maximevalmont

ThomasBeyer

You can make a fortune in a bad market, and lose your shirt in a good one

 

Yep, I agree.

Still, the best way to do it is to know the trade AND invest in a good market. I moved from Montreal to Calgary just for this ;)

By the way, I'm glad you take the time to post on this forum. You make quality Posts.

Valmont.

 

Welcome! We're glad to have you.

Regards,

Michael

In BRIC or E7 countries there could be more equity appreciation and undervalued RE opportunities
available, than opportunities with great cash-flow which could be harder to come by. Increases in GDP per capita and population shift to urban areas are drivers of equity appreciation in some of these places. Some RE investors in developing countries use a price to rent ratio, or 1% rule of thumb, 100 months of rent equal approximate property value.

Business Case: What about a commercial building sold at auction for $700,000 already fully rented paying $20,000 a month in rent, in Brazil or another E7 country, how attractive or unattractive would this be for some people? Investing using a corporate structure for example. If time is of the essence, what would be the main aspects to look at in a deal such as this in order to make a decision?

 

 On a commercial building, The value of the building is pretty much in the lease.

In commercial buildings, the leases can be quite long 5+ years.  To evaluate properly a commercial building you must be able to fully understand the leases; All the clauses, etc. You must also determine if the tenants are good. If the building has a tenant with poor credit, and his business is in a sector of the economy that's going down....It will affect the value of the building.


Also, what you are talking about here is the investment value. It's different than the market value.

In the investment value, your opportunity cost is calculated in the equation. With the market value, it is not.

jboire99

Business Case: What about a commercial building sold at auction for $700,000 already fully rented paying $20,000 a month in rent, in Brazil or another E7 country, how attractive or unattractive would this be for some people? Investing using a corporate structure for example. If time is of the essence, what would be the main aspects to look at in a deal such as this in order to make a decision?

 

You shouldn't make an investment like that, in my opinion, unless you've done research in the local market and understand the lease, the bankruptcy/insolvency laws (if your tenant want out), the judicial system, the re-lease/re-sale potential for the land, and the micro-location factors (eg neighbourhood, zoning, etc).

Just because a deal has a short timeline isn't a good reason to forego proper due diligence. If you're not familiar enough with the market to do the due diligence in time then you shouldn't bid.

Regards,

Michael

bizaro86

You shouldn't make an investment like that, in my opinion, unless you've done research in the local market and understand the lease, the bankruptcy/insolvency laws (if your tenant want out), the judicial system, the re-lease/re-sale potential for the land, and the micro-location factors (eg neighbourhood, zoning, etc).

This is excellent advice.  Any Canadian resident contemplating an investment in another country should read this ten times over before writing an offer.

It is very easy to dig up economics or follow the news on another country.  Sometimes socio-economic and political factors can make investments in other countries seem more attractive than what is available across the street.

The mechanics and costs of actually going out and making an investment are much harder to put your finger on.  All of the factors Michael suggests above coupled with tax laws in the subject country can alter the risk profile dramatically.  It is not as simple as looking at price to rent there vs. price to rent here and jumping in.

To add to what Michael and Mr. Redline have wrote - also note cultural issues /  corruption / criminal issues might be an issue and adds an extra element of risk that you would not find in Canada -

Ever try collecting rent off of someone half a world a way who's family is the police and/or judiciary?

Do you think in all situations you are getting appropriate rent amounts or repair costs even if you are a "foreign rich devil taking advantage of the renter's situation"

Investing in foreign countries without significant expertise is a great way for a small investor to go bankrupt.

 

I know a guy whose father died in Pakistan about 8 years ago. His father was a multi millionaire leaving a large estate. My friend is the sole heir. He fought to get his estate as outlined in the will for years, refused to pay off the judges, and now faces attempted murder charges because various attorneys who wanted a piece of the estate paid off corrupt police and judges to file those charges. He can no longer visit Pakistan as then he will be arrested and likely tortured into signing confessions. He probably will never see any of the money of his inheritance and now wishes he had just paid off the judges to start with (who wanted a LOT because the estate is so large).

This can happen to you in many, many other countries including Mexico

TangoWhiskey

This can happen to you in many, many other countries including Mexico

I won't even go there for a holiday let alone buy property there. 

Interesting post Tango, thank you