My Secrets
to a Lifetime of Making Money in Overseas Real Estate - Page Two
by Gary
Scott
Now, the same
thing is happening in Ecuador. My interest in this country began in
1996, when I was looking for the best opportunities in Latin America.
According to a recent survey I read, Latin America is currently the
least popular region for investors. Yet this is a region with great
potential. Neighbor to the United States, Latin America (according to
The Economist) has a larger disproportion of wealth than any other
region (including Africa). This means that the region has more potential
than any other for growth in its middle class. That’s why I was attracted
to Ecuador.
I believe the
global market will continue to expand. And I believe that the current emerging
market crunch has created an opportunity of a lifetime.
I also believe
that the investments most investors ignore are the ones that yield the
greatest profits.
Ecuador
is the oldest democracy in Latin America, and just slightly farther
from Miami than is Los Angeles. Prices are ridiculously low, yet foreign-exchange
restrictions have been abolished. You can hold dollar accounts outside
the country (for security) as you look for opportunities here.
When I first
arrived in 1996, the country was undergoing a shakedown. It had enjoyed
enormous reform in the early ’90s. The Ecuadorian economy had begun
to boom. Then, in 1995, an armed conflict with Peru and an unprecedented
drought (which interrupted electricity supplies) depressed the economy
and killed the boom.
Still undiscovered
This country,
you see, has everything: vast natural beauty, a rich culture, and better
law and order than much of the United States.
It has a very
low cost of living, and enjoys sleeping real estate and stock markets.
Resident visas are easy to obtain. The country has huge natural
resources and an incredible variety of climates, ranging from miles of
unspoiled beach to rain forests and rich Andean mountain ranges.
Yet Ecuador
had not yet caught on when I was first started looking at it. In fact,
it still hasn’t. Only 10 thousand foreigners lived there a few years ago.
And tourism was still in its infancy.
So I bought
Ecuadorian
shares
and started looking for real estate. My wife and I visited several times.
The more I saw, the more I liked, and I quietly began buying up land and
alerting readers of this newsletter. This advance warning has already helped
some of my readers cash in. We have been
living in Ecuador for the
past few months watching people make a profit.
Beachfront
property—$500 an acre For example, I just looked at a listing for an 8-year-old,
3,000-square-foot, beachfront house (fully furnished) in a charming Pacific
fishing village. It listed at only US$30,000 (asking price)! Brand-new,
magnificently beautiful, two-bedroom Moroccan-style condos in Quito are
selling for under $30,000. I heard that one of my readers bought 64 acres
of beachfront property at $500 per acre. Sounds cheap, doesn’t it?
Believe it or not, there is a listing for a 1,600-square-foot, three-bedroom
beachfront fixer-upper for just US$9,000! On top of all this, there are
no foreign-exchange restrictions in Ecuador. All profits can be taken out
of the country. Non residents can hold dollar accounts outside Ecuador
(for
banking safety) and then make real-estate investments just as if they
were resident.
One president
after another may be wiped out by the current bad times, yet difficulties
are the precursors to better times. Despite the bad economic times, the
country is still politically and socially stable. At its worst, Ecuador
still feels much safer than most U.S. cities in normal times. Another of
my readers, who bought a condo in Quito, described this phenomenon to me
when he wrote, “Quito is not a city whose social structure will break
up, even in the worst of times.” I agree.
Easy residency
requirements
The Ecuadorians
are among the friendliest, most easy-going people I have met in 30
years of travel. This is not to say there won’t be demonstrations, crimes,
or social problems, including strikes and occasional riots. But the problems
won’t be big ones—at least as far as real-estate investments are concerned.
And they won’t last long. They won’t involve death and destruction.
You can even
become a resident (and a citizen if you wish) with no investment, provided
your income is as little as $1,500 a month. This is why I believe the turmoil
(which may last for some time) offers such incredible opportunity
now. These problems allow you to buy land not too far from the United States
at a fraction of U.S. prices.
As the
global economy grows, and as technology allows more and more people
to live anywhere they choose (as Merri and I now can do) while they
work somewhere else, more and more people will flock to the sun. When they
reach Florida, they will find that prices are high and conditions are crowded.
They will look for cheaper alternatives. Ecuador is one such alternative.
This alone can push prices up. A modest beachfront house in Naples today
may cost 2 million dollars or more. How many can afford that price? A similar
house in Ecuador goes for $50,000. Just think how much extra
travel and other great things the extra $1,950,000 will buy.
Why Ecuador’s
properties are so cheap
In 1996, as
Ecuador was trying to recover from its battle with Peru (the two countries
have now declared a settlement), the people made a terrible mistake. They
elected Abdalah Bucaram (called El Loco—“the crazy man”—by many) as
president of the country. He turned out to be an incredibly inept leader—so
corrupt that he was soon impeached. Regretfully, the interim president
was not much better (and is currently under arrest for corruption as
well). The nation endured three years of political backwardness at
a time when strong leadership was needed most.
Simultaneously
five other events also hit the country’s economy hard. The first two,
El
Niño and La Niña, caused record rainfalls for two years
in a row. Almost continual flooding wiped out roads, bridges, and crops,
creating billions of dollars worth of damage.
In addition
to leaving bad crops, Latin America has been hurt by the fact that Europe
has been unfairly limiting banana imports from the region. Ecuador is the
largest banana exporter in the world. These limitations have hurt
the country’s economy. In addition to this list of black events, the emerging-market
crisis reduced the inflow of investment, raised financing costs, and added
to the nation’s woes.
To top it all
off, the price of oil crashed! Ecuador is the second-largest producer
of oil in South America. The government receives 25 percent of its
revenues from oil sales. These economic problems have led to a recession
and a banking crisis which caused the sucre (Ecuador’s currency) to plunge.
The currency collapsed (53 percent at one point in just a few days)
so fast that the president had to step in, declare a state of emergency,
and close banks for a week. There was no gas, business ground to a halt,
etc.
Now there’s
a new president, and the country has dollarized its currency. It may sound
like disaster, but, believe me, this is an incredible opportunity.
