How We Choose An Overseas Property Investment

At lunch yesterday, a friend in town for this week’s Live and Invest in Panama Conference broke out his phone and started showing my wife, Kathleen, photos of properties from a Portugal real estate e-letter he gets.

The cheapest one was a farmhouse in the countryside on an acre or two. The price was 17,000 euros.

The house was made of stone, more than 100 years old, and looked charming in the picture. Those factors and the price were enough to get Kathleen’s attention. She was ready to get on a plane to go have a look.

That’s how my wife shops for real estate. She buys what she likes. She doesn’t like to let the practicalities slow her down.

The practical aspects of a purchase are left to me. The buying process in the place where the property is located… the decision as to how to take title to the asset… the number-crunching to think through how we’ll make money from the buy… those are my concerns.

Kathleen assures me it’s a fair division of labor.

Really, it’s an organic consequence. Kathleen and I take completely different approaches when sizing up an investment opportunity. Sure, I want to like the property, too, but I’m OK buying something I don’t personally like if the numbers are compelling.

I’ve made many investments over the years in properties that were not places I’d want to live. However, I knew that they would make good rentals, for example, or that the markets where they were located were poised for quick appreciation.

Kathleen enjoyed the profits from these buys, I know, but she’s not going to take time to make them happen.

The Caribbean is a good example.

I’m not a Caribbean kind of guy. A couple of days on an island, and I’m bored. I don’t snorkel or scuba dive, and I have never understood the appeal of sunbathing.

However, I recognize that the Caribbean is a dream come true for millions of people all around the world. For some, a Caribbean island is the only place they’re interested in vacationing, and they are willing to pay a premium for the chance.

So, while I have little interest in spending time in the region and would never think of living in the Caribbean, last year I made a Caribbean island investment. It was a purchase based entirely on compelling rental projections.

A low price doesn’t mean a property is a good investment. That 17,000-euro farmhouse in Portugal may never be worth more than 17,000 euros, and it’s not likely to rent well.

Whereas a US$3 million property in Turks and Caicos could be an excellent investment. I know someone who bought such a house a few years ago. He’s earned 8% net renting it out each year since.

If you want to find a good real estate investment opportunity, look within your budget but don’t focus on price. Shop for something you like, but also focus on what should appeal to the broader market.

Then run the numbers before telling your spouse about the opportunity… and keep her away from friends who carry around overseas property listings on their phones.

Lief Simon