International Real Estate
- Thread starter jboire99
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lots in some areas .. not so much in others.
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[quote user=jboire99]what else?
1) Mortgage rates and/or mortgage money availability. Mortgages do not exist in many markets. If they will be created that will have positive effect on real estate prices as now more people can afford it .. such as S-America or many (but not all) Asian or African countries.
2) Land titles: do they exist or how strong are the rights of owners. Read the book by DeSoto: "Why capitalism works in the West, but fails everywhere else." Essentially a book on land titles showing that with secure land titles banks lends, and owners and business owners prosper - THE KEY INGREDIENT for a prosperous country.
3) civil war .. ending or starting. I would think that in North Korea, Venezuela, Egypt or Libya there must be some great beach front properties to be had for a song. Or mountain/oasis properties in Syria that might go up 10 fold once they have a democraticly rooted government system. or many in Africa.
4) currency control / inflation / money supply: huge money supply = rise in hard asset value in the local currency (but not US or Can$).
5) takeover or nuclear threats by neighbors
6) unexploited resources, be they gold, silver, oil, coal, gas, uranium .. e.g. USA, Venezuela, Middle East, Greece (yes, that Greece), Cyprus, Lebanon (lots of oil and gas suspected or proven in Eastern Mediterranean !)
7) local politics, moving from communism/socialism/left of center to modern democracy with a surplus or at least balanced budget: N-Korea, China, Cuba, Venezuela, Ontario, Quebec come to mind
1) Mortgage rates and/or mortgage money availability. Mortgages do not exist in many markets. If they will be created that will have positive effect on real estate prices as now more people can afford it .. such as S-America or many (but not all) Asian or African countries.
2) Land titles: do they exist or how strong are the rights of owners. Read the book by DeSoto: "Why capitalism works in the West, but fails everywhere else." Essentially a book on land titles showing that with secure land titles banks lends, and owners and business owners prosper - THE KEY INGREDIENT for a prosperous country.
3) civil war .. ending or starting. I would think that in North Korea, Venezuela, Egypt or Libya there must be some great beach front properties to be had for a song. Or mountain/oasis properties in Syria that might go up 10 fold once they have a democraticly rooted government system. or many in Africa.
4) currency control / inflation / money supply: huge money supply = rise in hard asset value in the local currency (but not US or Can$).
5) takeover or nuclear threats by neighbors
6) unexploited resources, be they gold, silver, oil, coal, gas, uranium .. e.g. USA, Venezuela, Middle East, Greece (yes, that Greece), Cyprus, Lebanon (lots of oil and gas suspected or proven in Eastern Mediterranean !)
7) local politics, moving from communism/socialism/left of center to modern democracy with a surplus or at least balanced budget: N-Korea, China, Cuba, Venezuela, Ontario, Quebec come to mind
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I would not advise investing internationally except if you are really experienced.
Don't forget that when you invest in another country, You make two investment:
1) In the building itself
2) In the currency. If the currency Drop, don't forget tht you get your rent in that currency.
Now, let the fun begins :
India :
-Real estate is booming. About 30% per year. The population will surpass China's population by 2030.
- 60% of the population live in villages of less than 5000 peoples. There is a massive rural-urban migration right now
-India has one of the lowest human development index in the world ( Too much government intervention for too long)
-About 50% of the population work in agriculture. But agriculture produce only 18% of their GDP.
- Predominande of inneficient state-owned enterprises, particularly in the bankinf system. It drags their economic growth.
- The adoption of a centrally planned economy after India's independance from Great Britain is the reason why India growth had been so slow compared to China.
So basically, it's poor
People go in New shopping Centers just for the air conditioning, they don't have enough money to buy.
There is no securitized Real estate market in India. So it would have to be a FDI. *Over 50% of FDI in China comes from Real estate, compared to only 1% in India.
Valmont's conclusion : I would not in India right now. There are better options.
Brazil: It's a stable place.
Economy is balanced, not overly dependent on exports to any other country. It will be the 5th largest economy by 2050.
Their Exports as % of GDP is low.
- They also have vast natural ressources.
-Contrary to India, Brazil is already a upper-middle income country with lower natural growth rate.
Brazil has been less affected by the financial crisis because :
1)Credit market forms a TINY (1%) of the economy. Not like Europe and USA
2)Government is smart and fiscally responsible
3)Wide range of trading partners
4) net exporters of food and oil
Median age is like 27, it's young! Brazil is aging at a really slower pace than Europe, Japan, America, China, Russia, etc.
About 50% of population is middle class.
Sam zell is highly involved in shopping centers in Brazil
They have one of the biggest housing deficit in the world.
Valmont's conclusion : One of the best place to invest.
China :
Lack of sufficient investment-grade is one of the main barrier of entry.
Most of local developpers comes from non-real estate background such as manufacturing ( they have access to land and financing).
China is not transparant at all. It's all relationships driven.
Since 2006 there is a new legislation tha prohibit foreign investor to invest directly in China. You have to open a Onshore corporate structure.
Securitization is on the horizon soon.
China's will become the worl's largest tourisme destination by 2020. There are building 80 airports.
/>
Seniors housing is going to be a huge market : China adopted a one child policy. Four grand parents for every one child will make their traditional form of elder care impossible.
Most developers in China build high luxury condos, but the big demand is for middle income housing.
Mezzamine loan market is huge right now : there are about 25 000 developers in need of mezzamine financing.
China's government is currently devaluating their currency, big time. It's good for them since they export alot. Weak currency = they export more. But soon the population will want Ipods, Computers, etc. The government will have no choice but to let the currency appreciate.
Valmont's conclusion : Good, but be careful
Don't forget that when you invest in another country, You make two investment:
1) In the building itself
2) In the currency. If the currency Drop, don't forget tht you get your rent in that currency.
Now, let the fun begins :
India :
-Real estate is booming. About 30% per year. The population will surpass China's population by 2030.
- 60% of the population live in villages of less than 5000 peoples. There is a massive rural-urban migration right now
-India has one of the lowest human development index in the world ( Too much government intervention for too long)
-About 50% of the population work in agriculture. But agriculture produce only 18% of their GDP.
- Predominande of inneficient state-owned enterprises, particularly in the bankinf system. It drags their economic growth.
- The adoption of a centrally planned economy after India's independance from Great Britain is the reason why India growth had been so slow compared to China.
So basically, it's poor
People go in New shopping Centers just for the air conditioning, they don't have enough money to buy.
There is no securitized Real estate market in India. So it would have to be a FDI. *Over 50% of FDI in China comes from Real estate, compared to only 1% in India.
Valmont's conclusion : I would not in India right now. There are better options.
Brazil: It's a stable place.
Economy is balanced, not overly dependent on exports to any other country. It will be the 5th largest economy by 2050.
Their Exports as % of GDP is low.
- They also have vast natural ressources.
-Contrary to India, Brazil is already a upper-middle income country with lower natural growth rate.
Brazil has been less affected by the financial crisis because :
1)Credit market forms a TINY (1%) of the economy. Not like Europe and USA
2)Government is smart and fiscally responsible
3)Wide range of trading partners
4) net exporters of food and oil
Median age is like 27, it's young! Brazil is aging at a really slower pace than Europe, Japan, America, China, Russia, etc.
About 50% of population is middle class.
Sam zell is highly involved in shopping centers in Brazil
They have one of the biggest housing deficit in the world.
Valmont's conclusion : One of the best place to invest.
China :
Lack of sufficient investment-grade is one of the main barrier of entry.
Most of local developpers comes from non-real estate background such as manufacturing ( they have access to land and financing).
China is not transparant at all. It's all relationships driven.
Since 2006 there is a new legislation tha prohibit foreign investor to invest directly in China. You have to open a Onshore corporate structure.
Securitization is on the horizon soon.
China's will become the worl's largest tourisme destination by 2020. There are building 80 airports.
/>
Seniors housing is going to be a huge market : China adopted a one child policy. Four grand parents for every one child will make their traditional form of elder care impossible.
Most developers in China build high luxury condos, but the big demand is for middle income housing.
Mezzamine loan market is huge right now : there are about 25 000 developers in need of mezzamine financing.
China's government is currently devaluating their currency, big time. It's good for them since they export alot. Weak currency = they export more. But soon the population will want Ipods, Computers, etc. The government will have no choice but to let the currency appreciate.
Valmont's conclusion : Good, but be careful
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[quote user=maximevalmont]Valmont's conclusion : Good, but be careful
Great post! Thanks for sharing.
Great post! Thanks for sharing.
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You are welcome, Brett!
Valmont.
Valmont.
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I think a useful rule for international investing is to use money that you won't require a return on in local C $ dollars. Ex - if you decide to go US RE for all of your income, you might find yourself squeezed big time if inflation really hits there and US $ value drops. Therefore try to use money that you can leave in that currency and not get hit with inflation and other exchange taxes/fees. The US $ is a great candidate for that since there are a lot of options for what to do with US dollars in the US or other countries without changing them back to Canadian $$.
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[quote user=maximevalmont]Brazil: It's a stable place.
Economy is balanced, not overly dependent on exports to any other country. It will be the 5th largest economy by 2050.
Their Exports as % of GDP is low.
- They also have vast natural ressources.
-Contrary to India, Brazil is already a upper-middle income country with lower natural growth rate.
Brazil has been less affected by the financial crisis because :
1)Credit market forms a TINY (1%) of the economy. Not like Europe and USA
2)Government is smart and fiscally responsible
3)Wide range of trading partners
4) net exporters of food and oil
Median age is like 27, it's young! Brazil is aging at a really slower pace than Europe, Japan, America, China, Russia, etc.
About 50% of population is middle class.
Sam zell is highly involved in shopping centers in Brazil
They have one of the biggest housing deficit in the world.
Valmont's conclusion : One of the best place to invest.
I don't disagree with all of this, but you're definitely missing some potential downsides here. Have you been to Brazil recently? The infrastructure situation is a serious issue, with serious underdevelopment in public transport especially. Crime has gotten better, but it's still a significant issue. The reason the rich in Sao Paulo commute by helicopter isn't because it's slightly faster, it's due to the prevalence of crime/kidnappings.
Also, the large appreciation in the currency over the past decade has made Brazil expensive relative to it's surrounding countries and the US, so wealth is currently flowing out of the country to investments elsewhere. That appreciated currency has also harmed various types of industries, and caused domestic prices of consumer goods to increase. These types of economic shifts add risk to the economy.
When you consider the significant trade/tariff barriers remaining in Brazil and the inflexibility that they (and price controls!) add to the economy, the risk is significant, imo.
Finally, price to rent ratios aren't favourable enough to compensate for the elevated risk or make it worth it to deal in a foreign land/language. It's possible that other investment types may compensate for this risk, I only looked at small scale residential property when I was there, and my primary purpose was tourism so I didn't investigate thoroughly.
Regards,
Michael
Economy is balanced, not overly dependent on exports to any other country. It will be the 5th largest economy by 2050.
Their Exports as % of GDP is low.
- They also have vast natural ressources.
-Contrary to India, Brazil is already a upper-middle income country with lower natural growth rate.
Brazil has been less affected by the financial crisis because :
1)Credit market forms a TINY (1%) of the economy. Not like Europe and USA
2)Government is smart and fiscally responsible
3)Wide range of trading partners
4) net exporters of food and oil
Median age is like 27, it's young! Brazil is aging at a really slower pace than Europe, Japan, America, China, Russia, etc.
About 50% of population is middle class.
Sam zell is highly involved in shopping centers in Brazil
They have one of the biggest housing deficit in the world.
Valmont's conclusion : One of the best place to invest.
I don't disagree with all of this, but you're definitely missing some potential downsides here. Have you been to Brazil recently? The infrastructure situation is a serious issue, with serious underdevelopment in public transport especially. Crime has gotten better, but it's still a significant issue. The reason the rich in Sao Paulo commute by helicopter isn't because it's slightly faster, it's due to the prevalence of crime/kidnappings.
Also, the large appreciation in the currency over the past decade has made Brazil expensive relative to it's surrounding countries and the US, so wealth is currently flowing out of the country to investments elsewhere. That appreciated currency has also harmed various types of industries, and caused domestic prices of consumer goods to increase. These types of economic shifts add risk to the economy.
When you consider the significant trade/tariff barriers remaining in Brazil and the inflexibility that they (and price controls!) add to the economy, the risk is significant, imo.
Finally, price to rent ratios aren't favourable enough to compensate for the elevated risk or make it worth it to deal in a foreign land/language. It's possible that other investment types may compensate for this risk, I only looked at small scale residential property when I was there, and my primary purpose was tourism so I didn't investigate thoroughly.
Regards,
Michael
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Nah, I don't agree at all.
You might be wright, but I don't agree at all
First of all I have no idea why you say Wealth is flowing out of the country. Everytimr I read about Brazil, people are investing there. Sam zell, is investing heavily there, as many others.
Like I said, Brazil is really stable economically.
Also, the middle class have now access to mortgages.
Their government is also really smart and they see foreign investment is Brazil as a good thing
I don't think you can judge an Economy just by going there and chill on the beach for a few weeks. It's all in the numbers.
There are alot of speculation right now saying the is a Bubble in Brazil, because there is alot of investment there going on. So I really have no idea why you say money is flowing out of the country.
So basically I have no clue of what you are talking about here, but hey, I often wrong and I might be this time too. I'm used to it now
Valmont
You might be wright, but I don't agree at all
First of all I have no idea why you say Wealth is flowing out of the country. Everytimr I read about Brazil, people are investing there. Sam zell, is investing heavily there, as many others.
Like I said, Brazil is really stable economically.
Also, the middle class have now access to mortgages.
Their government is also really smart and they see foreign investment is Brazil as a good thing
I don't think you can judge an Economy just by going there and chill on the beach for a few weeks. It's all in the numbers.
There are alot of speculation right now saying the is a Bubble in Brazil, because there is alot of investment there going on. So I really have no idea why you say money is flowing out of the country.
So basically I have no clue of what you are talking about here, but hey, I often wrong and I might be this time too. I'm used to it now
Valmont
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I say wealth is flowing out of the country based on reports of Brazillians buying up Miami real estate as a hedge against economic/political strife in their homeland. Sam Zell may be buying shopping centres there, and I have no idea what type of cap rates they trade at. But I did speak with a number of real estate people there, and the price/rent ratios aren't as good as I'm getting here in Calgary, so I'd never consider investing there with worse initial returns after considering the extra cost/hassles. Also, Sam Zell may not be the best person to follow lately (google sam zell tribune for more).
I also disagree with Brazil being stable economically, and that the gov't is "really smart." Their currently ranked 120th in the world for business friendliness by the world bank, after luminaries like Ethiopia and Egypt. http://data.worldbank.org/indicator/IC.BUS.EASE.XQ
Brazil's is governed by the left leaning Worker's Party, which is a disaster waiting to happen, IMO.
Anyway, I don't really care, since I won't be investing there anyway, but before you put your money into a foreign country more due diligence is necessary.
Regards,
Michael
I also disagree with Brazil being stable economically, and that the gov't is "really smart." Their currently ranked 120th in the world for business friendliness by the world bank, after luminaries like Ethiopia and Egypt. http://data.worldbank.org/indicator/IC.BUS.EASE.XQ
Brazil's is governed by the left leaning Worker's Party, which is a disaster waiting to happen, IMO.
Anyway, I don't really care, since I won't be investing there anyway, but before you put your money into a foreign country more due diligence is necessary.
Regards,
Michael
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Alright, fair enough
We'll see in the future what happens. So much thing can happen that could change everything.
But here is where we agree; Investing in Calgary is good
Valmont
We'll see in the future what happens. So much thing can happen that could change everything.
But here is where we agree; Investing in Calgary is good
Valmont
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[quote user=maximevalmont]
But here is where we agree; Investing in Calgary is goodOnly if you do not pay too much, manage it well and are not over-levered !
While a rising tide lifts all boats, some captains still manage to sink the ship.
You can make a fortune in a bad market, and lose your shirt in a good one. It's a business. Learn the tools of the trade.
But here is where we agree; Investing in Calgary is good
Only if you do not pay too much, manage it well and are not over-levered !While a rising tide lifts all boats, some captains still manage to sink the ship.
You can make a fortune in a bad market, and lose your shirt in a good one. It's a business. Learn the tools of the trade.
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[quote user=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.
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.
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[quote user=maximevalmont][quote user=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
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
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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?
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?
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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.
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.
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[quote user=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
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
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[quote user=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.
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.