JS 53: Live & Invest Overseas with Kathleen Peddicord Author of ‘How to Buy Real Estate Overseas’May 20th, 2013 by Jason | Comments Off on JS 53: Live & Invest Overseas with Kathleen Peddicord Author of ‘How to Buy Real Estate Overseas’
[iframe style=”border:none” src=”http://html5-player.libsyn.com/embed/episode/id/2325143/height/100/width/400/thumbnail/no/theme/standard” height=”100″ width=”400″ scrolling=”no” allowfullscreen webkitallowfullscreen mozallowfullscreen oallowfullscreen msallowfullscreen]
Kathleen Peddicord is the Publisher of Live and Invest Overseas and author of, “How to Buy Real Estate Overseas.” She explains how a real estate investment overseas can double as a retirement plan and why more people should look into retiring in France. There are are buying opportunities in “crisis markets. Surprisingly, Medellin, Colombia, is a good retirement spot, but there are numerous places to avoid. Kathleens discusses how to make retirement possible on a small budget, and the strategies involved for choosing the right property in the right country. She also breaks down how an investor can manage the asset. The most important information Kathleen gives: what every overseas property buyer needs to know about moving money around the world.
Kathleen Peddicord has been researching, writing, speaking, and presenting on the topics of living, retiring, and investing overseas for more than 28 years. Her newest book, “How To Buy Real Estate Overseas,” is the culmination of decades of personal experience living and investing around the world. Kathleen has moved children, staff, enterprises, household goods, and pets from the East Coast of the United States first to Waterford, Ireland, then, seven years later, to Paris, France, and, most recently, to Panama City, Panama. For more than 23 years, Kathleen was Editor and Publisher of the International Living group. In 2007, she decided to take a break, during which she did two things. First, Kathleen launched a new publishing group, husband, Lief Simon, decided to make a third international move, with their family and Kathleen’s new business, this time to Panama, where they live today with their 13-year-old son and 23-year-old daughter.
Kathleen has traveled to more than 50 countries, invested in real estate in 21, established businesses in 7, and renovated properties in 8. She has appeared often on radio and television detailing opportunities for living and investing around the world and has written innumerable books on the topic, including “How To Retire Overseas,” published by Penguin Books in 2011, and, most recently, “How To Buy Real Estate Overseas,” to be published by Wiley & Sons in April 2013.
Kathleen is the generally recognized Retire Overseas expert by The New York Times, the AARP, Money Magazine, The Economist, and U.S. News & World Reports, for whom she writes regularly.
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.
ANNOUNCER: Now you can get Jason’s Creating Wealth in Today’s Economy Home Study Course. All the knowledge and education revealed in a 9-hour day of the Creating Wealth Boot Camp, created in a home study course for you to dive into at your convenience. For more details, go to www.JasonHartman.com.
JASON HARTMAN: It’s my pleasure to welcome Kathleen Peddicord back to the show! She is the publisher of Live and Invest Overseas, and the author of How To Buy Real Estate Overseas. And she just has a wealth of information about the world, literally, of real estate investing, and living overseas. Kathleen, welcome. How are you?
KATHLEEN PEDDICORD: I’m very good. Thank you very much for inviting me back.
JASON HARTMAN: Good, good. Well it’s a pleasure to have you back. And you’re coming to us from Panama City, Panama today, right?
KATHLEEN PEDDICORD: I am. Yep.
JASON HARTMAN: Fantastic. Well, tell us a little bit about your new book!
KATHLEEN PEDDICORD: The focus is, as the name suggests, how to buy real estate overseas. And the big idea behind the book really, it can be boiled down to a single word: diversification. And that’s the driving idea behind the whole idea of buying real estate overseas right now, because I think that in the current global climate, that diversification is key. And not in the traditional, conventional sense only of diversifying assets. Everyone knows that you don’t want all of your eggs in one proverbial basket when it comes to investing. But the idea here goes beyond that to diversifying your life, your lifestyle, your future, your whole—everything about how you’re living, what you’re doing, your future, your family’s future, your legacy, and on and on, is all wrapped up in this.
JASON HARTMAN: Yeah, absolutely. And you know, Kathleen, I’ve been so fascinated by this topic, having traveled extensively—I’m up to 65 countries now—looking at real estate. Actually with some of your affiliates in Panama, Argentina, etcetera. And one of the things I really struggle with, when it comes to overseas investing, is that it seems like in so many of these countries, unlike the US, you have—you have very little middle class. And granted, the middle class is totally under attack in the United States, in my opinion. But you know, we still have a pretty big middle class here in the States. And when you look at real estate investing, I want to invest for cash flow. Sure, appreciation, capital gain, speculation, is great when it happens. But it’s not super reliable. It seems like in a lot of these countries there’s really not much of a renter class. So when you’re investing, maybe you buy a home for retirement, a second home, that type of thing. But on the pure investment side, I want cash flow. I want income. And I think a lot of investors feel that way.
KATHLEEN PEDDICORD: I would agree entirely. And in fact, a big section of the book is given over to this idea. But as you say, there are really two ways to make money from investing in real estate. Capital appreciation, and then cash flow through rental income or yield. And in the current climate, there aren’t a lot of markets where you can have some reasonable expectation of capital appreciation. There just aren’t. Last decade—mid last decade—everyone thought that all property markets all around the world would only ever go up. All markets were expanding, and so, people though, you know, you could buy almost anything anywhere, and feel really sure that two, three years from now it’d be worth a whole lot more than you paid for it.
JASON HARTMAN: We have a word for that. We have a phrase for that. That’s called the Greater Fool Theory. It doesn’t work.
KATHLEEN PEDDICORD: Exactly.
JASON HARTMAN: It doesn’t usually end well.
KATHLEEN PEDDICORD: It doesn’t hold up. and we’ve seen how badly that can turn out in a lot of markets where that—the Greater Fool Theory is a great way to describe, for example, what happened in Ireland, to take one market. That’s exactly what happened there. The Irish just kept selling and reselling and reselling to themselves, their own land, and property, and that completely fell apart. And the Irish economy and property market—they’ve collapsed. And Ireland’s not the only place where this has happened. It’s happened in a number of markets that are now in all-out crisis, and then many other markets have seen slides, have seen devaluations. They aren’t in outright crisis, but they’ve certainly—values have fallen by substantial margins over the past five or six years. But that is not everywhere. That is not the case everywhere. While capital appreciation is not an agenda right now, and we’ve seen that that doesn’t always hold up, and in some cases it can completely fall apart, and I would say that’s not a realistic agenda, investment agenda right now, but not all markets, at the same time, are contracting. And you made the point that in much of the world there’s not the kind of middle class that there is in the United States, there’s not that kind of segment of the population. That’s very true, but that’s also not necessarily—that doesn’t necessarily mean that there are no markets to invest in for cash flow.
JASON HARTMAN: Right, right. And you know, I would just liken the middle class to the renter class. That’s what I’m saying.
KATHLEEN PEDDICORD: Exactly.
JASON HARTMAN: And a lot of these countries, you’re not gonna rent to the locals. Their standard of living in low, their income is terrible, so then, you’re left with maybe some expats, tourists, or vacation rentals—
KATHLEEN PEDDICORD: And that’s the market I think that makes most sense in a number of places, is the tourist rental market. There are some parts of the world—Puerto Vallarta, Mexico, is an example of a place with a very proven track record for tourist rentals. Paris, France has the world’s most proven track record for tourist rentals. It has the biggest tourist market in the world. The most touristed city in the world. And those people all need a place to sleep. There aren’t enough beds for the tourists that come to Paris every year. So there’s a strong—there’s such a track record there. And in continuing to expand markets. So that’s one important idea for cash flow. The other is that while you’re completely right to say that in most markets there isn’t the middle class that we know in the United States, there are a couple of important exceptions to this, and two that I would highlight would be Panama City, and Medellin, Colombia. These are two markets where there are fast expanding middle classes, and so you also have a tourist market. It’s not the kind of tourist market you have in Paris, for example; not that volume. But there’s a steady tourist market in those two cities. And there is as well a local rental market, because there are expanding middle classes.
JASON HARTMAN: And so, what—talking about tourist market, for a moment—so, what you mean there is, rentals for two and three nights at a time? Or a week at a time?
KATHLEEN PEDDICORD: Or a month at a time, right. Short term rentals. And exactly, that’s a distinction to make when considering where to invest for cash flow. Do you want to buy property that would go into the show term market, which is going to be the tourist, the resort market, or the long term market? And there are pluses and minuses in both, either way you go.
JASON HARTMAN: And so, when it comes to the property management aspect, when you’re in the tourist market—I mean, in the states, typically for vacation rentals, they charge about 50% of the rental. Of course, the rental income’s higher, because people pay a lot more by the night or by the week than they do by the month. But on a one-year lease, how developed is the property management infrastructure, how ethical and honest is it, and transparent is it, and that kind of stuff?
KATHLEEN PEDDICORD: Exactly. It wouldn’t—in Paris, certainly it’s very developed. I would say it’s more developed than in the United States. And it would be very easy—I own an apartment in Paris that I rent out, and I have a property rental manager I’ve worked with for five years now, very successfully, and she’s been great, and she’s very reliable, and I trust her, and she’s done a great job keeping the place rented. But right, that’s not always the case. Paris would be at one extreme, and then a very developing, unregulated, emerging market in Central America would be the other extreme, where right, finding someone you could count on to take care of your property, to report properly and reliably on rentals, and to make sure that you netted everything you could, and that that net actually ended up in your pocket—that would be harder than in a developed market like Paris. But you mentioned the cost of all of this. Another one thing I will mention is that it’s nowhere near 50%. I would say that in—well, say in Panama City, for example, which I think is a good market to look at for rentals. And here, you could do short term, mid term, or long term rentals. There’s a market in each case. And your total cost of property and rental management would be something around 20-30%.
JASON HARTMAN: And what kind of overall income can you look at annually? In foreign markets they usually quote it in rental yields. In the US people usually just like to think of RV ratio. Meaning, if the property is $100,000, what’ the monthly income? I say, ideally, it should be at least 1% of that value. But your thoughts there?
KATHLEEN PEDDICORD: It would be very different market to market. Different parts of the world. When we were living in Ireland—this was some years ago—the rental returns were negligible. They were 1% or less, in some cases, and that was because values had inflated, had become so inflated. So, people were—if someone was buying a property for a million dollars, or a million Euros, in this case, the rental yield was 1% or less. And it was not uncommon, in the key markets, that that—that prices were that high were that big, as round numbers. You couldn’t buy anything in Dublin for less than a half million Euros, even up to five or six years ago. So that would be one extreme. Then at another extreme I would say would be Medellin, Colombia, right now, where values are a bargain on a global scale. So, you can buy something very rentable, for $100,000, and then you could look at a return, a net return, of 10-12%.
JASON HARTMAN: Yeah, okay. So that’s pretty good. And when you look at the long term rentals, how does the property management work there? We talked about the vacation or tourist rental.
KATHLEEN PEDDICORD: It works the same way, in that you need both—in many markets you need both a property manager and a rental manager. They aren’t necessarily the same person, and they fill different functions. So, the property manager is the one who makes sure that your property is maintained, that repairs are taken care of, maintenance is done, and that your bills are paid. You know, your electric bill, and your phone bill, things like that. Then the rental manager is responsible for actually keeping the place rented. For doing the advertising, finding you tenants, greeting them and checking them in, dealing with the actual tenant side of it, whereas the property manager deals with the property side of it. That would be one way to look at it. And again, the total cost between those two people—in some cases they could be the same agency. You might find an agency in Panama City, for example, that could fill both of those functions. Or you might end up working with two different people, or two different agencies. But the total cost would be about the same. I’d say, for 20-30%.
JASON HARTMAN: And, is everything pretty much that you’re looking at and recommending, is it pretty much all condos, or do you have single-family detached homes?
KATHLEEN PEDDICORD: You do, but it’s less common, and they come with more carrying cost and hassle. You know, because a house has more maintenance, and more repairs, and it might have a yard, and you know, a lot more to deal with as an owner. And long distance—as a long distance landlord, long distance owner, one thing to remember is the hassle factor. And so, you want to keep things as turnkey as possible, and that’s why, when you’re doing this long distance, investing in a rental overseas, a condo, or an apartment, the more turnkey the better—really can be the better choice.
JASON HARTMAN: What about the condo associations though, and the dues? When I look at stuff in the States for our investor clients, I don’t really like condos very much, because those associations are just—number one, they’re corrupt, a lot of times. Number two, they’re skimming so much money off the top, and the dues are high. And this problem won’t be true overseas so much, because the lending environment is very different. But in the States, these homeowners associations, when they’re in condos—now, I don’t mind homeowners associations so much, with single-family homes, where they’ll have a very small dues, and keep your neighbor in a single family neighborhood from repairing their car on the lawn, and that kind of stuff. Some of these neighborhoods get a little iffy. And what happens, Kathleen, is that the HOA will get into litigation. Either an unhappy resident will sue the HOA, or the HOA will sue the developer over construction defects, and the US is obviously the most litigious place on the planet, and that’s one reason you want to consider investing overseas, by the way. But when that happens, the banks will stop lending inside these HOAs! And when there’s no financing, there are—the buyers dry up, and the values plummet, and it’s a real problem! It’s a vicious circle! Can you address that at all?
KATHLEEN PEDDICORD: Yeah. HOAs are—you’re right. They can be a problem, they can create, or present, a lot of risks. But not the kind of risks you’re describing, especially the last one you described—I think that would be a very US-specific problem. Maybe you’d find that in the UK too, because there are a lot of similarities, I’d say, between those two markets in that regard. But in the rest of the world—right, there aren’t the lending industries locally. First of all, to begin with, they don’t exist. So that whole factor just isn’t there. But you do have still a lot of concerns with HOAs, and that’s why I make the point—and I talk about this in the book as well—when you’re buying a rental overseas, you’re buying not only the unit, but you’re buying the building. So you have to do your due diligence into the building. The biggest problem, frankly, with HOAs outside the United States, is owners not paying their dues. Because these organizations are much less structured, much less formal, and they are much less regulated, or visible, than in the United States. And so, it’s not uncommon—we own rentals in a number of countries, including here in Panama City, and my husband and I are on the board of the HOA for the building where we own an apartment rental here in Panama City. And so, we see this from the inside there, and it’s not uncommon for a building here in Panama City, to use this as an example, where you could have half the owners or more, not paying their HOA fees. Well, that’s a big problem, for obvious reasons. Then the building can be left with just not enough money to take care of itself. You know, not enough money to keep the elevators running, for example. And so, that’s the biggest concern outside the United States, I would say.
JASON HARTMAN: Yeah, definitely. So, we kind of led into that with part of the HOA issue relating to financing issue. Talk to us about financing. I mean, is it basically cash everywhere now? I know that in Belize, I was there about a month ago, speaking at an offshore investing conference, and I know that in Belize there’s some financing options now. I think Panama, you’re gonna say, probably has some financing options. But elsewhere, maybe not. I don’t know.
KATHLEEN PEDDICORD: Exactly. Europe, yes. In most countries it’s possible, as a foreigner, to borrow to buy. The terms aren’t going to be what an American is typically used to. So, you’re not going to get a 90 or 100% loan to value. Usually the best you’ll get will be 80%. You’re not gonna get a 25-30 year mortgage. You are looking at 10, 15, 20 years, typically.
JASON HARTMAN: That’s not terrible, though. I mean—one of the things I love about US real estate, Kathleen, is that ever since the Great Depression, it’s been subsidized by the government through Fannie Mae and Freddie Mac. And we have, without a doubt, the most exceptional lending environment here, and the most debt-friendly asset class. But what you’re talking about with overseas real estate, really is better than I thought it would be. Now, what are the rates, though?
KATHLEEN PEDDICORD: Well, right. In Europe right now they’re very low. The thing is that you’re not gonna get a fixed rate of interest, but current rates in Europe might be—in France, for example, it might be 3%. But the—so, again, they’re not—we’ll talk about Central America in a minute. There you’re looking at double-digit interest rates, typically. But in Europe, they can be very low. The thing is, they’re not fixed. You just won’t find a fixed rate of interest. So, there’s that risk. Now, having said that, it’s been a long time since even though interest rates are variable—since they varied up, if you see the point—they’ve been low for a long time.
JASON HARTMAN: Right, right, because mostly adjustable rate loans have declined recently.
KATHLEEN PEDDICORD: Exactly. Exactly.
JASON HARTMAN: But I don’t think that’s going to be the future, by the way.
KATHLEEN PEDDICORD: Well, and back in Central America, they said, here you’re looking at double digit interest rates. 15, 16% isn’t uncommon. And here, even probably less loan to value. So here, 50%. In Belize, for example, as you say, you can borrow there, but I know one bank, for example, that does lend readily to foreign buyers; the most they’ll lend is 50%, and their interest rates are going to be 12%, I think. 12 or 13.
JASON HARTMAN: Yeah, that’s not too desirable at all. What about in Colombia? Did you mention that?
KATHLEEN PEDDICORD: In Colombia there is no—it’s going to be very hard as a foreigner to borrow to buy. In Colombia it’s very hard even as a foreigner to open a bank account. So, there isn’t the developed, or very competitive or sophisticated banking or lending industry for non-nationals, non-residents.
JASON HARTMAN: Which, by the way, leads me to another question. A lot of people, nowadays especially, are very interested—and I don’t know if you cover this at all, but sometimes it ties in with real estate investment. They’re interested in getting dual citizenship, and having a second passport. Having kind of an escape hatch, if you will. You just never know what will happen, and if you might need that someday. Do any countries offer, that you want to recommend, like an economic sort of real estate investing related passport opportunity, that you know of?
KATHLEEN PEDDICORD: They do; many countries, just I guess to take a step back—it’s possible to acquire a second passport and citizenship in many countries. The one option for that is through residency. So, by being a foreign resident for x number of years and going through the process, it’s possible then to acquire citizenship as well.
JASON HARTMAN: But it’s not quick.
KATHLEEN PEDDICORD: It’s not quick, exactly. And so that’s the tradeoff. Either it’s—it takes a long time, or it’s going to be expensive. Because there are a number of places that offer what’s referred to as economic citizenship, or investment for citizenship. For example, Saint Kitts is a country that has a current economic citizenship program based on real estate investment. But the cost there is somewhere around $250,000, I believe?
JASON HARTMAN: Yeah, I heard like $250-400,000. It’s pretty expensive.
KATHLEEN PEDDICORD: Yeah. But again, it’s quick. It’s a quicker route, but that wouldn’t be within everyone’s budget.
JASON HARTMAN: Yeah, definitely not. A lot of the reason people are looking for these overseas opportunities is to cut costs, especially in retirement, and just have a nice retirement and low cost of living. Do you want to address any of the crisis markets where the buyer opportunities are really good? You may have alluded to that already in our discussion.
KATHLEEN PEDDICORD: I did a little bit. But I would say, again, I did mention Ireland, which is a market in all-out crisis that may be near the bottom. It’s—I don’t know. It’s all—it’s hard to say. But many people are calling this year into 2014, maybe the bottom of that decline that has been steady over the past six years.
JASON HARTMAN: What cities in Ireland?
KATHLEEN PEDDICORD: I would say—well, you want to stick with the tourist cities, because here, for rental, that would be the market to go after would be the tourist market. And so, around Cary, the ring of Cary, Galway, would be a great place that’s on the west coast, and then Dublin, of course. But Dublin’s going to be the most expensive place to buy.
JASON HARTMAN: Right. Okay. Go ahead. And other crisis markets?
KATHLEEN PEDDICORD: Another crisis market would be Spain. Here, it—it’s simple overbuilding. Spain was unbelievably, ridiculously overbuilt last decade, and then the buyers just stopped showing up. The buyers in this market mostly were British. The coast of Spain was developed, and populated then, by British, in search of some sunshine. But that market has dried up, and in the mean time, Spain, the developers along the coast, were building vast numbers of units, condo unit, in anticipation of a never-ending flow of British buyers. And then that flow stopped abruptly, and the coast is so overbuilt. I think that there’s still a considerable way further down in Spain, because there is just so much inventory. And so, while there is probably opportunity in Spain, I think you have to be very careful about where you buy, because there’s just so much inventory. But if you had time to look, and to buy in a good location, in a good building, there definitely are tremendous bargains to be had.
JASON HARTMAN: And you’re not worried about the collapse of Spain, and civil unrest, with unemployment I think at like 27%? It’s just ridiculous.
KATHLEEN PEDDICORD: Yeah, exactly, it’s very high. Someone asked me earlier today, someone wrote in to—a reader, to say, where do you expect bloody unrest? Not did I expect it, or was that a possibility, but where. Where did I see that? So, I mean, I don’t know. I’m not really a doom and gloomer. But I guess it’s not completely outside the realm of possibility. There are a lot of places around the world where things are very bad, and people are struggling.
JASON HARTMAN: Yeah, no question about it. I didn’t want to sidetrack you with that too much. But Kathleen, it seems like most of your work—and maybe it’s because of where the opportunities are—most of your writings and thinking is centered, and I may well be wrong, and this is just an impression, around Central and South America, rather than Europe. I know you’ve certainly—and we just talked about some European countries, and you’ve certainly talked about Romania before, and various countries in Europe. But is there a reason for that? Or is my impression wrong?
KATHLEEN PEDDICORD: You’re completely right, and there is a reason. It’s because Central America—well, it’s because my readership is primarily in the United States. My reader is mostly an American, and so, if I take the American perspective, and look at the globe from that point of view—well, the part of the world that’s nearest, easiest to get to, and that is, at the same time, can be cheap and sunny, is Central America. And cheap and sunny are the two things that get people’s attention in the first place. So, why would someone want to be doing this in the first place? Either living, retiring, or investing in a piece of real estate in another country? Well, the two driving factors are because it’s cheaper than in the United States—there’s a cost opportunity—and the weather’s better! Bottom line it comes down most times to those two things. And so, if you look at the world from that point of view—where is it cheap and sunny, and also, if you’re an American, easy to get to—well, that leads you to Central America.
JASON HARTMAN: Okay, yeah. Makes sense. What else do you want people to know? Well, you know, here’s a question for you. I always ask a question and compound it with another one. I apologize, it’s a bad habit.
KATHLEEN PEDDICORD: No problem.
JASON HARTMAN: What about buying—there’s a sort of romantic idea, buying a little farm in a foreign country, having an agricultural investment, or another type of investment, you know, rather than a condo. Are there any other sort of property types that are of interest?
KATHLEEN PEDDICORD: Yeah, that is a great question, because that’s something we haven’t talked about, and that I think is the other big idea. Maybe even a bigger idea right now, which is to invest in agricultural or productive land. It’s the other way to look for cash flow. And as you pointed out as we started our conversation, cash flow is really the thing to be shopping for right now as an investor. And so, you can earn that from a rental yield, but you can also earn that from a crop yield. And two markets that I think make a lot of sense in this regard right now, are Brazil and Uruguay. I think that a piece of farmland, a little farm in Uruguay, is one of the smartest things an investor could buy today. And I highlight Uruguay because it has so much farmland. It’s a country with so much really fertile, productive land, and where the government has approached this very formally, and created an index to rate land in different parts of the country—farmland in different parts of the country—and it amounts to a kind of MLS, multiple listing service, for farmland. And as you know, the multiple listing service is unique to the United States, for the most part. It exists in pockets elsewhere in the rest of the world, but for the most part you don’t find that. But in Uruguay they’ve created something that’s specifically focused on farmland. So you can go down there shopping for a farm, and you can combine this—another reason I like this, you can combine this again with the lifestyle agenda. You could shop for a productive piece of land, and you could use the government’s index to understand exactly what you’re buying. They’ll tell you depending on where in the country you’re looking, how fertile the land is, what kind of crops would grow best there, what your yield would be expected to be. You can find all this, it’s published online for free, all this data. And then, as well—
JASON HARTMAN: Do you want to give out a website for that?
KATHLEEN PEDDICORD: You know what—
JASON HARTMAN: Or some search terms? Just maybe some search terms.
KATHLEEN PEDDICORD: Search for farmland in Uruguay, and you’ll find that online. And so, but then, depending on what you want to grow, and what kind of yield you want, and find a little farmhouse. What could be more charming for a retirement home than a little hacienda in Uruguay? And so, buy it today. Say you’re eight years away, ten years away from retirement. Buy that today, farm that, lease it out to a farmer. I’m not suggesting that everyone has to go pick up a hoe, but lease it out to a local farmer, someone who knows what he’s doing, or a farm management company, which exist. Again, they’re very formalized in Uruguay. You’ll earn some yield every year along the way, and then when you’re ready, you could go live in the little house yourself, in retirement.
JASON HARTMAN: Fantastic. And you talked about the MLS, and that’s one of the concerns I always have, Kathleen. As I’ve looked at real estate around the world, the US market is highly developed. It’s a mature industry. And I’m not talking about the investment itself, necessarily. I’m talking about the industry of real estate sales. And as such, you’re not so concerned that you’re going to overpay. And least not dramatically. You can make mistakes in the US, obviously. Buy you’ve got Zillow, Trulia, the MLS system, agents are licensed, whereas elsewhere hey don’t have licenses, they just say hey, I’m a realtor, you know—I’m a real estate agent, I should say, to use the proper terminology. What do you do to make sure you don’t overpay? They have these off-plan developments, and maybe you want to define what that means too, it’s sort of a funny phrase.
KATHLEEN PEDDICORD: Off-plan is what is used in Europe, and the UK, to refer to what we might—what might make more sense to us as pre-construction. So, off-plan is buying pre-construction, buying before something is built. And in that case, you should pay a healthy discount to what values are expected to be when the project is completed, because you’re right, you’re taking on a risk. You don’t know for sure that the project will be completed as intended, or promised, or according to the timeline promised. And for an investor, of course, that makes a big difference; when does your return start? And if they don’t finish until 18 months after they said they were going to finish, well, that’s 18 months you’re without a return that you were counting on. So, you should pay a big discount to buy pre-construction or off-plan. That’s one point.
And then your bigger picture question is, how do you know what to pay in the first place? Because , as you say, without an MLS, you can’t run comps. You can’t say—you can’t ever say, or go to someone and ask, what should something cost? You can—in the United States, as you just said, you can find out what a two bedroom, 1500 square foot house in a certain neighborhood in a certain city should cost, within a reasonable margin. In the rest of the world that’s all but impossible. And so, what that means is, you’ve got to work with as many different real estate agents as possible. And that’s really the only way to combat this. It definitely puts the burden on the buyer, and it means you can’t just work with one agent. You can’t just find one agent you like, and develop a rapport, and a relationship, and then count on them. Because even if they are well intended, and for the most part, frankly, in emerging markets, they’re not. As you said, they’re not professionals, they’re not licensed, they’re just some guy, in many cases—I don’t want to overstate this, but it’s the reality. In many cases, they woke up one day and thought, hey, I think I could make a lot of money selling real estate to other gringos. And they do. And you know, no one stops them. No one even pays attention to them. So, you have to be on your guard. You have to understand that that element definitely exists in a lot of the emerging markets where you might be shopping. And so you definitely cannot work with only one agent. You need to work with as many as possible. This is true even in market where you might not expect it, like Ireland.
When we arrived in Ireland 15 years ago and started shopping for a house, we were so confused, because the agent we went to—we described the house that we wanted, and he told us that he had one. And I’m not exaggerating. This isn’t a joke. And we were like, what are you talking about? How do you have one house? He had one house on his books that fit the description we gave him, and then finally it dawned on us, well, let’s talk to another agent. And then we found that the other agent had three, which were different than the one the first guy had. Well, we finally realized, we had, at that point in our experience, much more focused in Latin America and Central America where we took this for granted. But coming to Ireland, we thought this was going to be a market more like in the United States, but it’s not at all. The US is indeed a unique marketplace.
JASON HARTMAN: Yeah, it really is, in that way. It’s very interesting. There are very few people in your world of specialty that have the kind of knowledge you do. Kathleen, give out your website, if you would. And I just downloaded the book on Amazon, the Kindle edition, but any resources you want to mention would be great.
KATHLEEN PEDDICORD: Oh, thank you. So, the website is LiveAndInvestOverseas.com, and that’s all one word, no hyphens and periods. LiveAndInvestOverseas.com. And the best getting started resource for all of this in general is the e-letter that I write. So, I have the book that just came out, how to buy real estate overseas, and that’s available in bookstores and on Amazon, and that focuses on the best places to think about investing in real estate right now. It talks about all these ideas we’ve talked about—buying for yield, buying productive land, crisis markets. But then, there are a lot of other ideas that go beyond real estate specifically to do with living, retiring, spending time around the world in other capacities, and to just start to get your feet wet, or start to consider these ideas, I would recommend signing up for my e-letter, which is free. I write it personally from wherever I am in the world each day. It comes out every day. And it—again, it’s the best getting started resource, because it talks about not only real estate, but lifestyle and retirement. It covers the world, and it’s free. And on the website, on the homepage, there’s a little box where you enter your email address, and then you’ll start to receive it. And when you’re tired of receiving it, you just unsubscribe
JASON HARTMAN: Two final questions for you real quickly, just to briefly answer, if you would, and I know you’ve gotta run. But, what should people know about moving money around the world? That’s a big one, but maybe just a—yeah, just a quickie on that would be great.
KATHLEEN PEDDICORD: Exactly. And there’s a chapter in my book on that. I spend a whole chapter on it, because there are a number of issues here that the typical investor isn’t going to be prepared for, just because he hasn’t encountered them before. By typical investor, I mean a US investor who is experienced with investing in the United States. When you start dealing with having to move money across borders, then new issues arise. You have currency exchange issues; sometimes you have foreign exchange controls, too, and restrictions to remember. In Brazil and Colombia, just to name two countries, two markets that make a lot of sense for investment right now, they’re also markets that impose some foreign currency controls. And so, it’s not—that’s not a reason not to invest in those markets, but it’s something you want to understand before you invest, because it’s a matter of paperwork, frankly. But you need to get the paperwork right if you want to be able to take your capital and your profits out of the country when you decide you want to do that. Otherwise you could have a problem. So, there are a number of issues that you do need to be prepared for. It’s not rocket science. It’s a process. And it really comes down to paperwork, in most cases. And fees. Understanding the fees of sending a wire, for example, or accepting money into your bank account here and there. There are going to be fees, and you want them to be as little as possible.
JASON HARTMAN: Yeah, absolutely. And you’ve gotta collect fees back from your property manager for your rental income from your tenants, so there are some issues there, so that’s in the book, good. And so, the last question—and of course, this is a big subject, I know it’s probably in the book as well—but making sure that you really get title to the property you buy. I mean, I’m sure there are many, many stories of people who plunk down a couple hundred thousand dollars, and then didn’t really get the property they thought they were getting, and just lost their money, and got completely ripped off.
KATHLEEN PEDDICORD: Yeah, unfortunately it happens. And you know, over all these years, I’ve been doing this for a long time now, I’ve heard lots of horror stories. And my recommendation here is, you need to, before you do anything, find an attorney who speaks English, who has experience with foreign buyers. Who has as much experience as possible helping foreign investors in his country. You want to interview three or four attorneys before choosing one, because your attorney is your ally, your most important resource in the country, and he’s the one—he or she is the one—who should be able to help you navigate any local concerns or issues to deal with history of ownership and title. And in some markets there are particular concerns that you want to be away of before you start shopping. And I do address these in the book country by country, because they’re country-specific. In Mexico, there’s ejido land. In Nicaragua there’s coopertiva land. In Panama, there’s rights of possession. And in Europe, there can be title issues as well. This isn’t only in Latin America. And then there are restrictions on foreign ownership throughout most of Asia. Again, something you want to be aware of before you buy something—before you find out, foreigners can’t own this, even though some developer or real estate agent might be happy to sell it to you, and then you discover too late that as a foreigner you in fact can’t hold ownership. So there are caveats, and most of them are market-specific, and this is where you really have to rely on your attorney. So again, that’s where to start.
JASON HARTMAN: Yeah, yeah. Very good point. And make sure you check your attorney out, and make sure they’re legit, and they’re not a crook too.
KATHLEEN PEDDICORD: Exactly.
JASON HARTMAN: And that’s the same in the US, by the way.
KATHLEEN PEDDICORD: Yeah. And one real quick point there I’d like to make is, your attorney should be your attorney—not your developer’s attorney, and not your real estate agent’s attorney. You go to buy from a developer in, say, Nicaragua—it could be anywhere. And the developer, you’ll get to know him, and you’ll feel comfortable with him, and you’ll be ready to buy, and he’ll say, oh, well, just choose my attorney, that’ll be easier. He knows the project, he knows the contract. That’s the last thing you want to do. You don’t want to use the developer’s attorney. Because there’s such an obvious conflict of interest; who’s he really working for? So, you want to—you want an independent attorney.
JASON HARTMAN: Great point. Well, Kathleen Peddicord, thank you so much for joining us today. You just have a wealth of information, and it’s always great to have you on the show.
KATHLEEN PEDDICORD: Thank you so much for having me back. It’s great to talk to you, as always.
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.
Transcribed by David