When it came to making money on real estate investments, Viva Tropical Founders Park Wilson and Josh Linnes knew everything. Well, that is, everything there was to know about the U.S. real estate market. However, land in Central America, they quickly learned, was a completely different animal. With no MLS system where they could obtain or share information, no market comps to help them determine what a property was really worth, and no logical blueprint to help them make sense of it all, they had to come up with something to help them wrap their left-brained minds around the Latin real estate market. That something was their detailed evaluation of the five market stages all emerging markets in Central America go through as they evolve from completely undeveloped local communities to full-blown expat towns. It's this framework that's helped them and their investors learn how to turn a profit on Latin real estate in each of the five stages.
Option 1: Buy Raw Land and Hold on to It
In the earliest stage of the market stages model, land is valued according to its worth to the local community. Things like its proximity to the ocean or its sweeping views of the lush valley mean nothing if all it's being used for is grazing cattle. There's tons of property like this all over Latin America, but most of it is currently inaccessible to your average buyer. However, those who can get in and get their boots on it (literally, as much of this land is only accessible by ATV or even on foot) can stand to make a considerable profit once other investors begin to take notice of the area and interest starts to grow. This could take a while, and there are other ways to make money on the land a bit sooner, but merely doing the due diligence needed to research ownership of the property and get it titled are all that's needed to add value to the land for the long-term.
Option 2: Invest in a Planned Development
Once those first intrepid developers have taken possession of the land and divided it into much more manageable chunks, it's a great time for investors to purchase a parcel and continue the shared vision for the area. Buyers at this stage can still get a great deal on land and add as much or as little development to it as they desire. It's still too early to build a high-rise condo or open up a surf shop. Most important at this phase is infrastructure such as roads, utilities, and other basic services that the next phase of buyers will expect to see in place. This option is best suited for speculators or investors who see the potential for the area and want to be able to influence the way it develops.
Option 3: Buy a Parcel and Build Something
After the basic infrastructure is in place and more end users begin to enter the market, the focus switches from land to residential or commercial developments. It's the perfect time to buy a lot to build an income property, or even a larger-scale development like a hotel or shopping center. Flipping undeveloped land or buying property with the intention to merely hold on to it are no longer successful models once more and more buyers are moving into the area. The key here is to take that land and turn it into something buyers can use. This is also the perfect time to get a great deal on a place of one's own. By buying land and building a tropical getaway in an emerging area, would-be expats can own an incredible piece of paradise for a fraction of the cost of homes in more developed areas.
Option 4: Pick an Up-and-Coming Area and Launch a Business
When an area begins to take off and developments and a community becomes established, the best way to make money is by finding an innovative way to provide goods and services to the local population. Development means an influx of residents, who will soon be looking for a place to get their morning coffee, have their clothes altered, or buy the latest best-sellers printed in English. A growing population will also translate into increased tourist traffic, and businesses that cater to tourists and expats are a booming industry in much of Latin America. From a variety of land and sea expeditions to lodging and dining options, these growing areas offer a wealth of opportunities for the entrepreneuring expat.
Option 5: Invest with a Trusted Team or Developer
Many of these options can seem quite daunting for the average North American investor, particularly those that take place when an area is in its earliest market stages. There's also the off-chance that some people won't want to make the move to the Latin tropics to operate the businesses needed to make money in areas that are already well-developed. However, a great option for those who don't have the ability or desire to take advantage of one of the first four options is to invest in another development or venture headed up by a team of trusted professionals with a proven track record of success. It may not be as glamorous as owning one's own piece of paradise, but it can be an incredibly profitable move nonetheless. The bottom line is that there's money to be made by investing in real estate opportunities in Central America. The key is having the ability to analyze the area, determine where it's headed, and know exactly what to do to help it appreciate into the next stage of development.