JF1091: Buying Property out of Country with Bobby Casey

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Bobby Casey:
-Managing Partner of Global Wealth Protection, LLC
-Helps clients around the world internationalize their assets & take advantage of investment opportunities
-Renowned speaker on anarcho-capitalism, free-market economics, and offshore business
-Say hi to him at www.globalwealthprotection.com
-Best Ever Book: Atlas Shrugged

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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today, Bobby Casey. How are you doing, Bobby?

Bobby Casey: Hey, Joe. How’s it going? Thanks for having me today.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Bobby – he is the managing partner of Global Wealth Protection. He helps clients around the world internationalize their assets and take advantage of investment opportunities. He’s based in Coppell, Texas, where I have immediate family, and I visit very frequently. His website is in the show notes link, so if you wanna go check that out, feel free to do so.

With that being said, Bobby, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Bobby Casey: First of all, there must have been a typo there somewhere. I’m not based in Texas at all. As a matter of fact, I’ve never even heard of that town in Texas. I’m actually living in several different places around the world, to be honest. About half my time I spend in Latvia, a small Easter-European country besides Russia; I spend quite a bit of time in the country of Georgia (in Tbilisi, the capital), I spend a lot of time in Medellin, Colombia, and also a little bit of time in the U.S. But most of my time is spent abroad between Europe and South America.

Like you said, I work with a lot of clients from all over the world, primarily entrepreneurs and investors, and we talk about different strategies for internationalizing their wealth, their business and their life. A lot of things we discuss are purely international-related – how to take advantage of international investment opportunities, how to minimize risk through international structures, for example using different corporate structures, trusts, that sort of thing, and how to protect their investment portfolios using structures, and also by hedging risk with the currency diversification and also geographical diversification. That’s a big part of what we do.

Joe Fairless: With your approach, how much of it – if at all – is actually real estate-focused?

Bobby Casey: We’re big believers in hard assets for your investment portfolio. We believe that real estate should be one of the biggest – if not the biggest – investment category you have in your portfolio. I’ve just recently read something about — I get it mixed up, is it the Fortune 400 or the Forbes 400? The 400 wealthiest people in the world – Forbes 400, right?

Joe Fairless: Yeah, probably. Forbes has a list; I’m sure other magazines do, too.

Bobby Casey: I get it mixed up between Fortune and Forbes, but anyway, I’ve just recently read that something like 77% of all the people in the Forbes 400 had a significant portion of their wealth tied up in real estate. If you really think about that, if I wanna emulate somebody in how to build wealth and how to structure a portfolio, do I really wanna listen to the 23-year-old kid that just got his undergraduate degree in Finance and Economics, who is working on their first job, or the 400 richest people in the world? From that perspective, we definitely advise our clients on different investment opportunities, specifically in real estate.

I’ll give you an example – right now in Colombia, the Colombian peso is about approximately 3,000 pesos to the dollar. Just a couple years ago the Colombian peso was about 1,700 pesos to the dollar. If you understand the way currency conversions and currency transactions work, that means that the pesos has lost a significant amount of its value in relation to the U.S. dollar over the past couple of years.

The reason for that is the Colombian economy is very resource-oriented; they’re very heavily tied to a lot of different oil/gas, a lot of natural resources, precious metals, that sort of thing. If you actually track the Colombian peso, it almost identically mimics the Canadian dollar, and if you know much about international investing, the Canadian market is a very resource-heavy market, with oil and gas and a lot of mineral exports.

So the Colombian peso almost identically tracks the Canadian dollar, because what’s happened in just the past few years is we’ve seen a pretty significant decline in the price per barrel of oil, especially since the big market crash in 2008 -2009. What that means is you go down to Colombia and you can buy ridiculously cheap investment properties down there. I’m talking luxury condos in the center of the city, in the nicest part of town, three and four-bedroom condos with gorgeous terraces and mountain and city views, for $150,000-$200,000, because of the currency correction on the pesos side.

From an investment standpoint purely in real estate, it’s a great cashflow investment to go down to Colombia and look at real estate. But from an asset protection on the currency speculation side, the Colombian peso is near its all-time low. The all-time low to the US dollar was almost 2,400 pesos to the dollar, and it’s just around 3,000 right now. So it’s fairly close to its all-time low; what that means is you can potentially, even if in  pesos the property doesn’t appreciate at all, as resource prices steadily increase – let’s say oil goes back to $80/barrel, well the Colombian peso is not gonna be at 3,000 pesos to the dollar, it’s gonna go down to 2,200 or 2,000, or something like that. You could see a 20%, 30% or even a 50% increase in your property values in US dollar terms even if it stays completely stagnant in pesos, and all the time you’re collecting rent checks on investment properties down there.

So those are the types of things we look at. I’m not a real estate agent in Colombia, don’t get me wrong… I could care less if you’re buying properties in Colombia. I’m just trying to give you an example of how accessing different international markets for real estate can actually affect your portfolio, how you can cash-flow it.

I’ve got a friend of mine down there who does some projects and he is in the real estate business… We were looking at his numbers – just people buying condos and renting them out – and they’re looking at 12%-14% net returns. I’m not talking cap rates, I’m talking about net cashflow. And 10%-14% net cashflow in Colombian pesos, but you could hold it with zero appreciation in pesos as the currency correction happens… For example, oil goes up to $80/barrel, the peso will go up to around 2,200 or 2,000 pesos per dollar. You could see a very significant increase in the value of your property in US dollar terms.

Joe Fairless: Yeah, that’s fascinating. It’s an approach that I haven’t heard talked about very often, and never on this show, so I’m glad that we are. I assume that some of your clients have done something similar to this, so what are the watchouts that people should make sure that they address prior to doing an investment in another country like Columbia, for example?

Bobby Casey: Well, first of all – I’m gonna keep using Colombia as an example, because personally I think Colombia is an excellent example and an excellent opportunity… For one, if you ask 90%-95% of Americans on the street “What’s your opinion about Colombia?”, what do you think, Joe, is gonna be their response?

Joe Fairless: Drugs.

Bobby Casey: Drugs, cocaine, right?

Joe Fairless: Yup.

Bobby Casey: Everybody’s a cocaine dealer, everybody’s getting murdered in the streets… It’s a killing spree, right? That would be the typical American response, because most Americans don’t really have time or the energy or could care less about actually digging in and doing research into the realities of this. I’ve been to all but five states in the U.S. and about 70-80 countries, so I do quite a bit of traveling, boots on the ground research in these countries. I’ve been to Colombia several times. I’m actually going to Colombia in about two weeks again.
There are parts of Colombia I personally will not go to, and I would not buy in. But then again, I also wouldn’t buy property in South Chicago either, or downtown Detroit, right? There are just places you don’t go to, and you could say that about any country in the world. But most people would shy away from Colombia, and it’s not because they’re right, it’s because of ignorance. I don’t say ignorance to mean it in a derogatory sense; it’s ignorance. If you don’t know something about something, that’s the very definition of ignorance, right?

Joe Fairless: Yeah, I’m with you.

Bobby Casey: I certainly couldn’t call myself an expert in the Mogadishu property market. I’m no expert in Somalia. As a matter of fact, I just said that… How many people listening to your show knew that Mogadishu is in Somalia? People don’t really know what they don’t know; out of fear, they’re just like “Oh, forget it. I’ll watch that show Narcos on Netflix that said all the Colombia is dangerous and people are [unintelligible [00:12:12].28] on the street.”

But the reality is — Medellin is a great example. 20 years ago Medellin had 400,000 people in the city; now there’s over 4 million. It’s a vibrant, beautiful city. Every year they’re breaking records on tourism. I can’t remember the number, but it was tens of millions of tourists that went to Medellin last year alone. It’s a very nice city. Great food, incredible weather… In Fahrenheit terms, in Medellin the locals call themselves paisas; to a paisas person, a cold that is 63 degrees Fahrenheit, and a hot day is 77 degrees Fahrenheit… If that gives you any idea.

Joe Fairless: Yeah.

Bobby Casey: Basically, the entire city, 365 days a year, is roughly what you set your thermostat at… Every single day. So it’s perfect weather, perfect springtime weather year-round. But the idea is people avoid markets they don’t know anything about, so they don’t try. But if you’re a real estate investor and in your own marketplace you’re struggling to get a 5% cap rate, why keep your money there? It’s crazy. I wouldn’t take my money out of a savings account for a 5% cap rate. That’s just crazy.

But I can get a — I won’t keep picking on Medellin… The Southern Coast of Spain is a great example, too. You can get incredible property deals in resort towns and get some ridiculously good deals there. Why would I invest in my hometown of whatever [unintelligible [00:13:46].21] Kansas with a  5% cap rate when I can go to Malaga, Spain and buy property that’s generating 12% net cash yield.

Joe Fairless: I get it, yeah. You’ve made that point crystal clear. But as far as what are some things we should watch out for (just back to the original question) if we were to invest into another country?

Bobby Casey: It depends on what you’re looking at to invest. I know we’re kind of a broad show about real estate investment, so that’s kind of a tough thing to say. If you’re in the market to buy a vacation condo, versus building an office complex, we have two completely different conversations to have.

Joe Fairless: Let’s use the example that you used, that way we’re just staying very specific… In Colombia, downtown, beautiful views, you said $150,000-$200,000 can get you something that would cash-flow. What would be some things to watch out for in that scenario as an outside investor?

Bobby Casey: First of all, you would want to hire a local good attorney that speaks English. That’s it, period. Because in Colombia less than 5% of the Colombian population speaks English. I’m not saying there’s not necessarily a gringo tax, as they say, but when there’s a language barrier, you can certainly miss something. First of all, the thing you need to watch out for is to find a high quality attorney that’s fluent in English, so that if there’s anything that you don’t understand in the contract – a purchase offer, or in the process of purchasing, or in property tax or insurance, or any of those types of things, you need to have a quality local attorney that speaks English.

I hate to even bring that stuff up, because I wouldn’t go buy an investment property in Houston, Texas without having my attorney review the contract and all of that stuff either. Research the market and get to understand — we’ll keep picking on Medellin… I told you, Medellin grew in 20 years from 400,000 people to 4,000,000. Well, what that means is there aren’t really any old buildings in Medellin. Almost everything has been built in the past 20 years. So you don’t have that concern, like in Europe you have concerns with buildings that can be 100 or 200 or 300 years old, with maybe 100-year-old plumbing in the building, for example.

In Medellin that’s less of a concern, because the likelihood you’re looking at a building older than 20 years is very, very low. That’s the thing – you’ve gotta research the market and get to know it a little bit. You’ve gotta understand those things. Like I said, if you go to Malaga, you could easily be buying a condo in a building that’s 150 years old, versus if you go to Medellin, there’s likelihood you’re buying in a building that’s less than 20 years old, or even potentially just a brand new building. You can get brand new real estate, brand new condos in Medellin for $150,000-$200,000, luxury places. Those are some things.

What else…? Understand not only the market, but the legal process in the country where you are looking to invest. In most parts of the world this is really not an issue, but there are some Latin-American countries, also some Asian countries where it’s very difficult for foreigners to own property. For example, Mexico – foreigners cannot own coastal properties in protected areas, but there are all kinds of developers down there that claim to sell beachfront condos in Cancun, or Cabo San Lucas. There’s all types of developers down there claiming to sell beachfront condos in Cabo San Lucas or Cancun. But you’ve gotta be really careful in those areas because in Mexico foreigners can’t legally own coastal property in those protected areas.

There are some ways around it where you have to establish a Mexican land trust, and you can name yourself as beneficiary, but then you have to have a trustee in Mexico, and then you’re using a local attorney as a trustee… I personally would just stay away from stuff like that if it’s not a very clear, simple title situation.

Certain places can be complicated… Panama is another place where you can have some problems with purchasing real estate. I had one of my friends about two years ago bought a condo, a little bit on the outskirts of Panama City, but a beachfront condo building. I guess it’s been more like three years ago that he bought it. It took him almost two years to get the deed to his property. And when he bought it, it was unclear the condition the property was being sold in, and that’s because he did not do what he was supposed to do by getting good local legal representation. They ended up selling him a condo that was just white walls. He was under the impression that it was a finished condo, but it was a white finish. Concrete floor, white walls, no fixtures, no lights, no flooring, not even door knobs. Nothing.

It’s his fault, he didn’t take the necessary precautions, but then it took about two years for him to even take title to the property, because his [unintelligible [00:19:05].25] not pay a lawyer to do the deed work for him, and it took two years for him to legally own his property. It was ridiculous.

Joe Fairless: For a Best Ever listeners who’s listening to this and they’re like “This sounds really intriguing. I’m gonna go look at property in different countries. I am heeding Bobby’s advice and will hire a local attorney who speaks English…”, what’s the best way for them to find a local attorney who speaks English that they should do business with?

Bobby Casey: You know what, honestly? Facebook. I know that sounds crazy, but do some searches on Facebook, like “real estate agents Panama City”, for example, and you’ll find all kinds of different people claiming they sell real estate. Like anything else in business, if you’re gonna be an investor or you’re going to be in business for yourself, guess what, buddy? It takes some work. You’re gonna have to get your hands dirty and pick up the phone. You might have to call 20 different attorneys to find a good one. And you’ll know when you talk to them…

You really do some research and you see “You know what? I really like Medellin, Colombia” or “I really like Costa Rica”, whatever you say you like. Buy a plane ticket, go there. I would never buy a property site unseen. That’s crazy. I can’t believe how many people actually buy properties site unseen. I think maybe it depends on the situation, but to me it seems a little crazy to buy such an expensive asset site unseen. I know tons of people that have done it, who have bought condos in other countries without ever actually going there, or they’re buying it pre-construction.

Actually, that brings up another point – if you’re buying a pre-construction deal, make absolutely sure the developer you’re dealing with on the pre-construction deal this is not his first rodeo. [laughs] Because especially in Latin America, there are tons of shady deals on pre-construction. Get references on the developer that he has done other deals with satisfied clients and completed projects.

We kind of started on the Latin America topic, so I’m kind of sticking with that. I don’t run into that in too many other places in the world, but in Latin America I do see quite a bit of shady deals on pre-construction. Of course, any time that you buy a pre-construction anywhere in the world there’s always a risk that the project doesn’t get finished, but the idea is you just mitigate your risk as best as possible. If you find a developer that has built four 100-unit condo projects before and delivered them all on time, happy customers, the likelihood is the fifth one will go pretty well, too.

Joe Fairless: Great feedback, and now I’m gonna ask you a tough question… Based on your experience as a real estate investor (knowing that’s our audience), what is your best advice ever for them, if they were to go in this venture to look at investing out of the country? I know you’ve mentioned a lot of good points… What’s the number one point that comes to mind?

Bobby Casey: You got my brain thinking in a different way when you first started… My best advice I could give to real estate investors — can I give you two things?

Joe Fairless: Yes, absolutely.

Bobby Casey: Alright, so first of all, I’m presuming the vast majority of your audience is US-based, with US real estate, right?

Joe Fairless: Yes, that’s correct.

Bobby Casey: So I’m amazed at people that don’t do this, but to me – of course, I’m biased because my focus is asset protection for clients; we deal with a lot of people’s assets, and protecting their assets with proper structures and trusts and that sort of thing… But it amazes me that US-based investor buy investment property and hold these assets in their name, personally. For a US-based investor that is not even thinking about investing overseas, the best advice I can give you is properly structure your investment holdings. Do not under any circumstance ever hold property in your own personal name. To me that is one of the craziest things you can possibly do with your real estate assets.

I hear all kinds of excuses to that. “Well, I have an umbrella policy that covers me. I’ve got general liability insurance that covers me, and I don’t really need to put my properties in trusts or LLCs or whatever… I’m not at risk. What’s anybody gonna sue me for?” The problem with unforeseen circumstances is – guess what? They’re unforeseen.

I used to make a joking example, telling people — when they’re talking about buying multiple properties in the US, I used to use this joking example, “What happens if you have a residential property and the tenant in there has a meth lab in the kitchen and closed the house up?” I used to use that as a joke until about a year ago when that actually happened to one of my clients in Texas. They actually had a tenant in the rental house blow the house up in a meth lab. I couldn’t believe it. I’m like “Huh… I guess I probably shouldn’t use that as a joking example anymore.”

You have no idea the risk you’re putting yourself in. You could have one piece of property, and somebody blows up that house. What happens if it kills a neighbor? It’s not just that house at risk, it’s everything you own, and potentially the future earnings of the rest of your life, if you’re not protecting your assets. So that’s my one tip for US domestic real estate investors.

The US is the most litigious country in the world. There’s a new lawsuit filed every 16.5 seconds. If you don’t believe me, go to the American Bar Association’s website and look at their statistics, do the math… Every 16.5 seconds. You’re crazy if you don’t have your assets protected.

So off-shore, foreign real estate, my biggest advice is if it’s blue ocean for you, you’ve never done it, it’s one of those things that you’re curious about that you don’t know if it’s for you or not… Maybe you think “Oh, that’d be kind of cool to have a vacation property in Costa Rica that we rent out, and then maybe we go down there, and go stay at the beach in Costa Rica a couple of weeks a year and make some money on it”, my suggestion then is stick your toe in the water and find a place that you personally enjoy being in and spending time in. Go to a touristy area where you will get at least short-term rentals for vacation properties, and stick your toe in. Go find something and go buy a property in a hot spot. You might pay more on your price per square meter or square foot, but if you’re in a hot spot, a touristy area, you know it’s always gonna rent and there will always be a market to resell it.

Don’t try to go in and seal a deal. Go in and say “Well, [unintelligible [00:26:12].00] pretty decent deal on a condo that I actually enjoyed being in in Costa Rica, and I can rent this thing out and make 10% a year on it. Let’s see what happens.”

Joe Fairless: Are you ready for the Best Ever Lightning Round?

Bobby Casey: Let’s see what you’ve got.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:26:30].10] to [00:27:31].07]

Joe Fairless: Best ever book you’ve read?

Bobby Casey: Atlas Shrugged.

Joe Fairless: Best ever deal you’ve done?

Bobby Casey: A warehouse in North Carolina.

Joe Fairless: Why is that?

Bobby Casey: Honestly, it’s been 15 years ago. I got it at a really good bargain, and I put one of my own companies in there in the office space, and I immediately found tenants to rent it out. The thing was cash-flowing like crazy within three months. I basically had free rent for my own company in the space, because it was cash-flowing so much from the other spaces, and then I ended up selling it.

Three years later, when I sold my company, I sold the property and made a very healthy gain on the sale of the property also.

Joe Fairless: Did you double, triple your money?

Bobby Casey: No, not that big. It had been going on for three years, but I ended up 30% more and it cash-flowed like crazy, and I had free rent for my company for the whole time.

Joe Fairless: Best ever way you like to give back?

Bobby Casey: I speak at events sometimes. I used to speak at a lot more events, but now I speak at entrepreneurship events.

Joe Fairless: What’s a mistake you’ve made on a particular deal that you can think of?

Bobby Casey: A mistake I can make on a deal… Aside from getting married at 21? [laughter] Oh, sorry, wrong show. Sorry, Joe. Alright, that’s a tough one on a deal, but I can tell you I had a company a few years ago – I sold it almost ten years ago now… The company did some installations for big retail outlets like Walmart, Home Depot, Lowes, stuff like that, and in my first few years of business I was really heavily leaning — most of my business was with Walmart, and I got a certified letter on 27th December, two days after Christmas, from Walmart, at my home – which I couldn’t believe; I got a certified letter from the Walmart corporate office in Bentonville, Arkansas, two days after Christmas, saying “Effective immediately, we have canceled our contract with you. Please by close of business today have all of your employees out of our stores.”

Basically, in one certified letter, in one minute, I basically lost half my business, and it was a few million. That was a big mistake… The big mistake on my end was having too many of my eggs in one basket, and relying heavily on one client.

Joe Fairless: Where can the Best Ever listeners get in touch with you?

Bobby Casey: Easiest is just our website, GlobalWealthProtection.com. We have a free newsletter you can subscribe to. Up on the right we have a contact page if you wanna e-mail me from there. Or my e-mail, info@GlobalWealthProtection.com.

Joe Fairless: Well, Bobby, thank you for being on the show and adding an element that we haven’t discussed in detail as much as we did today on the show, and that is — one of them is appreciation via currency correction, while cash-flowing the entire time… So talking about that, as well as how to approach investing out of the country, having a local attorney who speaks English. And as you said, it’s not just out of the country, it’s wherever you invest – it could be Houston, or Lexington, or wherever; you need a local attorney who knows the local law. That’s important, but especially when you’re investing out of the country, being able to speak English and you knowing exactly what you’re investing in.

A couple warnings – if you’re buying a pre-construction deal, make sure the developer has done it many times before, especially in Latin America. Then different intricacies along the way that you mentioned with the Mexican Coast and some other things.

Thanks for being on the show, thanks for spending some time with us, giving us your global insight, and we’ll talk to you soon!

Bobby Casey: Thanks, Joe. Take care!