How to Move a 5,000 Pound Block Using the Moon, Two Boats and a Tree Trunk

Here’s a head-scratcher for you: How do you move a 5,000 pound concrete block sitting on the beach 165 feet into the bay when you don’t have a crane or a barge?

Well, if you’re a Panamanian, all you need are two 10-foot boats with outboard motors, a rope and one metal bar.

And, oh yeah, the moon.

The Plan

Josh captured this feat in four different videos. I’ll link to each video at the end of the article. Continue Reading

What I Learned About The Real Estate Markets On My Drive Through Mexico, Guatamala, Honduras, & Costa Rica.

I have been a full time real estate investor for 15 years. The first property I purchased was a farm in Costa Rica at the age of 18. Since then I have spent years traveling, living in different countries, founding different investment companies, and studying how the real estate markets work, grow, stagnate, and function under different circumstances.

Continue Reading

Getting a Screaming Deal in Latin American Real Estate

Written by ETI’s Josh Linnes for Panama Realtor, Panama’s largest online real estate brokerage.

Many people who invest in real estate in foreign countries are not smart about how they do it. They may search on the Internet for something that looks pretty, go and spend a few days in a location and decide to buy. They may make a half-million dollar decision in 72 hours.

Unfortunately, whether people are buying property for a home or an investment, they take a massive risk doing it this way. The way to overcome these obstacles is through due diligence.

Talk to several different brokers and go to all the real estate offices in a town to learn what properties are available. Talk to attorneys and engineers who work in these towns. Going the extra mile to talk with those professionals will help you get a true picture of local real estate values and which properties are bargains. If you don’t do this work, make sure you have someone doing it for you.

I first bought property in Costa Rica as a teenager and have worked in real estate in Central America for 15 years. Markets here undergo big changes. Factors such as small town politics, lack of security, unprofessional builders and real estate agents can all complicate the process.

Our approach to real estate in Central America — we work in Panama, Costa Rica and Nicaragua — is to talk to as many people on the ground as possible. Then we take the information we have gathered, aggregate it and compile as many data points as possible to discover present and future values.

When our company acquired a 400-acre island in Panama, we relied on this boots-on-the-ground strategy to fill in the gaps in knowledge between what the locals know and what the international investment community knew about the area. For instance, we knew a new road was going to be built in the area. The locals knew the road was coming, but didn’t connect that with an increased desirability of the property to investors. We understood exactly what a new road would do to appreciate the value of the surrounding property, so we began scouting.

The area contained dozens of islands just off the coast. Our scouts located a 400-acre island that was completely uninhabited and covered in primary & secondary forest, with over five miles of coastline. So we began the process of acquiring the land.

Developing our island project involved what is called right of possession rather than deeded ownership. We spent $60,000 or $70,000 and two to three months of literally every single day going and meeting with new attorneys to learn everything we could before acquiring title.

We contacted the property owner through proxy. We were able to negotiate the deal for 1/6th of the owner’s opening price. We bought the property at such a low price, that even if the real estate market tanked, we could still sell for a profit.

In fact, the market did turn south shortly after we bought the island, and we still could have sold for a small profit but we held onto the property, and when the new road was built, the property values skyrocketed. The property is currently selling at a 200 percent return per meter on the initial investment.

We were also able to add value to the property by reducing uncertainty and risk for potential buyers. We completed a topography of the property, secured an environmental opinion, completed water studies, documented chain of ownership and created trails throughout the property to provide access.

There are no shortcuts when it comes to making wise investment decisions in emerging markets, but the rewards can be great. Here are a few pieces of advice for those who are new to the process:

  1. Start your research on the Internet. Each country in Central America now has two or three different real estate portals and probably 10 to 25 different real estate offices. Pick an area you are interested in and get as much information as you can, understanding that prices advertised over the Internet are asking prices. When you or someone representing you does leg work on the ground, you find that asking prices can differ by up to 50 percent.
  2. Look at as many properties as possible. The only way to know you are getting a good deal is to take the time to look at up to 50 to 60 properties. To me, 50 is the magic number. But look at everything you can to get a tangible sense of land values. The best way to do this is to carefully plan before you travel, narrowing down your search and finding locals who are willing to show you as many properties as possible.
  3. When scouting a property, understand that land in Panama and other Central American countries can change drastically between the rainy and dry seasons. Also be aware that livestock and neighbors may be using the property. Get to know your neighbors. Plan to spend several days there if possible and talk to as many people as possible to find out what the property is like year-round.
  4. Don’t take any part of the process for granted. Be aware that just because a piece of land Panama has a title does not mean it is safe to buy. Always get a title search and then have your attorney independently verify that title search.
  5. Don’t rush anything. Allowing ample time is the best negotiating tactic not only for real estate transactions but for all your dealings in Panama and other Latin American countries. Allow much more time than you think you will need for border crossings, travel and for really getting to know the area you are visiting.

People who dream of relocating to a tropical paradise often have many emotions attached to those dreams. But your best bet, whether shopping for a home or an investment, is to keep your emotions from clouding your judgment. As beautiful and compelling as property in Central America can be, don’t get attached until after you have done all your homework.

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Looking Panamanian

Looking Panamanian saves money while ensuring equal treatment from the bureaucracy and judiciary, but it makes doing business complicated.

Anyone who has traveled much in developing countries has come across a situation where tourists get charged more than locals.

The tourist price, or the gringo price as it is known in Panama, can be genuinely noble, like paying extra to visit a national monument and subsidizing access for locals while helping to fund necessary upkeep. Or it can be downright thievery, like paying several times the usual price for carpets and cab rides. Continue Reading

Land Development Stages in Emerging Markets

There are five distinct stages of land development in emerging markets each characterized by different land-use and types of buyers.

We use Market Stages in order to provide a framework for evaluating a market, property, and business plan.

Stage 1

The land is valued based on its value to the local community. Economic potential based on international valuation has yet to occur. So a location with a fantastic view or right next to a beach isn’t any more expensive than a nearby plot with similar value to the local economy.

There are Stage 1 areas all over Central America. Stage 1 areas may have great potential. Some may even be developed one day, but many will never realize the value that a global market would bring.

Buyers at Stage 1

In addition to locals trading property based on its value to the local economy, a Stage 1 buyer is like a pioneer with an eye for potential. They often have to enter on a horse or a boat to find the area, and they realize the difference between an excellent piece of land and a merely adequate piece of land. Sometimes they have a long-term goal for a return, but mostly they just love the area and the land is less investment and more passion.

Signs of Advancing to Stage 2

As international buyers with a new end-use for the land move in to the market, it’s beginning to move to Stage 2.

Stage 2

Early buyers recognize more global commercial potential and speculate on higher future value. There is no evidence of an international market for these properties at this time. Buyers are lured to the area by the opportunity to enjoy their own gorgeous piece of land at a ridiculously low price.

Often these properties have no road access or utilities, but buyers at Stage 2 can also heavily influence how the area develops by establishing the tenor of development as other investors seek to build complementary businesses.

Buyers at Stage 2

Speculators who also enjoy adopting an area, influencing how it grows, and then seeing it mature according to their vision.

Signs of Advancing to Stage 3

Word begins to spread locally about the price paid driving the price up as speculative buyers begin to purchase. As the price, and value, goes up, more money is drawn to the area feeding the cycle.

Many of the early buyers who purchased larger pieces of land for much less start to sell off small parcels from their property at a much higher price.

Stage 3 buyers who expect infrastructure, services and community to be there or to be arriving soon start purchasing land.

Stage 3

Smaller lots go on sale with a few houses popping up. The region doesn’t look much different from a Stage 2 area as very little building is happening. Most of the transactions are still speculative. Building of very basic amenities begins.

Buyers at Stage 3

Buyers start picking up smaller parcels and lots from the early large-scale speculators. A hand-full of small-scale buyers build houses, but most are speculating and plan to sit on the land a bit before building or selling. Selling of nearby large-scale pieces continues.

Signs of Advancing to Stage 4

Someone begins offering a cohesive residential product, like a subdivision, and people start to move in. The various businesses offering services to that residential base soon follow.

Stage 4

For the first time, you begin to see a critical mass of residents creating community infrastructure including restaurants, grocery stores and tourism businesses. A significant number of tourists decide they like the area so much that they want to settle and a lot more residential housing appears. Larger businesses like supermarkets and hotels start to appear as Stage 4 progresses.

The area begins to be recognized for what it is rather than its potential as businesses and community become established.

Buyers at Stage 4

Individuals, entrepreneurs and businesses looking to live, work and do business in the area start buying the properties. Simply flipping undeveloped land is a much more difficult business model in this stage.

Signs of Advancing to Stage 5

The big chains start building and plans for a full complement of amenities and advanced infrastructure emerge.

Stage 5

A full-scale large town with all of the typical commercial infrastructure, including a range of grocery, restaurant and entertainment options, medical services and maybe even an airport. Tourism is no longer an essential driver of growth as other forms of industries and incomes are established.

Buyers at Stage 5

There are all sorts of buyers mostly with the common characteristic that they plan on using the land.

Using the Stages

Each stage presents unique opportunities and challenges. By understanding these stages the investor has a better framework to evaluate a market and make better decisions.

Titling ROP

Titling rights of possession (ROP) land can be relatively straightforward or may require a patient wait-and-see approach depending on the type of land.

Article Highlights

  • PRONAT titles whole districts at a time under 2 separate programs. In both cases, the process is automatic and there are low associated costs.
  • The decision to title agricultural land is a lot easier than the decision to title coastal land. Agricultural land only requires the desire and a little bit of time and money.
  • It’s a better idea to hold on to ROP in coastal areas and wait for the titling process to improve or to wait until the property gets titled by PRONAT.

Rights of possession are a foreign concept that leave many international investors ill at ease. For many, it is just not worth the effort to learn and do what is required to acquire and maintain a healthy ROP claim. It’s quite possible to possess and sell ROP land just like titled land, but someone who is uncomfortable with ROP should make the effort to title the land for the added security and comfort.

Currently the titling situation depends on the location of the property. Continue Reading

ROP Now and the Future

Most signs point to the eventual titling of all rights of possession (ROP) as each attempt at legislation governing ROP gets progressively more balanced and fair.

Article Highlights

  • Momentum to title ROP continues to build. Legislative attempts to title ROP continue to mature. Even if the current attempts fail, it is a matter of when, not if, titling of ROP holdings happen.
  • There is virtual unanimity amongst the Panamanian professional class that ROP hinders the progressive image that Panama attempts to portray.
  • There is every reason to believe that ROP holders will be able to turn their ROP claims into full title at little or no cost.

President Ricardo Martinelli rode into power by combining populist politics with a solid business background. It sounds like a strange combination, but a President who’s already earned a fortune isn’t as likely to succumb to the pull of corruption that’s plagued many Panamanian politicians. And, as someone who understands the needs of business, there is a lot of hope that he can help both rich and poor by accelerating the expansion of the economy.

In his inaugural address, Martinelli specifically mentioned ROP as one of the government priorities.

We will begin a massive land titling program, so that I can tell everyone who’s listening who has possessory rights, prepare these rights because you’re going to have your piece of land titled.

Martinelli’s comments aren’t all that new. Continue Reading

Preserving ROP Claims

Preserving a rights of possession (ROP) claim requires a deliberate plan to demonstrate continued possession of the property.

Article Highlights

  • Preserving a rights of possession (ROP) claim requires a deliberate plan to demonstrate continued possession of the property.
  • Using the land helps demonstrate possession and makes it less likely that a neighbor will think it’s okay to use the land.
  • Hiring a caretaker who keeps everything neat and in good repair also helps maintain an ROP claim.
  • Building on the land is another way to demonstrate possession and strengthen an ROP claim.

Kurt Vonnegut once wrote that “everyone wants to build, but nobody wants to do maintenance.” Luckily for investors buying ROP, building is a large part of maintaining an ROP claim.

If an ROP claim is contested, Continue Reading

Advantages and Disadvantages of ROP

Rights of possession (ROP) has some important advantages and one big disadvantage compared to fully titled property.

Article Highlights

  • The main reason to buy ROP land is that it is the piece of land that best fits the business plan.
  • The biggest disadvantage ROP land has versus titled property is that it can’t be used to secure financing.

Purchasing ROP can be frustrating. The idea of possessing land instead of owning it is so foreign to most North Americans that many just give up and look elsewhere. But, once they understand the risks of ROP, there are just a few basic advantages and disadvantages that differentiate ROP from titled property. Continue Reading

Navigating the Risks of ROP

Poor understanding of rights of possession (ROP) on the part of foreign investors is the biggest obstacle to investing profitably in ROP as the main risks are well understood and easily resolved.

Article Highlights

  • The biggest obstacle to consistently purchasing and profiting from ROP land isn’t the unusual system, it’s the poor grasp of the system by foreign investors.
  • Historically, challenges to ROP claims come from either a family member of the seller or from a neighbor of the seller.
  • The way to resolve this problem is to go into the community and get signed affidavits from neighbors and family stating that the land in question is solely possessed by the seller.

Warren Buffett famously described the junk bond market as weeds priced as flowers. He warned anyone who would listen to stay away. In spite of the risks, Buffett found junk bonds that he actually liked. He never wavered from his opposition to junk bonds. But in a perilous market, he was able to find opportunity that justified the risks.

Purchasing rights of possession (ROP or derechos de posesorios) is as risky as any random junk bond. Unprepared and uneducated investors can get seriously burned. But an informed investigator can consistently Continue Reading