Rum and real estate don't mix. You want to be sober when considering property purchase options in a foreign land. And you certainly want your wits about you when it comes time to sign on the dotted line. The trouble is, in the lands of mañanas and fiestas, the rum flows, and so do the promises. The key to success navigating overseas and especially developing-world real estate markets is avoiding the liquor and turning a deaf ear to the assurances.
Here's how an overseas property purchase is likely to go: You'll arrive in the country where you're dreaming of launching a new life. In the terminal of the airport, the lobby of your hotel, and the restaurant down the street where you go for lunch, you'll be approached by friendly fellows with houses and beachfront lots to sell. Every taxi driver, bar owner, and shopkeeper will have a piece of property for sale or a brother or a cousin in the real estate business. You won't have to seek out agents or developers to help you find your new home. They'll find you.
The challenge isn't finding a local “expert” to take you shopping; it's finding one you feel comfortable doing business with. The best strategy is to speak with as many people as possible and to take nothing anyone tells you at face value.
Property developers in emerging, wild west markets should be treated with skepticism, as should the promises they make about the land they're developing. When shopping with a developer in a developing market, it's important to buy only what you see, not what you're told is planned. A developer may drive you out to his beach, show you a small clubhouse on the shore, and offer you lunch and drinks. The fish is fresh and the rum is local.
After you've eaten your fill, the developer will take you out in his 4x4 or on horseback to explore the beach and the surrounding countryside. As the sun is beginning to slip behind the horizon, the ocean's surface is glittering and dazzling, and the sky is turning fire red and orange, the developer will begin pointing. Over there, he'll say, is where the new clubhouse will be constructed. What you see today is only temporary. Down there will be the marina, and on the hills all around us will be the houses. This sunset could be the view from your front porch. You could have a front-row seat for this show every evening. And then you’ll head back to the clubhouse for a sundown rum punch.
You'll probably be smitten, and who wouldn't be? There's nothing wrong with appreciating what's being put on the table in front of you. The coasts of Nicaragua, Panama, Belize, and the Dominican Republic, for example, are special and extraordinarily beautiful. Seeing them for the first time can make you weak in the knees. The feeling can be something like falling in love. Don't resist it. Allow yourself to savor it. But don't so lose your balance that you marry the first beach that charms its way into your heart. Ask yourself, is this the beach you want to grow old with?
Enjoy the developer's hospitality, his fresh fish, even his rum cocktails. Let him make his pitch. Then take your leave. Go find out what the guy at the next beach has to offer and the beach after that. And keep in mind the fundamental rule of purchasing real estate in a foreign country: Buy what you see.
The developer who takes you to see his property will probably show you where the new clubhouse, dock, marina, and houses will be built. If you give him the benefit of the doubt, he probably fully intends to deliver on every promise he's suggesting. But, remember, here in the land of mañanas and fiestas, things don't always go as expected. Will there be a marina? The only thing you know for certain is that there is no marina right now. That's the reality you should act on. Think about it this way: If the marina were never built, would you still be happy living here? If there were never a newer, bigger clubhouse, would your experience of the place diminish?
Sometimes the stretch of beach the developer takes you to see is nothing but a stretch of beach. There are no roads, electricity, or even stakes in the ground to mark off individual lots. I've seen planned retirement communities on stretches of the coasts of Nicaragua, Mexico, Ecuador, and Belize, for example, where "buy what you see" amounted to an investment in sand, surf, and sun. Depending on your circumstances, your level of risk tolerance, and your timeline to retirement, maybe a deeply discounted, early-in purchase of a beautiful stretch of white sand, azure sea, and tropical sunshine is just what you're looking for. My point is to pay only for what you see when you're buying. Don't pay “all services included” prices for “not a single service anywhere in sight” real estate.
And don't buy anything on a first visit. If you were moving from Chicago to Santa Fe, N.M., would you take one trip to Santa Fe, tour around for two days, then contract to buy the first house you saw available for sale? A house offered to you by a guy you met over drinks in a bar the night before? The answer is probably no. You want to be more careful shopping for real estate in another country, where the language, customs, culture, way of doing business, and property purchase process are all foreign, than you would be back home, not more cavalier. In the unregulated markets south of the Rio Grande, you don't have the safety nets you count on back home.
What if the guy offering to sell you a house isn't, in fact, the owner of that house? What if you don't discover this fact until after you've handed over payment? What is your recourse? In truth, you likely don't have any. There's no Better Business Bureau, Department of Housing, district attorney's office, or local congressman to contact for help, and people in the rest of the world don't sue each other the way Americans do. You aren't going to find an attorney in Nicaragua or Belize to take your case. You must protect yourself, because no one else is standing by to protect you or to help you make things right if something goes wrong.
The best way to protect yourself is to engage an attorney to represent you through the purchase process. Make sure you find someone who doesn’t work for the seller, agent, or developer, but for you. You want your own independent attorney whose agenda and loyalty are clear.
You want to buy only what you see and to make sure that your vision is clear. I enjoy a local rum cocktail at sunset as much as the next person, but I've learned to wait until the effects wear off before I begin talking business.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter. Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.