Investing Without Borders

Central America Real Estate Solution: Why, When and How.

andresabbagh — Mon, 24 Nov 2008 01:27:45 +0000

It is true that the financial and economic crisis in the USA has quickly become an international problem. However, Central America is not subject to the loss of financial guarantees that provoked the crisis in USA, as the financial system is much more regulated in Latin American countries, as well as more contained. I feel confident, and so do most experts, that the crisis will not reach the widespread magnitude of USA.

The financial implosion in United States coincides with the phenomenon of a massive number of baby boomers’ reaching retirement age. The savings they had accumulated throughout a lifetime have been greatly reduced. I have personally talked to people who tell me that they have lost up to 40% of their 401Ks. In order to maintain (or improve) their quality of life during their retirement years, many are increasingly looking to moving to Central America, where they can live comfortably with around 60% less than they could ever live in the United States. This includes the availability of quality medical care, too.

The public and private sectors in Central America understand this and have been developing projects tailored to international pensioners; governments have been promoting tax and business incentives, and legislation that will facilitate this demographic movement. Indeed, the fastest growing demographic group in Central America is US retirees.

I recently gave a presentation at the annual convention and expo of the National Association of Realtors in Orlando titled “Central America Real Estate Solution: Why, Wghen and How” and as promised, have uploaded that presentation unto this blog. You may find the link to your right hand side or may copy/paste the following:http://www.box.net/shared/2098f7z3kz

For more information on specific projects and specific countries in Central America, feel free to email me at C21MiaFL@aol.com

Why the USA financial crisis won’t affect Central America (according to the experts!)

andresabbagh — Thu, 16 Oct 2008 02:41:49 +0000

Rolando San Roman, General Manager of the National Stock Exchange of Guatemala, stated to the daily Prensa Libre that “The Wall Street crisis that affects the USA and other nations will not directly impact the stock exchange in Guatemalan, since their natures are very different. The US stock exchange works through the trade of shares, whereas many Latin American stock exchanges work through securities.” Moreover, the financial crisis in the United States won’t affect most Central American nations, such as Guatemala, according to Mr. San Roman, because its banking systems are, by far, much less integrated into international financial networks.

Okay, now for many of us the “million dollar question” here is, what is the difference between a shares market and a securities market?

I will give it to you short and sweet. According to financial theory, a shares market allows the trade of documents that represent the property of the firm, in which the owner of said documents receives dividends for the profits that these may produce. A firm may also decide not to disburse these profits among the shareholders and instead, re-invest them in order to increase the value of the shares. Meanwhile, in a securities market, long-term documents are traded, and these may be bonds, common shares and others.

Now, back to Central American markets. It is important to highlight the difference between the financial markets of Central America, and its general economic environment. Whereas the financial markets might not experience much instability, the economy of Central America will probably be affected to differing degrees and to different extents. It is important, then, to have a prudent attitude and search for expertise and knowledge before tapping into the market. Nevertheless, the smallness and relative newness of the Central American stock exchanges work in their favor. Marta Eugenia Dabbha, manager of the Global Stock Exchange and an expert in agricultural securities, explained that markets in several Central American nations tend to be, not only fairly recent, but also “short term oriented” and thus, there are hardly any long-term operations. Wall Street, on the other hand, is much more dependent on long-term operations and its stock exchange, as well as that of other developed economies, has over 100 years of existence.

Both previously mentioned experts believe that the measures adopted by governments in Europe and the United States will work positively and avoid future disasters. On a more positive note for Central America, many investors and investing institutions have been recalling their capital invested in the United States, and such capital is being re-invested in Central America, thus producing greater development, such as construction, urbanization, improvements to technology, and others. I remain positive that it several areas in Central America are a happening market and am willing to put my money where my mouth is.

Play Nice, Make Money by W.T. McKibben

I would like to recommend a book I haven’t yet finished. The writer of this book shows how we all are tempted to hide or blame our mistakes on others, yet owning up to our mistakes actually makes our lives easier at home, at work or as business-owners. Play Nice, Make Money actually shows, through current case studies and examples, that using a business model that follows the highest ethical standards in its dealings with everybody, from customers to employers, shareholders and providers … hey, even the environment! … will in the long run be more profitable and productive than in following seemingly easier but less ethical alternatives. Benevolent capitalism, as one might call this business model, is not only good for business, but it is also the most viable alternative for peace and an end to social conflict at the local and global levels.

I would just like to end with a a quote from the beginning of his book: “Most of us realize that the sooner a misstep is acknowledged and corrected, the better it is for everyone in the business. Learning from our mistakes is one of the ways we grow the business. After several decades as a journalist, business person, and consultant, I am sure that doing the right thing is good for business…”

Brief Summary of Central American Seminar Presentation: “Investing in a Time of Crisis”

andresabbagh — Mon, 28 Jul 2008 15:46:08 +0000

The seminar was well-attended by real estate brokers, agents, investment executives and individuals interested in learning about investing in the United States during the current period of economic turmoil.

During the seminar, which was presented at the convention center of Europlaza, in the upscale business area of Zona 14 in Guatemala City, mortgage broker Gustavo Zintek and I explaned that the real problem with the real estate market in the USA is more of a mortgage problem than a real estate problem per se. That is, isn’t that there’s no buyers. Quite the contrary. The problem is that the buyers are “willing but not able” and we need buyers who are willing and able, in order for the market to move.

There was some give-and-take with the participants about the immediate future prospects, but with some economists forecasting one thing and others forecasting another, the truth is that it is extremely dicey to predict when the market will start improving again and if it has already hit rock bottom. The main thing is that the market has already fallen quite a bit, and real estate is still selling at the price that it is today, allowing for the prevalence of “vulture investors,” individual of groups of investors that takes advantage of the low prices in order to purchase several properties in order to rent and/or sell when the real estate market improves, as it surely will.

We believe that after the presidential elections–whichever may be the new administration, democrat or republican–the federal government will have to take a more aggressive stance towards resolving the mortgage problem and allowing individuals access to credit, in order to revitalize the real estate market as soon as possible. We already have legislation on the table that takes first steps in helping individuals facing foreclosure on their homes. In short, we won’t know when it has hit rock bottom until we see the market rising again.

Fortunately, there are several viable investment niches in the market, and the most interesting ones are:

a) Single family properties foreclosed by financial institutions.

b) Multifamily housing in urban renovation areas.

c) Bulk.

Attendants, real estate seminar in Guatemala City

Andre Sabbagh, speaking at the real estate seminar in Guatemala.

Real Estate Websites versus Real Estate Agents

andresabbagh — Sun, 29 Jun 2008 23:44:14 +0000

A couple of years ago, around 2006, there was a lot being heard and read about “do it yourself” real estate websites, and how these had garnered up to 20% of commission income from real estate agents in many cities of the U.S. At that time, the novelty was that for about $150 – $250, a number of websites would list a seller’s property. Some commentators were intimating that these websites deprived agents of up to 17 million dollars in commission, due to the real estate sales being transacted in these portals.

Mi experience, however, as well as that many of my colleagues in the real estate market of the United States, is that these portals have probably not taken away a great deal of business. One of their problems is that there is no cost involved for a buyer when he or she hires a real estate agent, since the commission is paid by the seller, not the buyer. Moreover, a real estate agent provides a personalized service, something that is harder to get through an Internet website. Many real estate agents today offer free publicity, some legal advise or will put you in touch with a reliable attorney and management companies, among other services. Another problem for Internet websites is that real estate agents usually have little to no incentive in showing and promoting “for sale by owner” properties, and such are those listed on Internet real estate websites.

So, what has been in general its effect on the market? Some real estate agents have cut their commissions in order to compete with the websites, others offer an increasingly personalized customer service and several other services. The “hotter markets” have not been greatly affected and there has not been much of a reaction from these; moreover, more vital markets might offer enough inventory and space for both real estate agents and brokers and real estate websites. In the end, most of the websites are managed by real estate brokers and there have been many different types of mergers between websites, brokers and agents in the last years.

Those agents that have not been able to adapt to the current turbulent market are gone, and those that have been more flexible, adaptable or lucky–or any combination of these–are surviving and garnering a greater chunk of the market.

It would be interesting about the experiences of other agents and it will definitely be interesting to see what happens in the coming months.

Why is buying rental property so hot?

andresabbagh — Sat, 07 Jun 2008 22:47:38 +0000

According to Jim Chesko, a The Wall Street Journal reporter, a lot of people who rent apparently want to keep it that way. A new survey by the National Apartment Association (NAA) finds that 67 percent of current renters are not interested in buying a home in the next year and 69 percent of renters surveyed stated that they plan to remain renters for at least 5 more years. Apartment occupancy is at an all time high. Doug Culkin, president of the NAA, stated “With the drop in the overall values in housing and the drop in house sales, everybody is trying to decide what to do.” Visionary investors, then, are scooping up condos and apartments for sale with the purpose of generating rental income in the years to come.

Recommended Book: The Starfish and The Spider. The Unstoppable Power of Leaderless Organizations by Ori Brafman and Rod Beckstrom (www.starfishandspider.com).

The book compares and contrasts centralized (closed) and decentralized (open) organizations with a comparison between a spider and a starfish as an analogy. At first glance, a spider and a starfish look alike. A spider has a body, a head, and many limbs. But if you cut off the head of a spider, it dies. The starfish, however, has a body and many limbs, but no head. The spider, then, represents a centralized organization. In a closed system or centralized organization, the organization will fall apart if the “head” or the leader is eliminated. On the other hand, the starfish is the model of the decentralized or open-system organization. One cannot cut off the head of a starfish. Moreover, if you cut a starfish in half, you end up with two starfishes. Why is reading this book important? The Internet has become a great facilitator of decentralized organizations. With the growth of the Internet, the ways, means and rules of doing business are changing. In the last decade, decentralized and open source system organizations have increasingly become a much greater force. Today, open source systems are the most iconic examples of the decentralized organizations of the future.