sales of their properties, the North Americans, and that’s how I got involved in the region. Then in 1998 we actually bought this resort that we’re sitting in today as a foreclosure property. And I left the computer business a few months before that, I’d gotten married, and my wife and I moved down here to basically turn around a foreclosure property, and that was my real entrée into doing business in this part of the world.
JASON HARTMAN: Okay, so, you moved to Belize first, then, is that correct?
MIKE COBB: It is. 1998. But I was here short term; it was a 6 month—roughly figured, 6 month stint—to come in, hire new people, put systems in place, get the property profitable, and then leave. And that’s what we did. We came for 6 months, and then we moved back to the DC area. Stayed there until 2002.
JASON HARTMAN: And so you’re down here—we’re at this conference called the Global Escape Hatch Conference. I’m speaking tomorrow here at the conference. You spoke today. And I think you likened it to the Wild West, down here. It’s kind of like going back to America, maybe, I don’t know. In some ways of course it’s not, and then it is in other ways. Maybe 70 years ago. Kind of going back to the old days, where there wasn’t a lot of infrastructure. There’s not a lot of infrastructure here, which is what I don’t like about it. But at the same time, that does represent some opportunities. And I do see that, and I notice it. And with all these different speakers that I’ve seen here over the past two days, it’s just kind of interesting. But it’s raw. How many countries are we looking at? There’s basically like six Central American countries, and you do business I believe in four of them—is that correct?
MIKE COBB: That is correct. We work in Belize, Nicaragua, Costa Rica, and Panama. And we’re looking at property in South America as well. I’m working on a deal in Ecuador, and we’ll end up with property in Chile as well at some point. So we’ll be in six countries. But there are six countries in the region. Seven if you count Panama—they call themselves South America. But, Panama, Costa Rica, Nicaragua, Belize, Honduras, Guatemala, and El Salvador. And we work in four of them.
JASON HARTMAN: Fantastic. So, you talked about something today that you call the S-curve. And that’s a term Harry Dent uses all the time. And the S-curve, as it applies to these different countries, some are a little bit more advanced and established, and that would be like Panama, for example. And some are far less advanced, and less established. And those less established properties may represent—or, countries—may represent more of a ground floor opportunity, but more risk, I assume, is associated with that. Kind of talk about that for a minute, and which countries are where on that S-curve.
MIKE COBB: Absolutely. I think if you start at—also, I use it as a popularity curve. That’s sort of my thought process. And it’s sort of a thumbnail way to kind of gauge, where does a country fall on this S-curve, this popularity curve? And I think one of my favorite thumbnail things is, where do people take their honeymoons? Right? Where are people taking honeymoons? And if you look at a country like Nicaragua, nobody’s taking their honeymoon in Nicaragua. Or Honduras, very few. If you look at a place like—
JASON HARTMAN: Berkeley hippies in the Peace Corps will take their honeymoon there. And I just have to make the disclaimer, folks, if you haven’t heard me say it before—my mother graduated from Berkeley in the 60s. With a degree in social welfare, but she was never a hippie. It’s kind of funny.
MIKE COBB: She was not a hippie?
JASON HARTMAN: No, never.
MIKE COBB: Okay. So, you got one end of the extreme, right? People who are taking their honeymoons not in Nicaragua, not in Honduras, not in Guatemala, not in El Salvador. At the other end of the spectrum you’ve got where people are taking their honeymoons, which is the pacific coast of Costa Rica. Jaco beach, or Guanacaste Peninsula. There’s a Four Seasons in Papagayo. JW Marriott’s there. So, it’s arrived. And people are taking their honeymoons by the thousands in Costa Rica. And then you’ve got Panama, which is maybe just a little less popular, and Belize, somewhere where that S kind of really begins that curve. And so, one of the things that I talk with people about who are investors, real estate investors, is that if you’re looking for cash flow—if you’re a cash flow investor, which I know a lot of your folks are when they’re buying rental properties—if you’re looking for cash flow, don’t look in Nicaragua. Don’t look in Honduras. Because those are immature markets, and you want to be looking at the pacific coast of Costa Rica. You want to be looking at Panama City. Because—and even Belize is not sort of cusped over. It’s still cuspy, but it’s over the hump. And again, by defining your location very specifically, you can be in a cash flow place in Belize, or you can be maybe a little on the other side of the curve.
If you’re looking for appreciation, well then you want to be looking at a place like Nicaragua. It’s the least popular of the countries in the region, and I think—I don’t think, I mean, it suffers from a perception problem. A negative perception problem. The reality is very different. So, people that come to Nicaragua, they see it, they understand it—I mean, Agora’s got a huge project there. A lot of folks have invested in Nicaragua, once they’ve come and looked at it. But the perception issue is what has artificially depressed prices in Nicaragua. And then, you know, again, you kind of come up the scale. Honduras, Roatan’s a little bit more popular. And then you get to Belize, and then you kind of get into the more popular countries. So if you’re looking for a real value that’s been priced into the market, look at a country like Nicaragua. The risk factor, by the way—I don’t think it’s a risk factor in the way that we would associate with Nicaragua—ooh they’re gonna steal my property. That’s not the risk. The risk is that it takes longer for Nicaragua to gain popularity, so it’s a time value of money risk, because nobody knows the future. So, I mean, I’m gonna have to sit on this property for 3 years, 5 years, 7 years, I don’t know. To get a double or a triple out of it. That’s what a country like Nicaragua holds. But it also holds that risk. Whereas cash flow’s fairly predictable, in the sense that you can know what you’re gonna rent it for, and you can do your numbers.
JASON HARTMAN: Okay, so very interesting point there. And I gotta ask you though—when it comes to enforcing a contract, I mean, first of all, who is your renter? Is it an expat? Are you talking vacation rentals here? Because, we get pitched—literally my real estate company, which you can find out more about at www.jasonhartman.com—this is my Jet Setter show, so we don’t talk too much about my real estate company. I have a few different businesses. But that company, we get pitched all the time, from most commonly Costa Rica promoters. And we get Belize also. You know, developers that have projects in Belize and so forth. And there’s really no cash flow model that they can ever present, because the natives can’t afford to rent anything they want our clients to buy. Maybe an expat would rent something, but most of these are like resort properties, and it’s not really vacation rentals; they’re all really recommending things that you just buy and retire in, or you just buy for some day you want to come retire. Is there a true renter business model here?
MIKE COBB: Great question. And I hope not too many developers are listening, or they’ll be kind of upset. But here’s my belief about rental return, generally. And again, I think there are specific ways to deal with this. But generally, I believe that if a project cash flows significantly—10, 12, 15%, which is generally what you hear. If you walk up and down the beach, people will try to sell you a condo, and they’ll try to sell you a condo based on this—oh, buy the condo and it’ll pay you 16% cash on cash if we only do 60% occupancy, and that’s conservative number, blah blah blah blah blah. Let me just say, I’m a developer. We sell to end user consumers. We don’t really sell investment product, although we have people who buy our product as an investment. But generally I think most of them are thinking no, I’m gonna use it in three years, five years, so in the mean time I’ll rent it out, make a little money when I’m not here. But in five years, I’m gonna move to Belize, or Costa Rica, or Panama, and I’m gonna live in my home. And that’s why I’m really doing this.
If somebody was really producing 12% cash on cash return, I know if I—let me say it for me. If I had a cash flow deal that was producing 12% cash on cash return, I would have cancelled checks, I would black out the person’s last name, I would have a wall of cancelled checks in my sales office, and when somebody walked in—I wouldn’t answer any question. I would just put the paperwork in front of them and go, sign here. And if they go, well what about—I’d go, I’m sorry. 12%. What part of 12% aren’t we getting? Sign here. Well what about—no no. 12%. Sign here. That would be my sales presentation. I have yet to see a wall of checks, okay? So, I don’t know that I believe very often, or ever, the condo sellers’ story about, you know, 60% occupancy, 12% return, blah blah blah blah. However, that all said, I think there are tremendous opportunities like we saw in the States. People went to Miami and picked up condos for 30 cents on the dollar.
You pick up a $200,000 condo for whatever, you know—70 grand, okay? I mean, now all of a sudden what do you need to rent it for to get a decent cash on cash return? Those kinds of opportunities are available in the region. They’re not the, hey, I came on vacation and I walked down the beach and I found this great deal. No no no. I mean, if you want cash on cash return as an investor, you need to come down here and live in this part of the world. Pick a country. Pick Costa Rica. Pick Panama City. If you’re looking for rental, Jaco Beach, or Panama City. Go live there for three months. Sniff out the bank deals, sniff out the guy that has to move back because his whatever—
JASON HARTMAN: Get to know the network. There’s always an informal network there, right?
MIKE COBB: And then buy a condo or a home for 30, 50 cents on the dollar, and then the market—I’m gonna just wrap up, I know you want this microphone back. But the market is expat. You want to rent it to an expat.
JASON HARTMAN: Yeah, very interesting point. And expats—are they ever going to be long-term renters, that’s one question. But the other question is, can you do single family homes? I mean, does your company—I know your company builds condos. And you know me, I’m no fan of condos. Because you’ve got a homeowners association, and they exert power over your property, and I just love this—my Third Commandment is, thou shalt stay in control of your investment. And with a homeowners association, you relinquish some control. Now, a detached home can also have a homeowners association, but they never exert that much control when the walls aren’t connected. It’s a different type of association. But, do you build single family too? I know you’ve got right here in Ambergris Caye, here in Belize, some condos. But do you also have single family?
MIKE COBB: Yeah, we do both, depending on where we’re developing. Here in Belize, we have condos, because we have a small parcel. We have 6 acres, 6½ acres, so we’ll develop that as a condo community. With [unintelligible] and restrictions, with a condo association, absolutely. Our Grand Pacifica project, we’ve got 40 single family homes. We’ve got 22 condos, so we’ve got about 60 residences completed, and then we’ve got another 42 under construction. And there, we have, again, twice the number of single family as we do condos, because it’s really built to be a single family type of neighborhood. And I personally do too. But the one thing I would say, and you heard me talk about this earlier today, is that actually, condo associations or property owner associations in this part of the world are actually your best friend. Because unlimited freedom—again, in the US you’ve got county regulations, city regulations, state regulations—
JASON HARTMAN: Yeah, there are no regulations—
MIKE COBB: That’s right.
JASON HARTMAN: We’ve gotta get into that, Mike. Because when you told me about the building inspector—what a joke! It’s hilarious down here. Basically what they do is they come in and they pound a sign in front of your property, your building, and you never see them again. You told me that, and that was fascinating. But so, the condo associations actually, you may need them more in this part of the world. Where in the States, you don’t need them as much, because you’ve got public roads, you’ve got county rules and regulations, you’ve got city rules and regulations, and so that’s a very good point. Maybe those associations are your what I call private governments—that’s what a homeowners association is—is a little bit of a different thing. And as long as you don’t get like radical vigilantes on the board of directors, which you do in the States—all these people that are hungry for power and have no power in their own life and want to exert them over others when they get on some board.
There’s even a show on an episode of Frasier, the TV sitcom from the old days in the States, where they get on the condo board, and Frasier’s fighting with the condo board, and you know, it’s pretty accurate, really. But you get that. And the other problem you have in the States with condos, is they always seem to find their way into litigation. And as soon as they find their way into litigation, no bank wants to lend inside that association. And as soon as there’s no financing, the properties just plummet in value. It’s a terrible thing. And the litigation could be either side. It might be the condo association suing the developer, which almost always happens right before the 10-year mark is up, okay? It’s—welcome to the United States, right? Where litigation is the name of the game. Or, it could be homeowners, or you know, some slip and fall, or whatever, in the association, that are suing the association from the internal threat or the external.
It could be plaintiff or defendant. It doesn’t matter. If there’s litigation, the lenders just put up their hands and go whoa! We don’t want to loan in there! Because it’s just…you never know. Litigation is just too volatile. So, the building inspector thing is interesting. That’s a very good point you made about the condo association. I want to ask you about building, because when we were walking back from the restaurant last night, there were several of us in the crowd, and you showed me a condo complex. It was very interesting, and [LAUGHTER] quite an interesting landfill there, I guess. They just do things kind of however they want over here. Maybe you don’t want to talk too much about it. I’m getting the sense that you don’t. But anything you want to say about that?
MIKE COBB: Yeah, again. I am careful what I talk about. And I suggest strongly that people do due diligence when they’re buying property. And that’s one of the reasons I’m—again, even my salespeople kind of hate me a little bit, because I usually tell people, look, don’t buy on your first trip. What you really need to do if you wanted to buy here on Ambergris Caye would be to come down and spend a week, two, three, right? Invest! You’re an investor! Invest a little money in due diligence, and hang out, walk up and down the beach, talk to 50 people about the three or four places that you think you want to own, and let them tell you all the stories about it. Because an expat who’s lived on this island for 15, 20 years, or 3 years, or 7 years, whatever the number is, can tell you an awful lot about the history of a project, or the history of a site. And those types of facts, those types of insights that you can get, are invaluable. Because once—look. Once the cement’s up, once the plaster’s on the wall and it’s painted, you have no idea what’s behind those walls, ever. And that’s critically important.
JASON HARTMAN: It sure is. I mean, it goes down to the level of, what did they do to the land before they built on it? Did they fill it up with compacted dirt, or is the property gonna in a few years sink into the land, and there’s gonna be all kinds of structural problems—this is not the United States, folks! This is the Wild West! Like you say. The other thing that happens is, the way they do the construction—you showed a great slide in your presentation today about the rebar that just wasn’t connected to the concrete! And that was interesting. Or the water lines, where if you didn’t look under the sink, the hot and the cold water was just one valve! And it’s supposed to be two! And then the power lines that come to the project. You call it three-phase power, where there’s three different lines coming to the project, versus just one, so you have redundancy, and you have more power. Another thing that you talked about was, lot of developers will put in septic tanks, rather than being hooked to a public sewer. And with that, the soil may not absorb the waste for the septic tank! So, a lot of stuff. And what was the concrete made from? What kind of sand? Is it the sand that you find here locally, or is it the sand that you find in another place that’s the right sand, but you gotta bring it in in a truck? So, if you want to mention anything along those lines—I mean, your company, from everything I’ve learned, does a legitimate, western style construction job. But most people don’t out here, huh? Because they don’t have to!
MIKE COBB: I think that’s the key: they don’t have to. That’s a correct way to say that. But a lot of people do, and I’m not saying we’re the only people that do it right. Not all of them are bad. But unless you really do your due diligence, there’s really no way to know. And, is it okay if I tell people how to get these 15 questions? Okay. Yeah, I’ve got 15 questions that we presented today, and these are the 15 questions that you should ask a developer or a real estate agent if you’re buying property overseas, because there’s no way to know a lot of these questions unless you’ve lived here, worked here, done business here, seen it with your own eyes. Because quite honestly, who would believe that underneath the cabinet in the bathroom where the faucet is, that you’d see one pipe coming out with a Y-adaptor going to the hot and the cold, and you don’t have hot water in the bathroom! Why would you even think to look for that?
JASON HARTMAN: Anyone would assume that you have hot and cold water, right?
MIKE COBB: Well, you have two handles, and they both work, right? So, if you’re interested in the 15 questions, send me an email. Just put 15 questions in the subject line, I’ll send them out to you. These, if you’re even possibly considering owning property overseas, these are the 15 questions. And what’ll happen is—yeah, the must-ask. But what’ll happen is, if you start to ask these questions—if you start to think through these questions—you’ll come up with 5 or 6 or 8 more of your own. Well, what about that? And what about this? And you’ll tease out information from the developer or from the real estate agent real fast. Because a real estate agent or a developer will either love you for asking these 15 questions, because—when somebody asks me these 15, I love them, because I know that like 80% of my competitors are dropping off like flies.
JASON HARTMAN: Let me take a brief pause, we’ll be back in just a minute.
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JASON HARTMAN: But the other thing is, look. Real estate agents in most places around the world, unlike the States, are not licensed. There’s no license. There’s nothing to lose if you tell a lie. You can’t—I mean, you can’t really sue them effectively. It’s not like the United States—you have some recourse in the US. Out here it’s caveat emptor, let the buyer beware. And will they even answer the question honestly in the first place? I guess they’ll know just by the fact that you ask, that you’re paying attention. So that’ll—that might scare off the bad guys, right?
MIKE COBB: Well yeah, and I think it’s important obviously to be able to read people, and read their body language, right? Just read the body language. Is it an, oh my goodness I can’t believe they’re asking me these, and they’re uncomfortable? Or do they embrace the questions? Yeah, you can read so much by how somebody answers, or how they react to the questions. I mean, the answers are almost irrelevant. Although a lot of them are very visual. You could look under the bathroom sink and see which way—so probably half of them are visual, and half of them aren’t. But you read the person and you’ll know the answer.
JASON HARTMAN: Absolutely. The other thing I want to ask you about, Mike, is what happens when someone wants to—and I want to do maybe another—we’ll just make it another segment another show, talk to you about banking. Because I think banking is a big deal. Lending, banking, offshore, all that kind of stuff. And you’re on the board for one of the main banks here, so I want to talk to you about that as well. But what happens with property management down here? I mean, is it like the States, where you hire a property manager? I mean, they’re not gonna be licensed. Like the realtors—or, they’re not even realtors, they’re real estate agents. And the last time I was down here, we spent like three days with a real estate agent, and every property we saw was in his boat! We saw it from the water! And we’d pull up to docks and go look, but it was amazing! I’d never been shown property in a boat before! It was always in a car [LAUGHTER]. Oh yeah, it was nice. We saw a huge shark come below the boat, too. It was mind-boggling. I think I got a picture of that. It was pretty amazing. But what do you do about property management? The person listening is probably not going to be here, they’re not going to self-manage the property. How do they handle all that?
MIKE COBB: I think that depends whether somebody’s buying inside a development or they’re buying a foreclosed property or a bank property or a distressed property. In all of these areas, even in Nicaragua, okay? Which is probably the least mature market, the least popular market, all the way to Costa Rica, Panama City, you’ve got people who do property management. And if you’re buying inside a development, generally the developer will offer it. Sometimes they mandate it. That’s another good question. It’s not one of the 15, but, does the developer mandate you use them? Maybe yes, maybe no. I tend to find exclusives to be not good. I mean, monopolies generally don’t produce great service or results. So when there’s freedom of choice, it’s probably better for the customer. But there are always people who do the work. And I think the reality is that licensing doesn’t mean anything in the States either, really. It just means you’ve passed some tests. Yeah, you may have some bonding in there—there’s some depth to it—well, go ahead.
JASON HARTMAN: Let me just comment on that. The thing about licensing in the States—look, I like Milton Friedman. He’s against licensure in pretty much every profession, and I see what he’s saying about that. However, the one thing a license for sure does—if it doesn’t do any bonding, if there’s no errors and omissions insurance, if there’s none of that—it gives the person with a license something to lose. So, if they have made their career out of selling real estate or managing properties, and they lose their license, or their license is sanctioned, where the Department of Real Estate says, you can’t practice for 6 months—that hangs over their head. And I think that is a bit of recourse.
MIKE COBB: Jason, point taken. You’re right. That is. There is something to lose, and that is an important consideration. In this part of the world, there isn’t licensing, as you mentioned, for realtors, for property managers. Make a business card, you know? I’m a property manager today. That’s it. The thing about it is, again, if you—I call it margarita madness. People come down, they’re sitting at the bar, they meet a realtor, they’re happy, they go on a boat trip on a beautiful sunny day, the guy’s got snorkel fins, and you jump in, whoooo! Now I’m in paradise, and I’m gonna buy this house, or this condo. The real issue is that there are good property managers, and there are not so good property managers. And the way you’re gonna find that out is to be here for a week or two, talk to a bunch of people, right, go out to the wine and cheese party. Hang out at a bar. But not just in bars, because they tend to be mostly negative, right? But the mix and mingle at very parts—if you’re a Rotarian, go to the Rotary club meeting. If you’re Alliance, go to Alliance, or Kiwanis. Right?
Go to church. Go volunteer at one of the organizations. There’s so many organizations. Green Reef, it protects the reef. Or there’s a homeless shelter. I mean, there’s lots of places you can plug in. And if you plug in to the community and just show your intention, or talk about your intention, you will learn about—and you can, hey look, I’m thinking about a property manager, and you’ll hear three people say, this person’s great, and this person’s not so good. Well, now you know, right? And I think that’s truly—that’s how you can make the best decisions. It’s a patient process, because again, you don’t have licensure. You don’t have other ways to verify. And you know, the Internet’s such a powerful tool now—if people screw somebody, it’s up on the Internet. So you can do a lot of your homework up front, to see who, where, how, why.
JASON HARTMAN: You know what Mike is really saying there, folks? It’s like the government. The reason government doesn’t work is because the government, generally their philosophy is, if there’s a problem, just throw money at it. And just throwing money at something doesn’t solve problems all the time. I mean, it’s helpful, sometimes, but you gotta do some work here. You gotta roll up your sleeves and do some due diligence. Hang out and chat with people, and you’re gonna learn stuff. Put your ear to the ground, as the old saying goes. So good point there. Well, let’s kind of wrap up on this property issue. Any other thoughts that you have? I just finished a beer, and maybe I’m not the best interviewer when I’m drinking a beer and sitting here on the beach with you; it’s beautiful out here, but we’ll do another segment on banking, because I really want to talk about the lending environment, and the banking environment. What if you want to have an offshore bank account, how does that work, there’s lots of regulations, especially if you’re a US citizen…so we’ll do another show on that. But, any other thoughts you have on the property market issue?
MIKE COBB: Yeah, I think the real bottom line is just do it, like the Nike slogan, right? Just do it. There are a lot of great properties, there are a lot of great developers, there’s a lot of great homes and condos. And for folks that are looking to be overseas, I encourage people to really do it! There’s a lot of things that are scary, but it’s never as big a deal as people imagine it might be. It’s not as difficult as it might be. We’re here at the Escape Hatch Conference. Bobby Casey, I interviewed him for my radio program. We’ll get you on ours in a few minutes, so, turnabouts fair play here. But the—but he bought one-way tickets to Europe when he moved. He bought one-way tickets! And I’m sure lots of people were like ah! You’re out of your mind! And he probably is. But you don’t have to be out of your mind to buy a one-way ticket! Just go do it! The opportunities overseas are phenomenal, and that’s probably one of the reasons a lot of people come to this part of the world. Because it is the land of opportunity. It is the Wild West, in a way that the US used to have this Wild West land of opportunity, go and make it, right? Hang out a shingle and make it. And I love that. I love the freedom. But I also understand that personal responsibility comes with freedom, and if you bundle those two together and you work in this part of the world, you can have a phenomenal experience. And I encourage people to take the steps and have the experience. It’ll be a great experience.
JASON HARTMAN: Yeah, thank you. And the bottom line to that message is, as you said in your presentation today, you gotta look out for yourself! You gotta let the buyer beware. This isn’t where you have a lot of infrastructure like you do in the States, or European countries, for example. You gotta pay attention a lot more, and you gotta bring your A-game to it. You know, one final question I do want to ask you, is that Costa Rica—it feels like people have been talking up the Costa Rican real estate market for 20 years now. Maybe it’s been longer. I didn’t notice it before that. But 15, 20 years I’ve been hearing about it. Costa Rica, I mean, with roads, with potholes the size of Volkswagen bugs—I couldn’t believe it when I went there, how big their potholes were. It blew my mind. But, is Costa Rica just sort of overdone, and oversaturated, and has the investment—you say that’s a mature market, and I’d agree with you. I mean, it seems like every other American has looked at the Costa Rica deal, and I’ve just gotta think that the opportunity there just has largely disappeared. Yes, or no?
MIKE COBB: No. I think anywhere it’s—you know, it’s location, location, location. And you’re gonna have places that have done better than others. Costa Rica, of all the countries in the region, when we had the big real estate bubble in the US, it bubbled with the US. And it probably most mirrored a Miami or a South Florida. It ran way up, and then it fell way off. But the reality is that if you just look at simple demographics—if you look at the number of retirees who are already living outside the US—about 529,000 according to AARP—already live outside the United States. Maybe 2, 250 of those live in Mexico. So about half live in Mexico, and about half live elsewhere in the world.
JASON HARTMAN: And what was that statistic you quoted today—10,000 per day? Or what was that?
MIKE COBB: 10,000 Baby Boomers retire every day for the next 19 years. So, we’re really talking about 84 million US Baby Boomers and another 9½ million out of Canada, and the Zogby Company did a big survey. Again, surveys are just what people might do, but another 4-5 million people looking at Latin America over the next 20 years. So, do I think Costa Rica’s seen its day? No way. Costa Rica went up, and it dropped off, it’s probably back to being a decent value in most places, and I think over the next 10, 15, 20 years, what we’re going to see is that Costa Rica will quadruple the number of expats living. And I think each of these countries, not just Costa Rica. Nicaragua. Panama. Costa Rica. Belize. Chile. Ecuador. I think all of these countries are going to see an influx of literally millions of US and Canadian retirees. And so, we’re actually at the very beginning of the opportunity in this part of the world. But again, it’s serving consumers. It’s not a speculative investment—I’m gonna buy a lot and flip it in three years. It’s not I’m gonna put 5% down on a condo and sell it before the building’s done. That’s not what it is. It’s—
JASON HARTMAN: The gambling. No gambling. Remember, thou shalt not gamble—that’s Commandment #5.
MIKE COBB: Right, and I love that one. Thou shalt not gamble. And so the real opportunity is serving true consumers who want to be in this part of the world for some part of the year as part of their retirement lifestyle.
JASON HARTMAN: Yeah, good advice. Good advice. And what we’ve been profiting from, and our clients have been profiting from, is those Baby Boomers moving to the southern states, especially the southeastern United States, and a little bit of the southwest. Phoenix and so forth. Although that’s gotten a lot more expensive. But moving from the cold states, the Rust Belt states, a lot of them from Michigan, certainly. What an economic disaster that is. But a month ago, Michigan became a right-to-work state. Maybe there’s hope. I’ll keep my ear to the ground on that one. But yeah, you know, Baby Boomers, when they retire, they want low-cost living, they want natural beauty, they want recreational opportunities, they want cultural opportunities. And so, we’ve noticed that in the southern United States, and I think for the more adventurous ones—or the ones with less money—getting out of the country completely, and being an expat, you can live really inexpensively down here.
MIKE COBB: Tremendously inexpensive. In most rural areas of Nicaragua, Costa Rica, and Panama—I mean, $1500 would be a nice amount of money. $2000 would put you into really a life of luxury. Full time maid, going to the movies, eating out. Pretty much a nice lifestyle. For a couple, and a couple grand a month, you’re not gonna find that anywhere in the US. Really, that’s what this region holds for people.
JASON HARTMAN: And I think the reason I like modernity too much, and I’m not too into this, is because maybe I’m just too successful [LAUGHTER]. I can afford the United States. I like the US, I like Europe. I like the more advanced countries. But I kind of see it. I see what people are talking about. So, it’s been really good talking to you about this. I think this is the most straightforward answering interview I’ve had on this subject, so, I appreciate you coming on, Mike, and just give out your website, if you would.
MIKE COBB: Sure. It’s www.ecidevelopment.com. Look us up!
JASON HARTMAN: Mike Cobb, thanks for joining us, and we’ll have you back on to talk about banking in Central America!
ANNOUNCER: This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews, please visit www.HartmanMedia.com, or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, or business professional for any individualized advice. Opinions of guests are their own, and the host is acting on behalf of Platinum Properties Investor Network, Inc. exclusively.