Buy What You Like

Sunday, Sept. 9, 2007

A friend wrote recently to exclaim disappointment, almost shock, after having learned that a piece of land she bought a few years ago on the east coast of Canada is probably unsellable right now. Nothing's moving in this market, the real estate agent she spoke with explained.

In fact, I own a similar piece of land in the same place. We bought at the same time, on the advice of another friend.

Was it a bad buy? A bad investment?

A reader attending a conference in Panama City a couple of years ago posed this question to me in the context of Panama property investing.

"What if the market here in Panama turns?" he asked. "What if you invest, and things don't work out as you hope?

"How can International Living recommend its readers buy here," he continued, "when you don't know for sure that values in this country will continue to appreciate as they have been? Or that the country will remain stable? Or that it will continue to welcome foreign investment?"

Indeed, we here at International Living have no crystal ball. We know no better than the next guy what will happen tomorrow or next year in the markets where we spend our time and our money…and where we recommend that you think about doing the same.

Which is why I say: Buy what you like.

The piece of land in eastern Canada? Was it a bad buy because the local agent says good luck trying to find a buyer in the current market?

No question, real estate, especially off-the-beaten-path real estate of the kind we recommend to you, is one of the most illiquid investments you can make.

Does that make it a "bad" investment?

Not if you buy only what you like in the first place. I'm not worried that I probably couldn't sell that lot in Canada today if I wanted to. I bought because I liked the idea of owning a bit of land in that part of the world. Maybe we'll build a cabin on it someday…take the kids and the grandkids up there canoeing.

Am I worried that the market in Panama City seems to be turning? In fact, I don't think this market is falling off…but, rather, shaking itself out. Some big projects, as we've reported, have been cancelled, and prices, generally, are soft. We own a condo on Balboa, at Bayfront Towers. Lief bought it pre-construction, closed on it earlier this year, and invested over the summer in having it furnished and made ready for rental. Today, on paper, this unit is worth at least 65% more than we paid for it about 2 1/2 years ago.

Plus, Lief reported to me this morning with a smile, it's performing well as a rental…at least in these very early days. First two months of rental activity are ahead of Lief's projections, and, if this keeps up, the place could net more than 12% annually on the purchase price.

Does all that make it a "good" investment, current market conditions notwithstanding?

Lief is certainly happy, as this Panama City investment seems to be timing out well. He bought in time to see good capital appreciation and, at the same time, to position himself for good ongoing returns from the city's emerging rental market.

But…will current values hold? Will the early rental returns continue?

Who knows. As with that lot up in Canada, though, I'm not worried, because I like the idea of owning this little apartment. We spend a lot of time in this city…Lief's activities will have him passing through even more regularly…we have friends here…and we look forward always to returning. I don't even mind that Lief has done up the place in Early Bachelor Pad. It's a nice change from the museum-like period approach to decorating (as Lief and the kids refer to it…not intending it as a compliment) that I typically take.

To consider another example…one that may be on your mind these days given current events…what about Nicaragua? We've been super-bullish on this market since the mid-1990s. We are heavily invested personally. And now, like you and the rest of the world, we are watching to see what Ortega will do next.

Does that mean our investments in Nicaragua over the past dozen years were bad? In fact, we own one or two things in this country we'd like to sell if we could. We may even list them for sale. But we won't be surprised if we have trouble, in the current market, finding buyers.

Again, were those bad buys?

Lief might answer the question differently, but I maintain that if you buy a piece of property because you like it, because you imagine some personal use for it, because you appreciate its intrinsic qualities…then market twists and turns do not themselves determine its value.

As I explained to that reader at the conference in Panama City a couple of years ago, I follow two guiding principles when investing in foreign real estate. First, I buy what I like. Second, I'm careful not to buy too much of the same thing in the same place.

No, that's not advice for someone looking to get rich quick. But it means I don't worry about slowdowns in the market in eastern Canada or nutty Sandinistas who manage to get themselves elected in Nicaragua.

My point is this: Organize your life, including your global real estate purchases, so you don't have to worry about market turns or political nonsense, either. Buy what you like in places where you want to spend time. And diversify--spring and summer, city and ocean side, condo and farmhouse, Old World and New--then schedule your time, year by year, to follow the seasons and your interests.

Markets be damned.

Kathleen Peddicord
Publisher, International Living

P.S. Want some help considering all the tantalizing options for where and how to organize your life once you begin to approach the challenge this way? Join us in Panama next month for the Ultimate Event II, our biggest, most colossal event of the year, during which our far-flung editors, convened for four days, will discuss, detail, and debate the world's best opportunities right now for living well and investing wisely. Where would Lief Simon, Dan Prescher, Suzan Haskins, Lee Harrison, Maria Savage, Steenie Harvey, et al. recommend you focus your attention and spend your money today? The conversation is likely to get heated and guaranteed to be a lot of fun. I'll be there with bells on. Hope to see you. Details here.

P.P.S. This is my last Sunday Edition for a few weeks. I'm off on vacation to…who knows where? The schedule is to be decided. One of the benefits of buying where you like is the right to lengthy and relaxing inspection tours… Meantime, our resident expert on retiring overseas, Paul Terhorst (who retired at 35 to wander the world with his wife Vicki), has graciously agreed to keep my editor's chair warm until I return later in the month.