I don’t like risk. But you can’t make any money from real estate investments without there being some risk, right? Every successful investor knows this.
Every successful investor also knows that you mitigate that risk by performing loads of due diligence. But wouldn’t you agree that the quality of due diligence you perform depends on your source?
Let’s face it: the riskiest part of any international investment deal is the local information source’s bias. They want their projects to look good in the best possible light.
There is a simple way to get around this bias so that you get a clear idea of the level of risk behind the investment. Interestingly enough, nobody in this space is taking advantage this approach…even though it’s public.
Keep in mind…it’s not the total risk killer. It’s just an obvious first step when it comes to due diligence. And I want to show you how to use it.
How Not to Overpay
I am an investor and will not pursue investments without doing a ridiculous amount of due diligence. And to be honest, for every opinion or recommendation I get I look for a half-dozen reasons why I shouldn’t invest. I look at 400 properties before pulling the trigger. That may sound excessive, but it’s the reason I’ve had the kind of success I’ve had.
This is so important when it comes to investing in Latin America. For starters, unbiased information can be very difficult to find. What complicates the issue further is this:
- Investors in Costa Rica have no idea what property is worth in Panama…
- Investors in Panama have no idea what property is worth in Nicaragua…
- And investors in Nicaragua have no idea what property is worth in southern Mexico.
Let’s imagine you want to find out the price for a piece of property in Nicaragua. So you grind it out for six months and get that information. However, you’ll be disappointed to know that it wouldn’t even be correct. In other words, you didn’t get the TRUE value of that property .
Why? Simple. If you are not a native to Latin America and you show up on a farm you are interested in buying and ask the owner how much he would sell for, you would get the “gringo price.” And you’ll get screwed.
What you want is the “local price,” which amounts to a steep discount. How do you get that “local price”? Let me show you.
My Secret: Local Country Boys
Throughout Central America, there are thousands upon thousands of land owners. But nobody—and I mean nobody—has any idea about the value of properties from market-to-market and from country-to-country…not even the landowners. However, that information is there for the picking. And we are picking it.
From the start we’ve hired a nimble force of local country boys and private investigators, native to their particular country, to approach landowners throughout Central America.
First, we identify a 30 to 50 mile stretch of coast. Then we send the scouts out. The scouts approach the owners, connecting with them in a very friendly way. The scouts then ask how much the owner would sell his property for. And because he is a local, and this is important, the scout gets the local price—not the “gringo price.”
The scout takes down this information. And because we equipped each scout with a GPS, they demark the boundaries. Furthermore, they interview neighbors, take down notes and explore the area.
The Project That Proves My Point
When the scouts return, they download all this information into a database. The really cool part is that we’ve connected with these landowners and nurtured those relationships…so guess who they call when it’s time to sell? Yeah, us.
Take our Playa Burica project for example. We chose to invest in Panama in general and Burica in particular after years of due diligence. My business partner and I had been living there for years and we started noticing some important characteristics about the region.
First off, Burica was in the Province of Chiriquí, which was the priority for tourism-related investment in the country. This meant that it was getting money to expand airports and build new roads and other tourist-related investment incentives, making it one of the best places in all of Latin America for real estate investment.
The coup de grâce, however, was when we got a tip that the government was going to build a new road to the end of the Burica peninsula. We immediately sent out our scouts.
What we found was a stunningly beautiful beachfront not far from the third largest city in David—but it was unbelievably hard to get to, which meant we were nearly all alone in terms of competition. Indeed, this was the perfect investment opportunity.
Over time our scouts had relationships with every owner in our target zone and we finally zeroed in on a few specific farms and owners.
After negotiations we ended up buying a total of 3 farms consisting of 62 acres and seven tenths of a mile of coastline. And because the sellers were motivated, we were able to negotiate a great price.
Your First Step in Minimizing Risk in Latin America Investments
Now, that’s what I mean by due diligence. Our consistent, under-the-radar approach allows us to know the true value of property through Latin America, whether it’s in Panama, Belize, Nicaragua or Costa Rica.
Which brings me to the little tip I was talking about earlier. Our due diligence starts with pulling together information from some of the best real estate, investment and tourism news on Latin America.
Every day, our bi-lingual staff sifts through the region’s top financial newspapers, magazines, journals, newsletters and blogs. We even reach back into the archives.
We then translate each article into English. On any given day we might find an article about the skyrocketing public transportation construction costs in Panama…why Guatemala ranks as a top ten dangerous place to do business…the one country booming with U.S. loan dollars…and which country just got a new $10M tourism related infrastructure project.
And then we use this information to make business and investment decisions. Well, we started thinking that we should start pooling all this information together for other investors and give it away.
In other words, we are passing on the most valuable news, ideas and opinions to help you make smarter investments in Latin America…
We call this source Emerging Terrains News. And our mission at ET News is to share useful, interesting news you may not have time to find yourself…but information you’ll be able to use immediately.
See, because we live and work in Latin America, we have an interest in knowing the pros and cons of investing in each country. We use this information to make decisions. It’s our first step in due diligence. And we invite you to use it as your first step in due diligence, too. Check it out now and let me know what you think.