BALTIMORE (MO.Properties) – “Nothing like the coronavirus crisis has come along before,” says Ronan McMahon of Real Estate Trend Alert, a publication of International Living. “And no one, no matter what they say, knows for sure where it’s headed.
“Many people feel powerless in the face of this chaos, but my feeling is that if you play this crisis right, it can prove to be quite lucrative over the long-term. But that means looking to internationalized markets, like Mexico’s Riviera Maya. Or to places where the middle class is exploding, like Colombia. Or to downward-trending spots like parts of Europe where the population is older and innovation is limited, but where offerings have historic appeal, like Italy, for instance.
“Now is the right time to take strong U.S. dollars from a stagnant domestic market and put them to work in vibrant overseas markets by buying undervalued assets and locking in super-strong income and appreciation potential.
“It’s possible to do this today by borrowing money at historically low rates. We are in an unprecedented zero-interest-rate environment, which means it’s possible to access incredibly cheap money to buy high-yielding, undervalued real estate.”
In his report, McMahon notes big opportunities falling into three categories:
1. Crisis in places on a downtrend… By places on a downtrend—locales that have passed their peak. Populations are old, innovation is limited, and bureaucracy is high. Think parts of Europe.
2. Crisis in places on an uptrend… Places on an uptrend have potentially bright futures. And maybe a dark or at least underperforming past. They have young populations, decent standards of education, often natural resources. Their cities and new middle classes are exploding. Think Brazil and Colombia.
3. A buying moment in places undergoing big multi-decade transformations…in the medium term, this crisis will be good for internationalized places at, or near, the ground floor of major transformation. Places like Mexico’s Riviera Maya or Panama.
According to McMahon’s report, places offering the most compelling opportunities right now are:
An Unstoppable Path of Progress in Mexico
Mexico’s Riviera Maya has undergone a spectacular transformation over the last few decades.
Back in the late ‘60s Mexico’s tourism investment authority, FONATUR, scoured Mexico for the perfect location into which to pour funds and roll out major infrastructure, thereby creating a moneymaking tourism machine. They settled on Cancún—80 miles up the coast from what was a tiny little town called Tulum. In Cancun they built an international airport, began major highways, and gave incentives to major hotel groups.
As time passed, the progress rolled south, turning Playa del Carmen from a one-horse town into an international resort city. The changes were truly spectacular, and Tulum was beginning to tick too. Today a modern highway brings you right to Playa.
Mexico’s Caribbean coast had the basics going for it, including the intrinsic value of being a Caribbean coastline with a huge potential market on its doorstep in the U.S.—only two hours away.
“Tulum town has been transformed, unrecognizable from what I encountered when I first explored the area,” says McMahon. “Thanks to the crisis, a buying moment exists today…a pause in the mammoth growth trajectory of the Riviera Maya, which can be turned to an investor’s advantage. The goal is to buy the right real estate ahead of this Path of Progress to be set up for income and appreciation.”
Buying pre-construction in this area means by the time a person takes delivery of acondo, millions of vacationers will have long ago returned to enjoy the beaches, cenotes, international dining and tropical weather.
“I believe many travelers will seek to stay longer, what with the growth in remote work,” McMahon argues in the report.
A massive transformation of how people work was already underway. The army of remote workers was rapidly growing, the number of companies pioneering remote employment and practices was shooting up. Mobile professionals have flooded to the Riviera Maya and Tulum for years now.
When a person doesn’t need to live in an expensive U.S. or Canadian city, endure cold weather, or limit their beach time to a yearly vacation, a place like Tulum starts to look like an obvious choice.
“I recently bought two condos at discounted prices I negotiated exclusively for members of my Real Estate Trend Alert,” says McMahon.
“We had the chance to buy spacious town homes in Tulum for $149,000 that I figure will be worth $76,000 more within a year of delivery and could throw off a 13% yield or more. “Thanks to the crisis, I was able to get a free pool thrown in with each home. The developer’s construction costs are in pesos, but investors are buying in dollars so, as his costs dropped, I was able to get him to concede more.
Cheap Homes in Italy
Italy has been hit hard by the pandemic. “This is catastrophic for its already fragile and debt-laden economy,” notes McMahon. “We will see big falls in value of best-in-class real estate. I’m figuring on 30% in Italy on prices that have been already been falling for 15 years. The value of marginal real estate in the hills and empty villages will go to zero.”
Italy has been giving away free houses for years in an effort to re-energize depopulated hill towns. However, McMahon believes the “free house” trend will now move northwards, although tourism will bounce back—in blue chip locales.
“Venice will still be Venice. Rome won’t lose its appeal,” he says. “But the hotel industry is going to be decimated by this crisis. When the bounce back happens, it will clear the way for vacation rentals.”
How quickly this bounce back will happen remains to be seen. It will be largely dependent on what’s left of the airline industry after the world comes out of lock down.
“Even before the crisis, I found apartments in central Florence and Venice that—with the right marketing—could throw off double-digit yields,” McMahon says. “The trick was to buy something old and unloved but in the right location, do some smart cosmetic work and market it better than any of the competition…something I think is straightforward in Italy. I came across apartments under $200,000 that fell into this category.”
Medellín, Colombia – Luxe Condos for Less
Colombia has solid fundamentals, McMahon argues in his report. It’s emerged from its troubled past to become a major regional player, building off its steadying political environment, market-friendly policies, rich natural resources, strengthening trade ties, and modernizing economy.
But its currency has tanked as big money has been pulled back into places perceived to be safer havens…like the U.S. dollar. And, like everywhere else in the world, the real estate market has stalled because of lock down and the current crisis.
McMahon points out that this means one can buy cheap in a place with big upside potential because its currency is depressed and motivated sellers have to drop their prices to attract buyers.
“Buyers call the shots and can play sellers off against each other,” he says. “Today big luxury condos in Medellin’s best neighborhoods can list for $100 per square foot. Find a motivated seller and you could pay less than $80. How do you find a motivated seller? Cast a wide net and let potential sellers compete for the sale.
“To give you an example, in the city’s premium neighborhood one of my researchers found a nice-looking three-bedroom apartment with an asking price of $178,392. Around Christmas, the price was $221,875.
“Now here’s the thing…that’s just the effect of falling currency. But as the crisis bites, more motivated sellers will appear. Not everyone will be in a rush to sell, but some folks will…
“The way I’d play a market like Medellin is find eight to 10 properties I would be willing to buy for the right price. Show each seller that I’m ready to go. Show them proof of funds. Then offer everyone 30% below asking. I’d be completely transparent. Tell each seller what you are doing. Straight away more than 50% will dismiss you. Then let the remain sellers compete with each other to offer the best deal.
“Medellín sits high on my global shortlist of incredible cities—one reason I keep such a close eye on opportunities there. Medellín is a hip, ‘must visit’ city. Before the current crisis tourism was on a huge tear in Colombia. There’s no reason it won’t continue in the future.
Across the world, liveable, internationalized cities like Medellín are drawing in mobile, creative, and productive people, according to the report. These people then generate economic activity. They start companies. And they need a place to live, fueling demand for real estate.
The full, detailed crisis-investing report from Ronan McMahon—including two additional locales around the world primed for smart investment today—can be found, here: Crisis Investment: Where to Buy Real Estate Now for Profit
Ronan McMahon is at the helm of Real Estate Trend Alert, a publication of International Living. He is also the author of the book, Ronan McMahon’s Profit Principle: An Insider’s Guide to Doubling Your Money in Real Estate Overseas. He produces a regular, free e-letter for people interested in owning good-value property abroad, called Roving Real Estate Investor
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