.
Talking
about Nicaragua - Investing in Nicaragua - Page Two
By Robert
Fordi
|
|
|
.
| A
few savvy investors have been following the Central American land speculation
boom since it began in Costa Rica in the early 70's, moved to Belize in
the mid 80's, and landed in Honduras by the early 90's. Other Central
American countries are also realizing that policies which encourage foreign
investment and foreign retirement can work. But as new countries
open their doors, others start to close theirs. Costa Rica and Belize
are clearly not as friendly to foreign investors and land buyers as they
once were.
There is good news, however, for investors looking for the "next Costa
Rica": If history is a guide, it can take a decade or more for the amount
of investment capital being sought by a foreign country to actually arrive.
Any blips in the home economy or political situation draw this time line
out even longer. Similarly, it takes time to attract future retirees.
Only after the the inflow has reached its target will a host country remove
the welcome mat.
With these off my list for now, I headed to Nicaragua. But first,
let's see why Central American beach property is a good bet for the future.
Lifestyle
changes
There are several longer-term demographic changes which are beginning to
intersect with one another. First, there is the increased mobility
of society brought about by the relative affordability of airline fares
to the mainstream public. Forty years ago, it was primarily the wealthy
who went on international excursions or vacations to an island paradise.
For the last twenty years, everyone goes. Look at where honeymooners
have gone since 1975 versus where they went in the 1950's and 1960's.
These sorts of trips are now viewed by many, not as a luxury, but as a
right.
Secondly,
is the passionate love affair people have with ocean and beaches.
Many people believe this fixation with sand and waves is an innate desire.
Go to any beach in the U.S. on July 4th and you might too. But as
I have travelled through Central America, it is clear this is not the case.
In reality, most native peoples in these countries live away from the waterfront.
And this, upon reflection, does make a great deal of sense. Safety
is a key factor. Your chances are much better of surviving a hurricane
if your house isn't built on a beach. And daily practicality plays
a large part. The farther one is from the water, the farther the
bugs are away from you. And if you get to a market before the buying
frenzy begins, you can reap substantial rewards.
|
Click On Map to Enlarge
| Robert
Fordi is agent for International Living Properties, S.A., owner and
developer of the Playa Rosada project a residential reserve located within
the 1,700 acre Rancho Santana along Nicaragua's southern Pacific coast.
If you would like information about Playa Rosada, visit their website -
Click
Here - |
|
|
The
third factor is the increasing affluence of the baby boomer generation.
Many of these dual income households are reaching their peak earning years
and beginning to realize the amount of money they've put into their 401-K
programs since 1990. Individual's retirement schedules are being moved
up, in many cases, by several years.
All of these factors are resulting in a march to the beach. These
buyers will begin, in earnest, to aggressively seek out second homes on
beaches somewhere far away from it all. And by acquiring beachfront
property at the earliest stages of this wave, before the rush of the
crowds, the
long and short term profit potential is staggering. Demand
to this point in time has only shown us the tip of its iceberg.
The real markets and profits have not been even partially tapped.
But let's get back to a good U.S. beach example for a minute.
Beachfront
history
A life-long friend of mine bought a nice two story bayfront beach house
straddling two lots along the New Jersey shore in the mid-1970's for $70,000.
He had always wanted a second home on the beach, away from the hustle of
Philadelphia. Twenty years later, he had spent $130,000 to move the
existing house over a few feet and add onto it. He's left with a
beach house selling for $1mm and a lot worth a solid $400k. A good
$1.2mm profit (a 15% compounded return) over the life of his investment.
Similar examples can be found on any coastline of the U.S., as long as
it is relatively near population areas.
Think Malibu
and Boca Raton. Though buyers always have needed to keep any eye
to where they are in an economic cycle, ocean front real estate has typically
been an excellent investment
over the medium
and long term. But can these prices keep going?
Actually, my friend's property in New Jersey hasn't appreciated much since
the late 1980's. He has a few thousand neighbors in the same
boat. Ditto Calfornia. Florida still chugs along given
the national population shift to the southeast, but this too will normalize
over time. Bottom line, the big money on coastal real estate in the
U.S. has been made. I do not believe anyone will get hurt if they
are prudent on the buy, but the year in, year out 15% returns for U.S.
and European beach front are over.
Misperception
= Opportunity
Though I am a charter member of the press bashing bandwagon, here is a
case in which the problem is really with the reader. For those without
an understanding of Nicaragua's geography, transportation systems and city
sizes, most typical newspaper articles are misleading. A quick read
of a few U.S. news articles about lawlessness, kidnapping, and torture
make the country completely off-limits to most. This may seem the
prudent move unless you understand that most incidents occured YEARS AGO
IN THE NORTHERN MOUNTAINS where less than 5% of Nicaragua's population
lives. The analogy here is to, say, decide not to visit the Napa
Valley today because there were riots in Los Angeles several years ago.
This misunderstanding is reinforced by lingering memories of a civil
war that has been over since 1990. Remember Oliver North?
I am not frustrated by these misperceptions, though. In fact, there
could not be better news for investors like you and me. As Francis
Bacon said, "Knowledge itself is power". For land speculators and
investors, knowledge ahead of the crowd is also the way to huge profits.
This sort of "phantom grist" keeps the media mill running at high speed.
It's old news and it's unfortunate for a country that's trying so hard.
The future
looks bright
Beachfront tracts, ranchland, single-family homes, you name it, if it exists,
it's for sale. But a buyer needs to exercise patience and strong
follow-up.
I believe there are incredible opportunities for investors willing to get
into this market. All signs point toward the imminent beginning of
positive international interest.
As with all speculative acquisitions, there are risks. But as in
other Central American markets that have boomed over the last twenty years,
investors who have prudently taken these risks stand to reap substantial
rewards.
Kindest regards,
Robert Fordi
Director
The Global
Real Estate Society
|
