Why Asians & Europeans Should Buy in South America

Why Asians & Europeans Should buy in South America
The biggest reason is the currency differences. South American Currencies are like the dollar in that they have been steadily losing value against other world currencies. Some of the currencies are undervalued. The Argentine Peso is 3.16 to the US dollar, which is pretty good. Most of the property there is priced in dollars though so that doesn’t really help some of from the USA. The dollar is 1.47 to the Euro. A European can get a significant advantage. The yen is 112.32 to the dollar, which is not all that great. The Yuan or RNB from China is 7.31. The Chinese have been accused ot keeping their currency artificially low; but considering recent events, that may not be the case any longer. Europeans will be the big winner on currencies, at least in the short term.

The next big reason is the things that are happenning to many of the South American Economies right now. They are shifting from commodities based economies to industrial and service based economies. Investing in South America now, with the exception of Bolivia, Venezuela and Ecuador, is like investing in the USA 150 years ago. The big difference being that they will probably compress 150 years of development into about 20.

The third reason is the agricultural potential. The coffee business has been hijacked by the Africans and Vietnamese. Soybeans, exotic herbs and fruits, ethanol and vegetables are the new order. The big users of these things are in the Northern hemisphere. When winter stops production in the North, summer prevails in the South.
David Segrest is a REALTOR in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com

New Year, New Perspectives

New Year, New Perspectives
I always make New Years Goals rather than resolutions. Resolutions are made to be broken. Goals get reviewed and usually accomplished. I will share two of my 2008 goals with you for 2 reasons. #1 you can keep my feet to the fire and remind me if I don’t accomplish it. #2 Maybe you can help me.
The first goal that I will share is to go to South or Central America at least 4 times during 2008. If you know of great real estate congresses, let me know. With the currency situation like it is going south makes a lot more sense than going to Europe or Asia.
The second goal is to find some large tracts of land in South America and find some European or Asian buyers for them. Let me know if you know land or buyers for land. We can share. The next blog will talk about why Asians and Europeans should be buying South American land.
David Segrest is a REALTOR in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com

Infrastructure, Trade & International Real Estate(Pt. 2)

Infrastructure, Trade & International Real Estate (Part 2)
I once had a listing in a small country in the West Indies. I spent a night there to understand the listing and get a perspective on marketing it. Getting there required a flight to San Juan, Puerto Rico and an overnight stay. The next morning a prop jet carried me to the capitol of this island. A 3 ½ hour drive by jeep fording a small river twice got me to the property.
It was a wonderful home, built into the side of the mountain. Solar heat and electricity and spring water were not just adequate; but exceptional. By walking about 2/10 of a mile to the top of a hill I was able to use my cell phone.
Going back required the same drive. The overnight stay was in the capital of this country in a fairly primitive beachfront hotel instead of San Juan. The flight back to San Juan started with a hand search of my baggage in the public part of the airport and a repeat performance on the secure side of the airport. In San Juan the flight connected on the same day. It was a great trip and a wonderful experience. I never sold the property. What do you think was the problem?
David Segrest is a REALTOR in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com

Infrastructure, Trade & International Real Estate (Pt. 1)

Infrastructure, Trade & International Real Estate (Part 1)
In an earlier blog, the relationship between container facilities and trade was discussed. What happens to the trade articles after they reach the (air)port? They have to go somewhere. Even if intermodal facilities are available there still must be a way for the trucks and trains to disburse the goods or bring in goods for shipment. Whereever highways and rail lines go the demand for real estate increases. The prices increase too.
Other infrastructure is necessary as well. Manufacturing facilities need electricity and water. Delivery systems need fuel. The lack of available generating power has slowed growth on the border of the USA and Mexico. Manufacturers have actually built facilities that they could not operate. The business parks advertize available power. Several parks may be advertizing the same power. Users who do not check with the utility producers and reserve capacity may find themselves unable to operate.
In Brazil much of the electricity comes from hydro-electric plants. When there is a drought power is short and many companies have to work at reduced output. Using a competent real estate professional can help avoid these problems. I can introduce you to someone.
David Segrest is a REALTOR in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com

Squandered Opportunities

Squandered Oportunities
Venezuela has benefitted from the high price of oil for several years now. None of that wealth has really gone to help the citizens or improve the countries ongoing economic situation. Money has been used to finance growth in Argentina. Nestor Kirchner has used that money to pay off the renegotiated external debt. This has caused a tremendous inflow of foreign direct investment. Other countries in South America are also experiencing tremendous inflows of money and growth in their economies.
Venezuela is not getting foreign direct investment; because business people are afraid of Hugo Chavez and because it is very difficult to repatriate funds from that country. The business people of Venezuela are unable to get hard currency to invest abroad. The entire economy is expected to stagnate during the coming year. Latin Trade Magazine http://www.latintrade.com/ predicts dire consequences for the Bolivar’s exchange rate and severe inflation. For Venezuelans local real estate should be the only safe haven for capital that cannot be moved outside the country. Real estate is cheap now; because people are leaving the country. The prices should reflect the inflation in other sectors.
An old investment adage says, “The time to buy is when the blood is in the streets”. There may not be blood in the streets; but it is hard to distinguish all the red ink from blood.
David Segrest is a REALTOR in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com

Rocket Economy and Real Estate

Rocket Economy and Real Estate

Brazil has the fastest growing economy in the world. Lula (elected on the socialist Workers Party ticket) has turned out to be great for capitalism. Lula’s fiscally conservative policies have strengthened the economy and the middle class. His social programs have boosted 36 million people from poverty to lower middle class.

What does this mean for real estate? It means demand. According to the National Real Estate Investor magazine http://www.nreionline.com , office rents jumped 25% from 2005 to 2006 and 28% from 2006 to 2007. Demand for retail space is still strong and demand for housing is really skyrocketing.

Brazil is an excellent example of what South America needs. For too long the wealthy people have had their status preserved by benefiting disproportionately when times are good and moving their money out of the countries when times are bad. Lula has used the national wealth to build the prosperity of everyone and expand the middle class (which is the backbone of any successful economy). Hugo Chavez is a perfect example of the old style South American caudillo. He is using the wealth generated by the surge in oil prices to bolster his own position and feed his own follies.





David Segrest is a REALTOR in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com

BRRRR!

BRRRR!

The weather reports from the northern and Midwestern US are scary. Ice, snow, floods, no power. People everywhere in the northern part of the northern hemisphere are experiencing similar weather right now. The perpetual darkness and overcast causes severe depression. How many of these people are saying, “How much longer can I take this?”

Many answer that question every year by heading south. Winter solstice is a popular time to head for balmier destinations. In much of the business world, December has been removed from the calendar. At the very time when the target buyers are most susceptible to desire for warmth and comfort, the target market is busy celebrating.

I always say I am tired of this cold weather the first day it comes; but nothing gives me a warm fuzzy feeling like a commission check. That is even better than chicken soup.


David Segrest is a REALTOR in Charlotte NC. His website is http://www.segrestrealty.com His email is david@segrestrealty.com

The Second Home Culture

The Second Home Culture

Almost every country with any 2nd home market at all seems to have developed cultural enclaves of people who are not from that country. In these enclaves the only “natives” one sees are the people who do service. Even the language(s) is(are) usually more foreign than domestic.

Practically everyone from the USA says, “these foreigners should at least learn English”. These same people may have a 2nd home in Mexico or Costa Rica and not speak a word of Spanish. I can understand how some people improve their comfort level with international travel and home-ownership by being around other people who are like them. There are many reasons for international travel and investment that have nothing to do with the culture.

The culture is what attracts me most. The prices are lower outside of the enclaves as well. The enclave offers a greater sense of security at the expense of the adventure of international travel.

David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Containerized Freight and International Trade

Containerized Freight and International Trade

It seems simple enough. Trade requires freight. Freight moves in containers. It has not always been that way. The standard 20’ or 40’ container is a relatively new development. Freight moved anyway so what is the big deal?

The big deal is cost and location. Before containerized freight each item of cargo had to be handled individually every time it changed mode. Manufacturing facilities needed to be as close to market as possible. Close was measured in how many modes of transportation were required. That was the reason for the growth of the big seaport cities. The ease and relative inexpensiveness of transferring containers has nullified this effect somewhat.

Anyplace a truck or train or airplane can go is a potential shipping node. Around these nodes manufacturing and distribution centers can develop. These are followed by service industries and the businesses that are necessary to support a growing population. Whenever and wherever a new container node arises is an opportunity for real estate people to cash in on the growth.


David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

International Trade & Wealth (pt. 5)

International Trade & Wealth (Pt. 5)

What is really important to us is “how does international trade affect real estate?”

The most obvious things of course are probably all of the imported items in any buildings that are built. In the USA a large portion of our lumber comes from Canada. Many of our fine wood items come from South America and Asia. The furniture comes from China. The cost of these items is held down by international competition. Some items of course are just things we could not have unless they were imported.

International traders and companies that operate businesses outside of their own countries are major users of real estate. Wherever a country touches the rest of the world is a major development point. Look at the areas around ports and international airports. Huge distribution centers spring up everywhere. There will also be manufacturing facilities that take advantage of the proximity to the transportation hubs. These places create jobs. They also bring in foreign workers who buy or rent homes.

Banking has gotten to be a huge industry largely because of the need to move money across national borders but also because of differences in national tax laws. Banks occupy a lot of office space. Their employees make a lot of money and occupy nice homes.

The travel people engage in for business creates an awareness that the countries outside of their own are not fearful environments. They learn to enjoy other cultures and other places. As their experience level grows so does their comfort level. 2nd homes in other countries becomes more desirable.


David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

International Trade & Wealth (Pt. 4)

International Trade & Wealth (Pt. 4)

There are winners and losers in international trade. In the developed world the consumers are big winners. The unskilled factory or technical worker are the big losers. In what is euphemistically called the developing world, all but a few of the people are big losers. This is why trade is often viewed negatively in these countries.

I am referring to the countries that survive off of commodities. Government officials make dishonest deals with big companies to sell the countries birthright (the minerals and resources). Foreign worker are brought in for the well paying jobs. The wealth of the country is exploited and the people of the country get nothing except a few low paying service jobs.

If the money from the sale of the resources was used to fund educational or social programs or develop local industry, everyone could be a winner. Unfortunately, most of the money goes to fund foreign bank accounts. The cycle of poverty continues. There are other instances where excellent resource management benefits everyone.


David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

International Trade & Wealth (pt. 3)

International Trade & Wealth (Pt. 3)

While international trade seems to be a wonderful opportunity to help everyone and make the whole world rich, there is a downside. Thomas Friedman in his book “The World is Flat”, Talks about how technology and communication has leveled the playing field. The book discussed how people no longer have to emigrate to participate in the world economy. He also talks about the many places in the world that are still round. These are the parts of the world that do not have access to the benefits of the global economy. They either have no communication capabilities or they lack the education to take advantage of them.

In many undeveloped countries the farmers cannot compete with big agribusiness and the government subsidies of the USA and the EU. We can say that they must modernize their farming practices so that they can produce enough food for the people in their country and to have surplus for export. We are already seeing the effects of big agribusiness in the developed world. Obesity, cancer and food politics are added ingredients in the mass produced factory food we eat. Talk to a person from outside the USA when they first arrive. Ask them how they like the food here. They may ask you, “What happened to it?”

Imports from China show what can happen when products from an unregulated manufacturing environment hit a vulnerable populace. The savings at the cash register are fast being negated by the dangers of lead paint and dangerous products.

We cannot blame trade for the problems. The blame belongs on greed and ignorance. More universal education can be the answer to many of our problems. Until we live in a perfect altruistic world a little diligence will help as well.


David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

International Trade & Wealth (Pt. 2)

International Trade & Wealth (Pt. 2)

Lets assume that the production possibility of country A is 100 units of item c or 50 units of item d. Country B has a production possibility of 100 units of item d and 50 units of item c. If neither country does trades they could each produce some of each item and come up with a net production of about 70 units depending on what it needs of each item.

By trading with each other each county could have a net gain in production of about 30 units or almost 43%. This is a gross over simplification and does not take into account the possibilities of increased production from economies of scale. This suggests that each country is at least 43% richer because of the trade. The reality is greater because the increased efficiency in production makes the items cheaper for the citizens of each county. This allows them to buy more and further increase production somewhere and increase profits at every stage of the manufacturing and distribution system.

Duties and tariffs do not actually stop trade. What they do is “skim” the profits and reduce the effects of savings and efficiency in the market. Protective tariffs are often counterproductive. The USA tried to protect the steel industry which had about 200,000 jobs with a protective tariff. The result was to drive the steel using industries which employed 10’s of millions offshore. Eventually this hurt the steel industry as well.




David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

International Trade and Wealth (Part 1)

International Trade and Wealth (part 1)

Adam Smith may be a little bit passé but there are a couple of economic theories that still apply to international trade. These are the theories of “Absolute Advantage” and “Comparative Advantage”. Basically according to these theories when trade takes place between countries wealth is created beyond the actual value of the trades.

“Absolute advantage” assumed that a nation would export items that it produce more efficiently than other nations and import items that other nations produced more efficiently. The theory of “Comparative advantage” says that even if one country produces items less efficiently than another country, it could still get an advantage by producing the item(s) that it produced most efficiently and importing the item(s) that it produces less efficiently.

In order to demonstrate the creation of wealth one needs to understand the “production possibilities” of the countries being compared. “Production possibilities designates the capabilities of a country to produce goods when all of its factors of production are fully and efficiently employed” The next section of this blog will demonstrate how wealth is created. This article and the following articles on this subject draw very heavily on an economics textbook by Franklin R. Root called “International Trade and Investment” The sentence above in quotation marks is a direct quote from that book.

David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Managing Properties for Non-resident Aliens

Managing Properties for Non-Resident Aliens

A property manager (or tenant on an unmanaged property) is required to withhold and remit 30% of the rent on a property owned by a non-resident alien. This is not really a withholding tax as it will not be returned to the owner. There are ways to avoid doing this. The owner title the property in a domestic artificial entity or make an election to be taxed on a net basis.

The withheld money must be remitted within 10 days of receipt. This can be a real pain for the property manager. It really makes sense to be sure the owner uses one of the above options. The owners who get caught on this are usually owners of vacation homes who only rent the property out occasionally. There is still no reason not to re-title the property or file the election.

Most properties of this nature do not make a profit and would normally pay no taxes. The property would probably have a net operating loss carry over. A non-resident would probably not meet the criteria to take this loss against other income; but it could reduce the taxes due at the time of sale.

The negligent property manager could be liable for all or part of the taxes owed. If fraud is believed to be involved, criminal penalties may apply.

David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Natural and Unnatural Disasters

Natural and Unnatural Disasters and International Real Estate

In the USA and most of Western Europe we see natural disasters like the fires in California and we sympathize with the victims. They’ve lost “everything”. We think about the irreplaceable items that went up in smoke, blew away with the wind or washed away in the flood.

Most of these people at least have insurance. When the events such as earthquakes and many floods are outside the bounds of insurance they get help from federal and state governments. What happens in a place like Bangladesh where there is no insurance and the government doesn’t offer much if any help. The only assistance comes from international aid agencies.

The people don’t have much in the way of worldly goods anyway; but think how much harder it is for them to replace them. In many cases the disaster is political. A person who leaves their home for political reasons may either have to enter another society as an unwelcome guest or live in a refugee camp for years upon years. When they finally are able to return home, they may find their property occupied by someone else.


David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

International Forum...Luke Romero

International Forum…Luke Romero

“True wisdom comes from a fortune cookie”

“Honesty & friendship bring you fortune”

Why (do) international (real estate)?

Great opportunity base
Expanded market base
Constant movement of Capital
Risk appropriate investment Choices

Who is the market?

Business transferees
2nd home buyers

Finding the client…Networks

Great Destinations…Wherever you want to be.

Where to begin
Look around
Secure a certification
Build good relationships

Getting Paid
Establish the contact
Develop relationship
Get it in writing
Verify form of payment
Stay in contact
Currency exchanges
Be Patient

Access the wisdom


David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

International Forum... Paul McBride

International Forum…Paul McBride

Paul McBride is with Prima Panama. He has a very unique business model which we will discuss in a later blog. This blog will only deal with his presentation at the forum.

Paul’s company wanted to know who there clients were so they sent out a survey by email with 85 questions. They got 600 responses. This is some of what they learned.

Most of the buyers came from referrals either from a friend or someone who had responded to an advertisement.

Most buyers do 3 to 5 years research before they buy. They want lots of information.

The types of purchases they make are: A primary residence or a 2nd home. Many buy for rental now with the idea of a personal use property later. Buyer’s need to know the selling process.

The reasons for purchase are:
Costs of living
Weather (typically warmer)
Proximity to their home market
Taxes
Be around friend & other foreigners

Broker & Attorney very important for foreign buyers, they need to have relationships with others in the transaction.

Transfer Tax vs. Capital Gains
2% transfer tax paid by seller
Corporate transfer no transfer tax
Capital Gain in US less any tax paid in Panama.


David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

International Forum... Mitch Creekmore

International Forum…Mitch Creekmore

Last week I was in Las Vegas at the NAR Convention. On the 13th I moderated a panel discussion on working with International Buyers. The panelists were Mitch Creekmore, Paul McBride and Luke Romero. The next 3 blogs will be summaries of their presentations.

Mitch Creekmore is with Stewart Title. He is the co-author of 2 books. One about Mexico and the other about Central America. I will simply give my notes from his presentation.

I. According to Article 27 of the Mexican Constitution, everything except the surface rights to all of the land in Mexico belongs to the government. One should understand that they do not own subterranean or mineral rights when they buy property.

II. Mexico has the right to expropriate property. (Eminent Domain)

III Foreigners can buy in the interior of the country.
A. They must register
B. The Calvo Claruse requires owners to consider themselves as Mexican citizens for the purpose of any court actions.
C. In the restricted zone, 100 Kilometers from the borders, 50 Kilometers from the coast and all of Baja peninsula cannot be owned by foreigners. Remember… In 1810 the USA stole ½ of Mexico.

IV. Ejido grants rights to communities to farm land. No title can be obtained on this property.

V. A Fideicomiso (trust) is used to purchase land in the restricted zone.


David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Choosing a Location for a Vacation Home

Choosing a Location for a Vacation Home

There are so many factors involved in choosing a location or even a country for a vacation home. How does one make that decision? There is bound to be an intelligent way to choose; but this is an emotion based decision. Does intelligence matter? I think it does. The heart has to have veto power though.

The activities desired has to be the first qualifier. Make a list of things to do on vacation. Make a list of places to choose from. Match up the two lists. Hopefully this will narrow the choices down some. Costs may or may not be a big factor. Check the airfare from home to the vacation home. Some places are accessible by car. What is the expected mode of travel. Golf clubs are not too bad on an airplane. Surfboards are tough. Windsurfers, kayaks and canoes are probably impossible. Can they be rented at the location; or can you store one at the vacation home.

If the vacation home is to be rented when not in use a financial analysis is a good idea. If it is not to be rented, how will the property be secured when it is not in use. In many places leaving a property vacant is like putting up a “move in free” sign. Getting a property back after someone moves in is nearly impossible. Possession is so hard to get on an occupied property that some places even offer “tenant insurance” to cover the rent and costs if a tenant quits paying and refuses to move.

What about security? Capital flows to the highest yield with the lowest risk. A person willing to acquire a property in a less secure environment can expect to pay less for an equivalent property. What type of risk are you willing to take? Nicaragua is a bargain if you are not afraid of Daniel Ortega. I personally do not think he will kill the goose that laid the golden egg. He may even make thing better.




David Segrest is a REALTOR with Segrest International REALTORS. His webpage is http://www.segrestrealty.com

Coastal Properties

Coastal Properties

Because I’m in Brunswick County, NC right now the focus today is coastal properties. Even the properties that are not on water here are very expensive. Several years ago when I was here everything was really cheap. I have asked the local REALTORS why.

It seems that this area was “discovered” when I-40 came through. That was immediately followed by a sewer line along highway 11. This caused a proliferation of huge golf course communities with million dollar homes. Progress is not cheap though.

The area is quite low and marshy and wetlands must be preserved. The abundant wildlife is what gives the area its allure. They don’t want to kill the goose that lays the golden egg. The sewer system was very expensing. The county bought all of the existing sewer plants within its borders and connected everything else. There are places that are flatter than Brunswick county but not many. I can just imagine how much pumping is required for the sewage. Most places it moves by gravity. The tap fee is $10,000.

One thing that really amazes me is that the foreign developers have not discovered this place. There are challenges to development here; but they cannot compare with the challenges faced in Europe. The wetlands and the high water table and the scarcity of the building materials are the biggest challenges. A few of the smaller municipalities have anti-growth policies. Most of the county is waiting with open arms. Do you need to meet some Brunswick County REALTORS? Send me an email.



David Segrest is a REALTOR with Segrest International REALTORS. His webpage is http://www.segrestrealty.com . His email is david@segrestrealty.com

The Lure of Water

The Lure of Water

It amazes me just how much the view of or access to water enhances the value of a property. People are willing to pay more, face hurricanes and typhoons and pay exorbitant prices for insurance just to be near water. What is it about the water?

Could it be the connection to the greater world? That could be the case on a navigable river or the ocean or inland waterway. What about these little mud-puddles in the middle of cities that are called ponds or lakes? Many of them are only breeding traps for mosquitoes. Could it be the energy that seems to come from the water? Could it be the restful feeling from watching the water or listening to the waves at night?

Whatever the reason, water adds value to property. It probably adds more than a garage or a deck and it requires no maintenance. Access to water is one of the things that is fueling today’s international second-home boom. Mexico, Central America and The Caribbean area are all benefiting. In Dubai the new developments involve building islands and increasing coastline. Developers in many areas are building lakes in their subdivisions and charging premiums for lake front and lake view lots. That is real value added.

How will climate change effect the water factor? Will previously water-front properties be dry or so dangerous that no one wants to live there? Will previously dry properties be water-front (or sea bottom)?

Do you want a property looking at or adjoining water? What is your motivation?


David Segrest is a REALTOR with Segrest International REALTORS. His webpage is http://www.segrestrealty.com

Buying Large Tracts of Land as an Investment Pt. 2

Pt. 2 Buying Large Tracts of Land as an Investment

There is a good strategy for buying land as an investment in South America. I would probably exclude the countries of Venezuela, Ecuador and Bolivia for now. In many countries of the region large working farms, hunting preserves and timber areas can be purchased.

Campesinos Sin Tierra and The Mayennes are still a concern; but by operating the property as an ongoing business with onsite staff reduces the odds of encroachment. This also precludes nationalization for the reason of “underutilization”. Hugo Chavez and the other leaders who view him as a role model are exceptions to this possibility. The problem is not that they are socialist or leftist but that they are unpredictable.

In Brazil, Argentina, Uruguay and Chile the property systems are well developed enough that good title is probable. Title insurance is available in these countries. Title insurance is an absolute must. In Peru and Colombia there are also many good opportunities. Colombia offers rather severe security risks in some areas. The second rule of international real estate is “Capital flows to the highest yield with the lowest risk”. A natural corollary to this rule is that the higher the risk the higher the yield. Some chances are worth taking.

My pick of countries for large land purchase are Argentina and Uruguay. If you have an interest in land anywhere in South America, I can help you.


David Segrest is a REALTOR with Segrest International REALTORS. His webpage is http://www.segrestrealty.com

Buying Large Tracts of Land as an Investment

Buying Large Tracts of Land as an Investment

In the USA or Western Europe, one can buy a large tract of land (if it can be found) with reasonable security. It is expensive if it is in the “path of progress”. If it is not in the “path of progress”, it may be cheaper. Possibly it can be used to grow timber or leased to a farmer. The yield will be low and the holding time may be long. When development time comes there may be significant resistance from neighbors and people who are using or would like to use neighboring properties.

The good news is that so long as the taxes are paid ownership is pretty secure. Eminent domain could be exercised; but compensation is usually fair. Even if the property is “downzoned” compensation must be paid. Tax benefits can be obtained by placing property in a “preservation trust” of some type. This limits future uses.

In parts of Asia, South America and Africa. Huge tracts of land can be bought relatively cheaply. Ownership may not be as secure as in other parts of the world. In South America, “Campesinos sin Tierra” and the “Mayennes” make a practice of moving onto unused or unguarded land and claiming squatter’s rights. The governments there lack the political will to evict them. In many African countries. The black governments are seizing white owned land for redistribution to blacks. This seem fair enough, since the white owners seized the land from the blacks in the 1st place. This is not a practice that encourages investment however. Usually redistribution means giving the land to the ruler’s relatives, friends and supporters.

In many countries there are also problems with getting good title. Title insurance is not always available. In some countries it can be obtained at a fairly high cost. The high cost is still cheap compared to buying a property and not owning it. The next blog will identify some countries where land is still reasonable and will discuss how to own the property securely.


David Segrest is a REALTOR with Segrest International REALTORS. His webpage is http://www.segrestrealty.com

Thoughts from O'Hare

Thoughts from O’hare

I have been looking at the “Consensus Forecast” from Latin Trade magazine for the coming year. Latin America overall seems to be declining a little from the strong economic growth that has been experienced over the last year or so. The still are projected to have fairly good growth.

As long as commodity prices hold up the Latin American countries should do well. Tourism is a big shot in the arm and several of the economies are developing non-commodity sectors. The “new left” of the Spanish world has discovered that the best way to help the poorer people is to promote the economy. Thankfully, they are putting some of the new wealth into education and job creation and infrastructure instead of dividing it up among a few friends.

Transparency and good government are the order of the day. The exceptions being Venezuela, Bolivia and Ecuador. Bolivia has commodities; but can’t seem to profit from them. Ecuador’s most profitable commodity is the relationship with Hugo Chavez. While Venezuela is flush, they are buying influence. Commodities prices will probably remain high for many years; but they may not remain “relatively” high. The increased cost of fuel and raw materials and food is driving up the cost of everything else. While having a high income is nice, if the costs of imported goods continues to rise. The commodity producing economies will see their advantages reduced.

I asked a friend from Bolivia if she was worried about Evo Morales. She said, “Our presidents don’t last that long anyway.”




David Segrest is a REALTOR with Segrest International REALTORS. His webpage is http://www.segrestrealty.com

What I learned in Argentina

A Few Things I Learned in Argentina

I promised some URLs from the last Blog. Sorry about that. They are in my check luggage. I am in the Red Carpet Club. I did learn some interesting things about Argentina. Most of them are more cultural than Real Estate related; but real estate is based on relationships. Cultural understanding is necessary for building relationships.

1) Real estate practitioners here study for 3 years to become brokers. In Buenos Aires they can study at the Camara Inmobliaria Argentina or the Collegio de Martilleres y Corredores. They can receive a license from the Martilleres; but a license is not required to sell real estate.
2) This week the Collegio de Martilleres signed an agreement with ICREA which is the International Consortium of Real Estate Associations. This will link them to Worldproperties.com. World Properties is the closest thing we have to an international MLS. About 200 practitioners here received their TRC designation. This empowers them to make and receive international referrals in a secure environment with other members of the consortium. TRC stands for Transnational Referral Certificate.
3) Music and other items in Latin America bear a label describing the type of Spanish used. The three types noted are Mexican, Neutral and Argentinean. The Argentineans do not want their children to learn neutral Spanish. Many of the words are different in Argentina. The biggest difference is the pronunciation. There are some subtle differences; but the most noticeable is the pronunciation of the double “l” In most of the Spanish world “ll” is “y”. In Argentina it is halfway between a “g” and a “ch” .



David Segrest is a REALTOR with Segrest International REALTORS. His webpage is http://www.segrestrealty.com

CIPS Class in Buenos Aires

CIPS Class in Buenos Aires

Today was spent in a CIPS “International Real Estate for Local Markets” Class in Buenos Aires. There has not been a lot of opportunity to find out about market conditions today. Hopefully that will be remedied tonight and tomorrow. I have met many fine Argentinean professionals. There are about 250 of them in the class.

I have received a gift from Silvano Geler (silvano@geler.com) of 5 books that cover the real estate process from beginning to end in all of the countries that speak Spanish. These books are in Spanish. I will be reviewing them in future blogs as I have a chance to read them.

The class is taking place in a Pavilion at the Hippodrome of San Isidro. It is a beautiful facility devoted to horses. It is sponsored by the Colegio de Martilleres y Corredores Publicos. This is a beautiful facility dedicated to horses and horse racing outside of the city of Buenos Aires.

During the break I had the pleasure to talk to Francisco Rodolfo Pesserl (Francisco@pessrl.com.br) of COFECI in Brazil. They are developing a Multiple Listing system that will cover all of Brazil like Realtor.com in the USA. This will eventually connect to Worldproperties.com which strives to become a worldwide MLS.

I will try to get some URLs for the organizations and books mentioned in this blog.


David Segrest is a REALTOR with Segrest International REALTORS. His webpage is http://www.segrestrealty.com

Currency Trends, Good or Bad

Currency Trends, Good or Bad.

When I studied the trend between the USA dollar and the Argentine peso a couple of months ago, I was amazed that the peso had held its own against the dollar for several years. No more. When I checked the peso for my trip to Argentina, I was happy to see that it was at about 3.19. Sad for Argentina. Great for me. I need new shoes and Argentina and Uruguay make the best.

I say sad for Argentina; but is it? I will probably buy 2 pair of shoes instead of one. Maybe my wife will get a new pocketbook. The pesos will still pay the workers and buy the leather and keep up the location for the shoemaker just like before. Only if he wished to buy something imported will he be worse off. Even then because of the extra business, he may have more pesos.

My wife and I went to Buenos Aires back when the peso was tied to the dollar. The stores were full of merchandise. Everything was incredibly expensive and nobody was buying. Argentina is basically a commodities based economy. Economy prices were down so nobody had much money. Now the peso reflects the economy of the country and the prices of the commodities. The people’s income will not change in pesos. Financial misery will be avoided.

Tomorrow I will report on conditions on the street in Buenos Aires.

David Segrest is a REALTOR with Segrest International REALTORS. His webpage is http://www.segrestrealty.com/

y

Winners and Losers of Climate Change

Winners and Losers of Climate Change

Often when we buy real estate we have a long hold plan and a specific use for the property. With the current speed of climate change, perhaps the likely conditions for the target area should be studied before the purchase is made.

In England farmers are able to grow new crops because of warmer weather and a longer growing season. The German vintners who make “Ice wine” have had to keep looking further and further north to obtain the frozen grapes used in that process. Central America and the Southern tip of Mexico are located between the Atlantic and Pacific Oceans, which are major weather pattern creators. The weather phenomenon in these areas has already intensified. Combined with poor land use in the past this is causing mudslides, severe flooding, and increased susceptibility to hurricanes.

Many of the dry areas of the world are getting dryer. Many of the wet areas are getting wetter. If sea level rises will the beautiful beachfront property be beachfront or ocean bottom? Do we need to add a climatologist to our list of helpful professionals when we buy real estate?

For a preview you can go to http://www.npr.org/news/specials/climate/interactive/?ps=bb5




David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Total Cost of Occupancy

Total Cost of Occupancy

Yesterday’s blog discussed methods of evaluating properties in locations where comparable sales are not available or highly inaccurate. One way to compare properties but not evaluate them is to determine the total costs of occupancy. This is a common method of decision making for commercial occupants of space. It is even used to make rent vs. own decisions.

The basic idea is to add all the costs of occupying a property. This could be rent or mortgage payment. If the property is purchased for cash, the cost of not having the money any longer would be evaluated or the purchase price could be amortized as if it had been loaned to a third party. To this would be added taxes, utilities, common area maintenance charges (in a multi-tenant situation) and or maintenance.

A commercial occupant would consider the costs of access to clients and access for employees. Someone looking at a vacation home would look at airfare and telephone costs of the different locations. When considering different cities employment costs must be taken into consideration. In many areas, a residence can not be left unattended. Servants may be needed to live in the property when the owner is away. In a rental, the costs of supervision or management and leasing must be considered. It is also a good idea for any budget to have a generous allocation for “miscellaneous expenses”.

After all of the costs of occupancy are totaled the properties can be compared. In a personal use property this is important; but non-quantifiable items may be just as important. Things like the quality of the environment or the neighbors or personal safety. Even items like the future of the country and possible changes in political, economic and climate conditions. The next blog will discuss winners and losers in climate change.




David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Evaluation of Foreign Properties

Evaluation of Foreign Properties

How do appraisals get done in markets that are not transparent? In the developed world we can use comparable sales. How does one get comparable sales on properties when the records are either non-existent or fraudulent? There is no really good answer to this dilemma; but there are ways of getting pretty close to the value.

On income properties it is relatively easy to get the rent paid on the particular property or see the rent advertised for similar properties. One should keep in mind that asking rent and the amount accepted may be different. Capitalization rate is the amount of net income divided by the purchase price. From this number something should be subtracted for “risk premium” before comparing the yield with investments in other countries or even other types of properties.

In emerging markets, the yield is seldom in line with the price. The properties in many of these areas are appreciating so fast that prices outstrip rents quickly. One way of accounting for this phenomenon is to use the Internal Rate of Return. The internal rate of return discounts all the projected cash flows plus a reversion at some point in time back to the beginning of the investment. All of the cash flows should produce a net present value of 0% when discounted back to the beginning.

There are several problems with this method. The main problem is that the further away from the beginning of the investment the projection goes, the more inaccurate it will be. In any market quickly rising prices are something like a game of musical chairs. The property keeps selling for a higher and higher price. When the music stops the price stops increasing or declines and the last person is left with an overpriced property.

Another problem with internal rate of return is that it assumes all cash flows are reinvested at the same rate as the investment being measured. This is not necessarily the case. A financial managers rate of return assumes small amounts of money are reinvested at a “safe rate” until enough money is accumulated to reach a “reinvestment threshold”. At this point the money is assumed to be invested at a “reinvestment rate”. This gives a better method for comparison.

For user properties total cost of occupancy can be used to compare properties. This does not really establish a market value. The next blog will consider total cost of occupancy.




David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Immigration policy and 2nd home surge in Mexico & Central America

How US Immigration Policies are Fueling the 2nd Home Surge in Mexico & Central America

The falling dollar, great natural beauty and political stability make the US an ideal retirement or second home location. The immigrants and visitors who come and buy for this purpose are welcome additions to whatever community they grace with their presence. They spend money and don’t take jobs. They don’t participate in entitlement programs. Most of the countries in the world are striving to attract these people.

The USA would be first choice for many of these people; but the unfriendly atmosphere runs them away. Most of the people in the USA are really friendly and welcoming of outsiders. Almost any religion is welcome or at least tolerated. The problem is the bureaucracy at homeland security. Everyone is treated as a terrorist until proven otherwise. The countries of Central America and Mexico realize the benefits of immigration and support it. They welcome immigrants with open arms.

The USA should have a special retirement visa. ( I think it is in the works). In addition to that we should have special programs for school teachers, scientists and mathematicians. Foreign students should receive a warm welcome in our educational system and should be encouraged to remain after graduation. A fast track for citizenship should be offered for students graduating from USA colleges and universities.

Diversity enriches our society in many ways. Some diversity enriches our society more than others. If legal immigration were easier we would attract more law abiding immigrants. Our current policies attract only people who are willing to be criminals in order to come here.

David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Which Indexes to Watch

Which Indexes to Watch

Reading the Economist, listening to NPR or CNN, one is deluged with numbers from indexes. There is even an index of leading economic indicators. Is that something like the National Association of Associations? Anyone who has ever traveled to a developing country knows that the information in these indexes is either totally erroneous or simply “plucked from the air”.

In the USA we have a yardstick called the consumer price index. This started out as being a total cost of a “basket” full of items. The government uses this to determine how much to increase payments under entitlement programs. It is in the best interest of the Government to keep the increases low. They have determined that tying this index to a “fixed” basket of goods is not as valid because if something in the basket gets more expensive, a prudent consumer will buy something else. In other words if the price of filet mignon goes up, people will make do with chitterlings. Sometimes I hear on the radio that inflation last month was low except for food and fuel. How long does anyone go without buying food or fuel.

The most relevant index for everything in my estimation is the consumer confidence index. The performance of the stock market, real estate prices, currency exchange rates and everything else in the economy is tied to fear or confidence in the market place. The problem with the consumer confidence index is that it is based on surveys and numbers. I think a better confidence index would be to take everyone’s blood pressure and base the index on the average change in blood pressure. Since this index is unavailable I have another one I use. I call it the “Lunchette index”. It is not very scientific and it doesn’t have a numerical number for reference. I go to lower to middle class eating and drinking establishments and listen to what people are complaining about. If people are complaining about the food or their job or the government, that is good. If people are complaining about prices or taxes, that is not so good. When people are complaining about their family relationships, they are under severe financial stress.

David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Micro Events, Macro Results

Micro Events Macro Results

A common comedy theme is the tiny event with imagined (usually stretched) consequences that turn into a major possible implication. The comedy versions are usually far fetched. In the real world this stuff can happen. A good example is the current sub-prime crisis.

Only a very small percentage of mortgages are in foreclosure. Of those, many will liquidate without a large loss. The real crisis is fear. The sudden lack of confidence in mortgage backed securities has caused a liquidity crunch. This is not just in the sub prime market. When mortgage brokers can’t sell their accumulated mortgages, they can’t get the money to make more mortgages. No mortgages in most of the civilized world means no sales. No sales means no building. No building means no jobs and no materials purchases. The secondary purchases people make when they buy a house are also drying up.

Another by-blow of the sub-prime crisis is that noone really knows who owns all the bad mortgages. Investors afraid of getting stuck don’t invest. The whole world economy suffers. Is this a market landmark? How much further will the economies tank. The stock exchanges have benefited from the Federal Reserve rate cut. How long will this exuberance last? Answer these questions. Get rich.

David Segrest is a REALTOR in Charlotte NC. His website is http:www.segrestrealty.com .

Population Change and International Real Estate

Population Change and International Real Estate

According to an article in The Economist magazine, by the year 2015 the world population will begin to decline. What will this mean for international real estate? I am not an economist or a futurist; but I do read science fiction sometimes. The dire situations there are usually for the purpose of supporting an unreal environment for the purpose of speculation.

What will really happen? Already the population is moving from rural areas to urban ones. More efficient agriculture makes this possible for now. More efficient is not always better. People who can afford it are avoiding factory-grown food as much as possible. People are also moving from developing countries to developed ones for employment and standard of living reasons. Oddly enough other people are going the other way for the same reasons. Central Americans and Mexicans are moving to the US and Spain to find work and money. People from the USA and Spain are going to Central America and Mexico for a slower less expensive lifestyle.

People are living longer in most of the developing world. The birth rate is dropping. The economists seem to think that retirement ages will have to increase. The economists have been shown to be wrong about the things a country should do to increase GDP growth and improve their economies. Maybe they are wrong about this too. Over consumption is wasteful and expensive and after some time it loses its appeal. The Europeans work 36 hours a week and still have unemployment.

If work becomes more portable and people do jobs that do not use up valuable natural resources and energy and do not pollute the environment, think what a change that will make. Automobiles could last 20 years easily. Sure the old cars use more gasoline and pollute a little bit more. How much energy consumption and pollution is caused by making a new one? Why do we need to replace perfectly good clothes because of style changes?

Maybe instead of more consumer goods, a more leisurely population would need more music, more art, more literature. We could live anywhere and produce these things and enjoy life in our own way.






David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Lot Polish and Orbitz

Why I will never book with either one of these companies again:

In May I taught a CIPS Institute in Romania. I made the serious mistake of booking my ticket with Orbitz. Have you ever tried to communicate with Orbitz other than to buy a ticket?

Orbitz booked me an illegal connection in Newark NJ. I took US Air to Newark from Charlotte. They were 15 minutes late. I went to the Lot Polish check in. They would not let me check in because there was less than an hour before my flight. I had to be in Romania the next morning. The only help they were willing to give me was to "try" to put me on the next days flight. I went back to USAir. Not much help there. They did find me an alternative flight on Continental.

I went back to Lot Polish. They had closed and gone home. I booked on Continental and paid for it myself. When I came back I tried for refunds and complained to the FHA. I stopped the payment on my credit card. The credit card did not understand so they went ahead after a couple of months and reinstated the payment. I paid for 2 tickets. I only flew once. I would strongly advise against booking any ticket with Orbitz.

David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Excuses and Promises

Excuses and Promises

I have not written for a while. I have had a very intense teaching and traveling schedule and a little bit of writer's block. I will write something tomorrow. It will not be about real estate. It will be about travel. I will be saying bad things about Orbitz and Lot Polish Airlines. Don't you love smut?

David Segrest

Government Immigration Policies and International Real Estate

Government Immigration Policies and International Real Estate

The real problem in immigration may be the lack of a clear policy as much as the policies themselves. Visa policies for visitors are as much of a problem as the restrictions on permanent residents. The attitude of the government, reflecting the attitude of many Americans, is fear driven. The politicians are afraid to lose their jobs. Many other Americans have a similar fear.

The real results of immigration could be very different with an intelligent immigration policy. The USA could be an economic retirement alternative for Europeans. This would spur the economy, increasing jobs without taking jobs. Skilled and better educated workers could fill serious science, mathematics, engineering and teaching jobs. The taxes and social security they pay would offset the problems that will be caused by the baby boomer bulge as we move through the “snake”.

Lower skilled workers would fill the jobs that undocumented workers fill now. If the legal pressures were removed they would not add to crime and social service problems. States have made it almost impossible for undocumented persons to get drivers’ licenses. This means they drive with no license and no insurance. Part time residents can only get licenses for limited periods of time. A person who spends 6 months out of the year here has to get a new license every time they come.

Tourism is discouraged by the policies of immigration and security. A valuable industry is losing a lot of revenue. This business is being driven elsewhere. The current stupid policies are a partial cause of our current economic slowdown. Complain to your elected officials.







David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Earning a living as and International Real Estate Broker

There are many ways to earn a living in International real estate. It is best to find one or two and stick with those. If the first choice does not work out, build on the experience you have gained and try something else.

Making a business plan: It is necessary to calculate the time and money needed for any endeavor before beginning. A good business plan can be a roadmap to success. A business plan starts with a mission statement. A mission statement for a broker who works with investment properties might read:
“ I assist in the formation of wealth by finding, evaluating and presenting properties that are appropriate for the portfolios of individuals or organizations.”
Once a mission statement has been developed a “break-even” cash flow level must be established. In a business plan for an individual agent the starting place is to determine minimum personal financial requirements. Then the fixed costs of operating the business are added. This gives us the total fixed cost of the enterprise.
The next step is to calculate the profit margin of each transaction or service that will be provided. In real estate this is the most difficult step. A person who has a history of a year or two in the business can use historical data. For a new agent, the only source of these numbers is to talk to experienced agents. These numbers will be different for everyone; so great care should be taken in the research for this step. Now an estimate could be made of the average transaction or service gross revenue. The profit margin can be applied and the number of transactions required to make the break-even income can be estimated.
Now the activities required to cause the transactions to occur must be listed and “closing ratios” must be established. Finally the amount of activity is determined that must be completed to make the “break-even” cash flow level. By examining the activity required the feasibility of the enterprise can be determined. If the enterprise is not feasible or if break even is all that can be expected, the entire process must be re-examined. It may be necessary to go all the way back to the mission statement.

Here is an example of the portion of the business plan discussed above. Please be aware that all of the numbers and assumptions are “plucked from the air”.

Minimum personal requirements (monthly) $ 2500
Fixed business expenses
Car $ 700
Supplies & Postage 200
Office expenses 800
Telephone 400
Travel 1200
Personal Advertising 200
Dues 200
Miscellaneous 200
3900
Break-even cash flow $ 6400

Because the mission statement states that properties will be found for investors, there will be no marketing costs for the individual transactions. It might even be assumed that it will not be necessary to look at every property that is offered and possibly not even all of the properties that are sold. Perhaps the cost percentage ratio of each transaction in this plan will be only 5%. Assuming that the average commission is $35,000. The net profit on each transaction is $33,250.
Since the break even of $6400 per month adds up to 76,800, 2.3 transactions per year are required to break even. If each investor buys a property every 3 years, 7 investors are needed. It will be considered that an investor will be considered “found” when the first property is purchased by them. A further assumption may be made that every year one investor will die, retire, or get out of the business. Also the assumption will be made that one out of every ten properties found will be suitable for one of our investors and one out of every 10 properties offered will be purchased.
This mission statement in the model requires two basic types of activities. One is finding and qualifying investors and the second is finding suitable properties. Another blog will discuss acomplishing these objectives.

David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Climate Change and International Real Estate

Climate Change and International Real Estate

As I write today the “Mayan Riviera” is being pounded by Hurricane Dean. This is a category 5 hurricane. The area just recovered from Hurricane Wilma. No one really knows if climate change is responsible for increased hurricane intensity or if it is just a cyclical thing. We do know that climates are changing. Climate change will have to affect land uses.

The variety of crops that are planted is already changing in England and many of the Scandinavian countries. Fish migrations are changing. As the polar ice packs break up, new areas will become habitable. Other areas may become less desirable. The Sahara desert was once a fertile plain. Some of the “improvements” that come with habitation are actually causing some of the problems.

Draining the swamps in Florida has affected the aquifer that supplies water to most of the southeast. The drought conditions cause seasonal wildfires. Channeling the Mississippi has increased the intensity and destructiveness of the floods. Many of the causes of climate change are irreversible. All that most of us can do is react. There are things we can do to reduce greenhouse emissions. The behavior changes that are needed to effect real change may cost more than we are willing to pay.

As people move to the wilderness to avoid overcrowding and pollution, the over crowding and pollution follows. Is climate change a “market landmark”? What will happen where? How can savvy investors benefit from the changes? What can we do personally to avoid destroying our habitat?







David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Panama Rising

Panama Rising

The construction cranes dominate the skyline of Panama City. Panama seems to be a perfect example of a country doing every thing right. Since the departure of Manuel Noriega and the return of the Panama Canal by the USA, the real estate industry in Panama has done almost nothing but prosper.

Panama made a serious commitment to good management of the resources they obtained in the Canal handover. They have either sold the properties at auction or given concessions to commercial interests providing jobs. In both cases generous tax holidays were offered. The economy got a kick-start from very low paying manufacturing jobs. As wages increased these jobs have moved on to be replaced by better jobs in banking, tourism and the high tech sector.

The retirement market, that once provided buyers for real estate, has been replaced by a thriving second home market. Compared with Costa Rica, the real estate is still cheap. The government guarantees title. The real estate agents are licensed and adhere to a code of ethics. This is a safe market. The environment is protected as well and some of the old problems are being cleaned up. There is still a little bit of corruption; but it is being rooted out. A government official wiped out a banyan swamp to develop the property; but he was caught and imprisoned.

If you are interested in Panama, I have excellent connections there and can introduce you to a competent real estate professional or developer.



David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Real Estate Agents Around the World

Real Estate Agents around the World

Most countries and markets have some really professional practitioners in the real estate business. Finding them is usually the problem. In many countries the industry is totally unregulated; so bad actors don’t get punished or removed from the business. They continue sowing havoc throughout the local market.

The lack of regulation is the main problem. The buyers and sellers are also a large part of the problem. The buyers and sellers have no loyalty to the broker. The broker returns no loyalty to the buyer or seller. Every party looks out for their own self-interest only. No one really benefits. Markets need several things for the brokerage system to function well and provide actual benefits for the buyers and sellers.

The first is regulation and licensing. This is best done by government. In some places where government is unwilling to do the job. Trade associations try to fill the gap. A good example is AMPI in Mexico. They have a code of ethics and minimum membership requirements. This is better than no regulation at all; but it cannot compare with government regulation. Panama is an excellent example of regulation stimulating the market. Since they began licensing brokers, the real estate business and the brokerage business have both prospered.

The second thing is exclusive listings. When a broker cannot get an exclusive listing they have to keep the fact that the property is on the market a secret in order to be in the middle of the transaction. When “everyone” is responsible for marketing, “no-one” does it.

A multiple listing system, where all brokers share all listings is the next thing. Multiple listing systems and exclusive listings are like the chicken and the egg. Either is difficult without the other. Brokers sharing listings with universal offers of cooperation is the only way for the brokerage business to function efficiently and for the real estate markets to achieve their full potential.

Transparency is also a necessity. Unless the data on comparable sales is available, pricing and appraisals are just guess work.







David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

The Flat World and International Real Estate

The Flat World and International Real Estate

Ever since reading Thomas Friedman’s The World is Flat, the implications of globalization have had entirely new meanings. A short summary of the book is that because of advances in technology and attitudes, and because of events like the fall of the Berlin Wall, anyone can have and operated a multinational corporation from their bedroom.

The most exciting implication of this to me, is that the bedroom can be anywhere in the world. There may be a few deep valleys somewhere, where a satellite dish would not work and no other internet service is available; but for the most part any location will work for many businesses.

Some businesses of course are highly localized. These people lose the flexibility that globalization affords; but they also avoid much of the global competition. I really love real estate; because my local business has protection from globalization and increased demand from foreign buyers. My international business gives me personal portability. My hardest decision is “where do I want to be”. Where do you want to be?

The Flat World and International Real Estate

The Flat World and International Real Estate

Ever since reading Thomas Friedman’s The World is Flat, the implications of globalization have had entirely new meanings. A short summary of the book is that because of advances in technology and attitudes, and because of events like the fall of the Berlin Wall, anyone can have and operated a multinational corporation from their bedroom.

The most exciting implication of this to me, is that the bedroom can be anywhere in the world. There may be a few deep valleys somewhere, where a satellite dish would not work and no other internet service is available; but for the most part any location will work for many businesses.

Some businesses of course are highly localized. These people lose the flexibility that globalization affords; but they also avoid much of the global competition. I really love real estate; because my local business has protection from globalization and increased demand from foreign buyers. My international business gives me personal portability. My hardest decision is “where do I want to be”. Where do you want to be?

Ecuadorian Independence

Ecuadorian Independence

Friday the 10th of August was Ecuadorian Independence day. This was the day of the first cry of Independence in Latin America. Celebrations of Columbus’ day and Independence Day are combined. I cannot comprehend why a nation of mostly indigenous people would celebrate Columbus’ day but they do.

Ecuador became part of the Inca Empire around 1450. In 1526 the Inca Huayna Capac died and left the empire to 2 sons. The northern empire based in Quito was given to Atahualpa. War between the brothers softened the Inca empire for the Spanish. Atahualpa was murdered by Pizzarro on August 29 of 1533 and Ecuador became part New Granada (Peru). The Incas burned Quito to the ground rather than leave it to the Spanish.

Guayaquil was the first city in Ecuador to achieve its independence from the Spanish on 10/9/1820. Ecuador along with Venezuela and Colombia became Gran Colombia. This only lasted 8 years. Ecuador achieved full independence in 1830.

Quito is the capital of Ecuador; but Guayaquil is the largest city. The regional differences sometimes make Ecuador seem like two countries. The country has a rich culture which is a blend of the Indigenous and the Spanish heritage. The music features indigenous flutes and melodies that are absolutely haunting. The “panama hat” comes for Ecuador. The country actually has two capitals. Quito and Guayaquil.

The popular foods include “cuy” which is Guinea Pig. The most popular sport is Soccer. When the FIFA adopted a rule that official games could not be played above 2500 meters. President Rafael Correa made an official protest.

The Galapagos Islands are a UN World Heritage site. They are considered very instrumental in the formation of Darwin’s “Origin of Species”. 65% of the population is mixed indigenous and Spanish. The pure indigenous population is about 25% . Only 7% is of pure Caucasian descent.

70% of population of Ecuador lives below the poverty line. This is probably why so many Ecuadorians have emigrated to other countries. They are a valuable inclusion to the culture here in Charlotte, NC. and in the other countries where they have settled. Viva Ecuador!!!!









David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

International Real Estate in Spain

International Real Estate in Spain

Spain is the number one target country outside the USA for immigration. This is largely due to the progressive immigration policies. Spain is also a prime target country for vacation homes. This of course is due to the beautiful beaches, the benign weather and the wonderful people.

Over half of the immigrants to Spain come from the European Union. Some of these come to work, some come to retire. Many Northern Europeans buy vacation homes on the Costa del Sol. The rest of the immigrants are mostly from Northern Africa and South America. The largest representation of a single country comes from Ecuador.

South Americans love Spain because of the language and culture. The jobs are plentiful and personal security is better than in South America. Immigration to Spain is easier than to the USA and the government is friendlier. Home ownership is quite easy for an immigrant who can prove income. They can even use Spanish Mortgages to purchase homes in their own country. Spain has one of the fastest growing economies in the EU. (It has slowed some this past year). The ready source of jobs is very attractive to immigrants. Spain has wisely focused their law enforcement strategy on keeping out human traffickers and criminals.

Are you interested in immigration to Spain? Are you interested in a vacation home in Spain?




David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Baby Boomers in Central America

Baby Boomers in Central America

Central America and Mexico have long been retirement havens for people for Europe and North America. The benign climate and economical living conditions have been attractive. Costa Rica, because of its stability and good government have been a prime target. The real estate prices in Costa Rica got higher and higher. The retirees have been displaced by second home buyers. These people buy in expatriate enclaves which are normally gated communities with golf courses, private beaches or other amenities.

As Costa Rican prices have escalated the buyers have begun to focus more on Panama and Nicaragua. Panama has everything Costa Rica does at 1/3 of the price. The Panamanian government even guarantees the titles so no title Insurance is needed. Nicaragua is less expensive even than Panama. Some people worry about the Ortega regime coming to power. I think Ortega has learned that prosperity is the real beneficiary of all the people.

The vice president spoke to our “FECEPAC” real estate conference in February. He expressed the government’s intention to make Nicaragua an investor friendly environment. The biggest issue facing real estate buyers in Nicaragua is quality of title. The government has expressed its commitment to remedying that situation.

Do you have a desire to explore the mountains, hot springs, beaches and rain forests of Central America? The life-style there is fantastic. The people are warm and friendly. I can help. Contact me.


David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Foreign Purchase of Land in the USA

Foreign Purchase of Land in the USA

Small tracts of land, often called mini-ranches, in rural areas of the USA are very attractive to foreign buyers. The Europeans and South Americans both like the Southern Appalachian mountains for several reasons. They are attractive to Europeans because it is very hard to find properties of 2 to 10 acres (1-4 hectares) at a reasonable price in Europe. South Americans like the properties because they can be left unattended when they are not being used, unlike South American properties.

Nice tracts of land can be had for between $40,000 and $100,000. This is comparable to the cost of a city lot in the USA and in much of the world is a great deal less expensive than a city lot. Another attraction of these lots is there accessibility. In many areas of the world a remote property means it will have to be accessed by 4-wheel-drive vehicles or in some cases by mule or horse. Here most of the properties can be driven to in a low-slung sports car.

Because of the great attractiveness of these properties, I am working up a list of available tracts to which I can refer my friends. As this list becomes available I will be happy to share it with those who request it.


David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Market Landmarks

Market Landmarks

Savvy investors in all fields look for market landmarks. Market landmarks are indicators of a possible shift in risk or yield. They may be selling signals or buying signals. A huge landmark in recent events was the end of hostilities in the former Yugoslavia. The real estate markets in these countries have boomed. As countries join the European Union, they have a strong upward swing in real estate prices. Joining the Euro has the same results.

The Middle East could be an excellent place to look for market landmarks. One only has to look at Qatar and Dubai to realize what could happen with liberal stabile regimes in this part of the world. Murmurs of peace or liberalizations of regimes can be market landmarks. One thing to remember though: Change can also bring instability which will, at least temporarily, affect markets negatively.

A good example of this is when Suharto left power in Indonesia. The resulting instability is still affecting conditions there. A slow return to normality will improve conditions. Certain areas like Aceh may be slower to return to stability. There is a great deal of profit to be made in taking advantage of this type of system change. One of the oldest investment maxims is, “The time to buy is when the blood is in the streets”. While that may be a little extreme, turmoil does indicate a possibility of opportunity.

Other market landmarks may be less ominous. The uncoupling of the dollar and the peso and the freezing of assets in Argentina caused some great buying opportunities. The peso has, after the initial crash, maintained its position against the dollar. This could be as much a result of negative events in the USA economy as positive events in Argentina’s economy. Commodity prices are strong and Argentina is a commodities based economy.

How does an individual investor identify and take advantage of market landmarks? That would be a good subject for a later blog.

David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Finding Good Market Information

Finding Good Market Information

One of the toughest things about international real estate is getting good market information. The USA is great for “transparency”. The tax offices and the MLS in most areas have information on past transactions. Please departments have neighborhood-by- neighborhood data on crime. The census office provides excellent demographics. Talking to owners will normally get the property performance data needed to project yield.

In Scandinavia the situation is even better. Western Europe is still good for the most part. Central and Eastern Europe, much of Asia and South and Central America gets tough. The Middle East and Africa is almost impossible. Jones Lang LaSalle publishes an annual “Real Estate Transparency Index”. This is an excellent guide to how much market information is available.

Without good market data it is almost impossible to make good investment decisions. One of the problems is the way transfer taxes are calculated in some countries. The increase in the price of a property for each seller is taxed. Each seller tries to keep this low; so part of the transaction is “official”. Another part of the transaction take place privately. Since the seller only reports part of the sale price, the buyers have a lower original basis in the property. When the buyer becomes the seller, the basis is low and the sales price is reported lower again.

Getting information in many areas is only possible through a trusted real estate professional. Even the information available to them is mostly hearsay.





David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Owning Rental Properties Abroad

Rental Properties Abroad

Just how good an idea is it to own rental properties abroad? There are several advantages and disadvantages to doing so. An astute investor can take advantage of currency trends and situations where the perceived risk is higher than the actual risk. The most important caveat is that the investor must have a deep understanding of the legal and social niceties of the market.

The rule that capital flows to the highest yield with the lowest risk, implies that one will receive a higher yield in risky markets. Unfortunately, this is not always the case. The countries in Central Europe that are new or coming members of the EU have seen such an increase in the price of properties that the yield is no higher than Western Europe. The safety is not commensurate with the yield.

Commercial properties probably offer the greatest security. In many countries residential tenants receive so much protection and preference over the landlord that one loses control of the property by renting it. In fast growing cities there is considerable upside potential in the rental rates. Some countries have some rather unique ways of renting properties.

In the USA and Western Europe, most commercial leases are on a net basis. This means the tenant pays for everything. In South America commercial leases are a fairly new phenomenon in many places. The occupant would buy a floor or half of the floor in an office building. This is changing. Most of the leases are not on a net basis now; but change is coming.

In South Korea, the deposit is often as high as the value of the property. The rent is extremely low or non-existent. The landlord can invest the security deposit and keep the return on that deposit. This could be a possible risk for the tenant.

Market knowledge and understanding of the local culture is essential in any investment.





David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Residential Rentals Abroad

Just how good an idea is it to own rental properties abroad? There are several advantages and disadvantages to doing so. An astute investor can take advantage of currency trends and situations where the perceived risk is higher than the actual risk. The most important caveat is that the investor must have a deep understanding of the legal and social niceties of the market.

The rule that capital flows to the highest yield with the lowest risk, implies that one will receive a higher yield in risky markets. Unfortunately, this is not always the case. The countries in Central Europe that are new or coming members of the EU have seen such an increase in the price of properties that the yield is no higher than Western Europe. The safety is not commensurate with the yield.

Commercial properties probably offer the greatest security. In many countries residential tenants receive so much protection and preference over the landlord that one loses control of the property by renting it. In fast growing cities there is considerable upside potential in the rental rates. Some countries have some rather unique ways of renting properties.

In the USA and Western Europe, most commercial leases are on a net basis. This means the tenant pays for everything. In South America commercial leases are a fairly new phenomenon in many places. The occupant would buy a floor or half of the floor in an office building. This is changing. Most of the leases are not on a net basis now; but change is coming.

In South Korea, the deposit is often as high as the value of the property. The rent is extremely low or non-existent. The landlord can invest the security deposit and keep the return on that deposit. This could be a possible risk for the tenant.

Market knowledge and understanding of the local culture is essential in any investment.





David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Rental Properties in Cartagena, Colombia

Rental Properties in Cartagena, Colombia

Yesterday, I was able to spend the day with my friend Carlos Bustamante with Inmobiliaria Bustamante & Cia. in Cartagena Colombia. He has a general brokerage operation, with emphasis on property management. We discussed rental properties in Cartagena.

The rent on commercial properties there is normally 1% of the value of the property per month. The rent on residential properties is from .3% to .5% of the value of the property. Rent increases are usually annual and are based on the Colombian equivalent of the Consumer Price Index. Because it is generally believed that the government manipulates these figures, the increase is usually the index plus a premium.

As in many countries, once a residential tenant is established in a home, removal of the tenant is quite difficult. For this reason there is a “tenant insurance” system. The landlord pays 2% of the rent to the insurance company. The insurance company screens the tenant and either approves or denies them. If the tenant fails to pay the rent by the “late payment” date, the landlord calls the insurance company and the insurance company pays the rent. The landlord may not accept payments from the tenant after this. The tenant must pay directly to the insurance company. The insurance company will collect the rent or evict the tenant. They pay the rent to the landlord for up to 36 months while the eviction process is going on.

If the eviction process takes over 36 months the insurance company no longer pays the rent. They will finish the eviction process. Does it seem frightful that the eviction process could take over 36 months?


David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

Other Risk in International Real Estate

Non-economic Risk in International Real Estate

The two major concerns other than economic issues in International Real Estate are personal security and property security. Reading the news or the government advisories can give the impression of almost impossible conditions. The only way to know is to go.
I have traveled in countries whose security conditions were supposed to be horrible and found things to be at least as safe as conditions in my home town.

I take the attitude that I would not invest my money anywhere that I am afraid to take my body. In many cases the danger of kidnapping, terror events, robbery or civil unrest make visiting or investing unwise at best.

Property security is another matter. There are very few places outside of the USA and Western Europe where you can leave property unattended. Not only is the property subject to break-ins and things of that nature; but it may be occupied by someone that is difficult or impossible to remove.

There are several national and international organizations that specialize in takeovers of private or public properties. The Mayennes in Brazil and Campesinos sin Tierra in Spanish speaking South America are just two. Their basic modus operandi is to wait for a long holiday, when the courts are closed, and mass people and materials close to the target property. They can build and entire village in a long weekend. The governments usually do not have the political will to displace them. The property owner just loses.

In rental properties it is essential to examine closely the procedures for eviction in the locale of the investment. Some places have simple legal procedures others have regimes that are virtually impossible. Sometimes the rules for commercial and residential are different. Even temporary rental of a vacation home can turn into a nightmare in some areas.

David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World

What I learned from my students.

What I learned from my class today

Teaching international real estate is great because I always learn so much from the students. Today’s student mix included Asians, Latins, a German, a Scot and many others with extensive international backgrounds.

I learned about “strat-titles”. I hope I spelled that right. It is a form of ownership using an artificial entity. It is popular in Central America. I can’t believe that as many times as I have been there, I had never heard of it.

A strat title is a very common system for holding property title. In many places it is very expensive to transfer property; but relatively cheap to transfer ownership of a company or other artificial entity. By taking title in the “strat title” the transfer of ownership becomes much cheaper.
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I learned about a type of Indian Feng-shue called vaastu. Vaastu is the science of direction that combines all the five elements of nature and balances them with the man and the material. Vaastu Shastra is creating a congenial setting or a place to live or work, in the most scientific way taking advantages of the benefits bestowed by the five elements called “Paancha Maha Bhootas” of nature thereby paving the way for enhanced health, wealth, prosperity and happiness in an enlightened environment The five elements are earth, air, fire, water and space.

I learned a lot about Las Vegas. I never realized that this was a huge 2nd home market. There is also a very large Philipino community here.

Economic risk in International Real Estate

Other Economic Issues

While currency fluctuations are probably the major economic consideration in a cross-border transaction, there are quite a few other considerations.

Repatriation of Funds: Most countries allow foreign investors to “repatriate” or take their money back home. Some do not. Some only allow a certain amount to be carried out of the country. Other countries allow for repatriations but “hard currency” may not be available. Planning for any investment should include an “exit strategy”. This is extremely important in international transactions.

Allowable Foreign Ownership: In most of the industrialized countries there are no or very few restrictions on foreign ownership. These are usually matters of reporting and paying taxes. Some countries, such as Mexico, have restrictions on properties within a certain distance of the borders or the coast. Other countries either do not allow foreign ownership or require participation by a national of that country. Frequently the restrictions can be avoided by using a domestic artificial entity such as a corporation, anonymous society, LLC, trust or partnership. The artificial entity may need a portion of foreign ownership as well.

In certain cases, like China, no one can actually own the land. They can only lease it from the government. This is true in specific situations in other countries. In Russia the land outside the cities can be owned by a domestic entity. Land inside the cities is owned by and leased from the city. In Israel, a lot of the land is owned by the Israel Land Agency and leased from them. In these cases the individual only owns the improvements.

Taxation: This can be an extremely complicated issue. Buyers should always talk to a local tax attorney specializing in working with nationals of their own county. Frequently there are special permits required for foreign buyers or sellers. A foreign buyer potentially becomes a foreign seller. The time to examine taxes is before purchase. Tax treaties are also extremely important in the treatment of foreign buyers, sellers and owners. Occasionally governments offer special incentives to foreign companies and individuals to stimulate investment. This possibility should be examined as a standard part of the planning process.
Transfer expenses: Taxes are a major transfer expense in many places; but they are not the only transfer expense. In some countries the cost of buying or selling a property are very low. In other places they are quite expensive. Often it is good to have an artificial entity that owns each property. It may be cheaper to sell the entity than the property.

Possibility of Nationalization: This threat is not limited to the developing world. Eminent domain is the law in most countries. In some countries taking is subject to due process in other cases it is not. Australia has a reputation for not paying fair value. Venezuela takes land that the president considers to be “under-utilized”. In Zimbabwe all the land owned by whites was just taken. These are only a few examples. In the USA in Connecticut, land was taken for homeowners to sell to a commercial developer.

Tomorrow, I will travel. If a post is made it will concern other risks of owning foreign real estate and how to deal with them. If not the next post will deal with the future of international real estate. Your comments and thoughts on this subject would be appreciated.



David Segrest is a REALTOR in Charlotte, NC

David S. Segrest, CIPS, CCIM, TRC, CEA
david@segrestrealty.com
http://www.segrestrealty.com
Serving the world in the Carolinas, Serving the Carolinas in the World