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/

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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 .