#555 – The Expat Files: Real Estate, Remittances, and the Latin American Market

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came up to play and now I wonder Hello there all you expat wannabes I'm Johnny Mueller and you're listening to the expat files living in Latin America The show that tells you just what it's like to live work play and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started You know on the last show think it was the last show I was talking about buying a real estate from desperate sellers Now to review this for just a second One of the best ways to find a desperate seller is to look for what they call a work in gray or Obra in Greece

[00:47] In other words, you're driving around and you see a project that looks half finished or a third finished It's all gray not painted of course because there's no doors and windows and looks like there hasn't been a worker around in weeks months Maybe maybe years. Well, that's what you call an Obra in Greece or work in gray That means more often than not there's a desperate seller behind that project Of course Like I said many times in Latin America houses are built in fits and starts because those remisses are coming back all the time From the states and when they get a big chunk of dough coming in couple grand Maybe from uncle Julio's cash-only gray market leaf-blowing service up in Cleveland Then all of a sudden a handful of workers show up at that project another room gets finished or the roof gets put on maybe since sometimes the

[01:32] Patriarch on the receiving end of those remisses would rather buy a big-screen TV or maybe take his 15 year old kid to A strip club and show him the ropes. I'm not kidding that does happen But that's the topic for another show by the way Speaking of remisses if you're a gringo or expat down here in Latin America You'll have a phone of course and you'll get text messages and you won't be able to read them probably because your Spanish sucks Well, most long-term expats including me can read them because we have our Spanish down Kinda and I got to tell you about the text messages. I just got on my phone today. Let me read it to you I'll translate it says are you worried about your remisses getting to you on time? Are you worried your remisses won't get sent securely and safely? Well, don't fret your Claro and Tigo phone services have just joined up with money

[02:19] Graham along with Bunko BC Citibank and BAC and Bunko continental And now you can receive your US remisses Instantly by internet then it has contact reply information here So anyway any of you guys and gals up there in the states who want to send me remisses now You can send them to me directly from the states by Tigo or Claro phone through one of those banks using money Graham so do send those remisses to me on time. I'm counting on them. I got a working gray I got a finish and Obra in Greece No, just kidding But you get the point remisses are big business huge business and they're funding a lot of these real estate projects in the bubble And like I said, you're never gonna find one of these Obras in Greece on the internet You have to be driving around and getting your boots on the ground to see that kind of stuff

[03:06] And you know, sometimes there'll be a sign that says say Vendée means for sale and sometimes we'll even say Ganga which means very cheap Ganga and here's a memory aid for you think Lady Ganga now if that doesn't conjure up very cheap and trashy for you Nothing will now I know that most gringos and expats want to build your buy in a gated guarded community You know with a condo or homeowners committee and all that stuff so you can make your own rules Unless of course you want to have some rural acreage and a spread out in the county with ducks horses chickens and outhouses and stuff But most expats and gringos aren't on that trajectory though. I know a few who are so that's one possibility anyway so now I'm talking basically to you guys and gals out there who want a little piece of real estate and the best bet then

[03:52] Is to check inside some of these gated communities, but you don't want to pay bubble prices That would be nuts and note the nicest ones are slightly out of the city in what you might call the burbs now Used to be the boonies some years ago But what you're seeing is hundreds if not thousands of guarded gated communities with big lots with plenty of land lot of trees great views They're of course part and partial of the real estate bubble too But I can tell you this in almost every single guarded gated community like that You'll find one or more of these works in gray these Obras in Greece I'm talking about now That's not to say there aren't gated guarded communities with tiny little lots and your living room window is facing into someone's garage A lot of that stuff out there, too Nice to rent for a few months when you first get down, but you really don't want to live there permanently

[04:40] So let's say you're coming down here in a real estate scouting mission and you hooked up with someone like John Galt who will get you Together with a bilingual translator slash girl Friday from his expat concierge service Or maybe if located your own bilingual helper slash assistant either way Let's say your mission is to find some of these works in gray Obras in Greece to possibly put in a very low ball bid Now of course these are almost always cash deals, and that's how you can really beat the price down But some sellers are so desperate they'll even take payments Of course your latin lawyer is gonna have to work out that deal for you and set up an airtight contract in your favor And such anyway doing that show last week about desperate sellers and Obras in Greece That's works in gray. You wouldn't believe how many emails that show generated now just to clear things up

[05:30] Some of those Obras in Greece will have for sale signs on them, but more often than not they won't So how do you find the owner to put in a low ball bid? Well, you just ask the guard at the gate and generally he'll be more than glad to give you a gringo It's your gringo advantage again the phone number and email and whatever data he's got on the homeowner or Pro patario pro patario means property owner if you're looking for real estate You'll have to know that word pro patario now if you write it out You'll see it's got the word property in it So it's easy to remember pro patario though not as easy to remember as lady ganga Which is as we know synonymous with cheap and trashy? So then from the happy smiling guard you get the name the phone number and maybe the email

[06:16] Of the pro patario with a desperate seller on that obra in Greece That's when you let your bilingual translator call the guy and find out what he wants Because you don't want the owner the pro patario to know you're a gringo and we'll talk a bit more about that later Now if you're really interested That's the time you get a hold of an architect to have a look at it and see what it would take to get it done And that's when you mention your own ideas about the additions and subtractions you want on your final dream house So that can be figured into the mix, too Oh, and by the way, I got some emails from astute gringos asking me if it would not be a good business for a gringo To search out those obras in Greece buy them up or put options on them Then make a business out of selling them to gringos who are coming down looking for property Well interesting concept I thought but I don't think it's gonna fly because remember we're in a big real estate bubble

[07:08] And those obras in greece and distressed properties are popping up more and more meaning more on the market less demand So why would you want to get involved on the down end of that slope? My suggestion scout out desperate sellers for properties you want to live in again. You have to get boots on the ground You're not gonna find any of this stuff on the internet However, if you come down to my july expat insider seminar You'll learn all about that step-by-step process because we do a whole day on real estate half day in the classroom Half-day boots on the ground. Remember you still got about a week to sign up and get the 500 dollar per person Early bird discount on may 1st. It goes back to the regular price Just go to www dot the new expat dot com Click on johnny's 2016 latin american seminar link on the top of the page and you'll get all the info and pricing

[07:56] And also while you're at the new expat dot com website do check out john gault's optional pre and post seminar trips Because if you're gonna come down all that way You're gonna want to have some really great things to do and get your boots on the ground In as many cool places as you can and john gault Well, he knows his way around and you know people who took his pre and post seminar trip last time say You'll never come across a better tour guide slash Conversationalist slash hand holder than john gault and he's an absolute volcano of expat information But we were talking about desperate sellers now, right? So anyway, my advice is when you find a desperate owner Don't think about flipping it or selling it or fixing it up and put it on the market Think about buying it fixing it up and keeping it for yourself

[08:42] That should be part of your plan b and part of your foothold position in latin america I know a lot of you are thinking about permanently relocating some of those assets you've got up in the states They have to go somewhere don't they and they're not safe in either us real estate or us banks Not anymore and you got to wonder what those puss brain politicians are going to think of to skin us next By the way, the word politics is a combination of two greek words the word poly meaning many and ticks meaning blood sucking insects Did you know that assets like gold and silver and cash are not even safe from bony ass dead broke uncle sam In a bank safety deposit vault Yep Some banks won't even let you put that stuff in their boxes anymore And the ones who will will report it to the irs

[09:30] So again when you come down you're going to want to rent at first at least for six months But in that time you just keep your eyes open for desperate sellers And if your idea is to build well you find desperate sellers who are selling land And if your idea is to buy a house that's complete There are plenty of desperate sellers out there with brand new empty houses They've been trying to sell or rent for months even years again You have to have boots on the ground to see this kind of stuff So anyway after I ran that show about desperate sellers last week I got a ton of email a lot from people asking just how to find those desperate sellers and some people wrote in who are Expats mostly long-term expats who've built houses and bought properties confirming exactly what i've been saying In fact right now. I want to read you an email from such a gringo who's living down in columbia

[10:18] Who's been through much the same thing listen to this and i'll paraphrase a bit here starts out Johnny i'm a new aficionado and very much enjoying your show After listening to your last few shows on latin american real estate. I thought i'd send this out for you and your listeners Now i'm a gringo, but i'm kind of the exception to the rule I'm a retired us cop married now to a columbian gal for 10 years I'm fluent in spanish now With 30 years practicing the language i've got some bilingual kids etc And we speak both languages in the home by the way i'm also native american slash Caucasian so I don't look too much different than anyone else in columbia when i'm down there

[11:04] So I slide under the radar easily. We bought our retirement home in san gill columbia in 2009 I've posted some pictures for you here and feel free to use them as you wish You know what mike? I will i'll put them on the youtube. So I hope you all go to youtube and check that out later Anyway, he says about the house after a year and a half of negotiation After dealing with mierda and lawyers and more negotiations, etc. I bought it and yes, johnny It was an obra in greece and I paid 40 000 us dollars for it, including the land cash and carry, baby That's what us gringos like to do down south and everyone appreciates it Then he says I finished the house the way I wanted for an additional 30 000 so with

[11:50] 70 000 bucks from start to finish and 2100 square foot four bedrooms three baths with a terrace on top and A separate lot on the side of the house. We got our dream home Wait a minute. Just a second. It's me again I have to interrupt here because if you figure the numbers on mike's house, he's 2100 square feet at 70k That's about 33 bucks a square foot, but it's really not it's much cheaper because remember it's including the land here So then let's say conservatively the land's worth 25 000 bucks. Remember he's got two lots now That means mike built his dream home for around 21 to 22 dollars a square foot So for all you naysayers out there who sent me emails saying johnny. I don't think this is possible

[12:39] That's when I was talking about being able to construct the first world house for 25 to 35 bucks a square foot So here's what I say to you doubters out there I say just remain relaxed on that sofa in cleveland and come up with some other excuses not to come down And get your plan b moving then mike says and of course this is latin america So we went through the lesson with the columbian manana time with workers and contractors, etc See senor be there at two o'clock sharp on tuesday Then show up 4 p.m. On thursday and can't understand why i'm pissed Hell, i'm a gringo. That's why i'm pissed and then come the excuses señor Pero que and you know, it's me again. You hear that all the time pero. Okay. Okay, meaning what like what's up, man?

[13:25] What's wrong? I made it i'm here Kalmati tranquilo relajarte. Oh, I love those three words Tranquilo means be tranquil relajarte means relax and kalmati means stay calm Meaning when you're trying to get something done down here in latin america Let's say you want your refrigerator repaired or you're building a garage or a house or something Those are the three words and phrases you'll most commonly hear relajarte kalmati and Tranquilo, oh and don't forget that fourth phrase you'll hear all the time No problemo which many times means just the opposite but back to mike's email He says johnny on the upside. I have ceramic stone floors handmade custom hardwood cabinets and doors

[14:11] wrought iron handrails A very nice house complete with all those goofy little lack of attention to detail items You're talking about all the time normal for any project like this, I suppose My point is with boots on the ground my spanish ability and experience in real estate We smacked that bad boy out for around 30 bucks a square foot. He's talking about the whole project there now But there's more as you might imagine the transferring of funds from the us to columbia was a real joy My u.s bank was very curious why I wanted to wire 40 grand to columbia I ended up wiring it to ban columbia branch in my jammy Then the money went to my builder's notary My wife and brother-in-law there and was confirmed via blackberry

[15:01] It felt more like the emotional roller coaster of a drug deal than a real estate deal But it all turned out and everyone went to lunch afterward now get this johnny The house has tripled in value since 2009 and the property taxes have gone up too To 600 bucks a year Yep, it's very nice. I know there are a lot of tourists now passing through st gill columbia We are pretty much off the gringo tourist trail and hardly meet anyone who speaks english, which is just so nice That's all for now PS Now here's a big ps folks. He says did I mention? If you're a gringo with no boots on the ground and no spanish your gringo prices will start at double Hmm. Keep it up. Johnny signed Miguelito that's little mic. Oh and by the way any spanish word that has ito on the end

[15:52] That's i-t-o It's a term of endearment meaning little though. It could mean little as in short or small like Carrito, that means a small car or it could mean junior For example, if there's two mics in the family one could be megal and one could be megalito But where was I? Oh, yeah There's an email that brings up a lot of different points A guy who transferred money down from the states and you saw how that went a guy who bought from a desperate seller with an incomplete house Working gray a guy who's seeing what the gringo tourist trail is doing to his adopted country gringo prices that double what he can pay not to mention the real estate bubble that's puffed his house value up 300 In seven years talks about the contractors and the lack of attention to detail, etc, etc

[16:39] But how in the end he's super satisfied and got pretty much everything he wanted out of the deal So you can see how you could do it, too Now I know what you're thinking. He's married to a columbian girl and he speaks fluent spanish Although it's not necessary to marry a latino or latina Once you get down here, you gotta get started working on your spanish So imagine you came down and you spent six months renting which is highly recommended Of course before you buy anything and in that time you study spanish pick it up more and more hook up with a bilingual translator slash concierge person and start scouting out those nice neighborhoods where you want to live Keeping a close eye out for desperate sellers In fact, I know of a half dozen works in gray that I could drive by in 10 or 15 minutes from where i'm doing this show

[17:24] Right now and that's not to mention the desperate sellers I see here and there on supermarket bulletin boards who can't even afford to advertise their properties in the paper And of course, there are the local newspaper classified ad sections where you'll spot desperate sellers here and there, too But as you know, or maybe you don't desperate sellers have had their properties up for sale or rent for so long with no takers That oftentimes they just quit advertising Just like the chronically unemployed up in the states Just fall off the rolls and the government doesn't count them anymore and us unemployment's at five percent, right? So when desperate sellers get really desperate, they don't buy ads in the paper anymore That costs money and of course, they've listed their properties all over the place with remax and century 21 and all the local agencies But you know after a place hasn't had one hit in over a year

[18:12] They get relegated to the back of the file cabinet and of course, you know real estate agents They're always pushing their pet projects and down here in latin america in places where the bubble is huge Real estate agents have been getting caught in their own frenzy They bought up properties tried to flip them and stuff and now many of them have pet projects that they're invested in themselves So they're frantic to show you that crap first you get the picture Oh and here's something that's going to blow your mind If you don't think there's a huge real estate bubble here in latin america Just drive along one of the big sections of highway in a nicer section of town and you'll see all kinds of billboards popping up everywhere advertising first world real estate projects people wouldn't have dreamed of seeing down here even five years ago And how about this over the years? I've been monitoring these giant billboard ads and I noticed a couple of them that

[18:59] Kind of tell the history of the real estate bubble story in a nutshell Of course, that's not what their intention is, but you judge for yourself Now if you are down here with boots on the ground, I could show you some very big expensive billboards on the pan american highway You know the biggest highway in all latin america goes from alaska down to panama And believe me if you have a business or a project or a housing development You want to put up a billboard there because that's where all the traffic is now along that highway There's some very nasty neighborhoods and bad pieces of real estate a lot of farmland and some very very upscale pieces of real estate, too Now i've been watching this one development and their giant poster ads with great interest because about a year and a half ago When the project was just about done big billboards started popping up and by the way, the houses start at around

[19:45] $200,000 and up so at first a year and a half ago when the billboards first went up They were asking 20 percent down and it said so right on the billboard By the way a down payment here is called enganche in spanish. Okay, so a year and a half ago 20 percent down That's 40 grand up front minimum, right? Now I know this upscale subdivision and I drive by at night sometimes and there's almost no lights on so things are not going Well, they're not selling so then about a year ago the billboard signs on the pan american highway started changing Same upscale first world subdivision, but now only 10 down. That means minimum 20 grand up front, right? Okay, fast forward to about a month ago. I'm driving along again. See those same billboards. They're being changed

[20:34] Yep, they still say 10 and ganche that's 10 down However, it says you can pay that 10 down in 12 easy monthly payments Wait a minute to me. That's no down payment. A down payment is cash up front and they're letting you finance the down payment That makes sense. Have you ever heard of that? I mean you have a down payment So you can prove to the lender or the housing development which might be self financing that you're good to pay the payments, right? You have to put skin in the game then and there But if you can't even come up with the down payment and have to pay that in payments Well, what does that tell you talk about creative financing, huh? So then you might ask why not just drop it to zero percent down Well, that's the next step and i'm seeing that happen all over the place, too

[21:22] Where initially there was 20 percent down then they dropped it to 10 then five sometimes or straight to zero money down Does that remind you of anything shades of 2006 seven and eight? Maybe who knows? Maybe the next step is to do like they do with car loans in the states No money down and waive the interest for a year or two So with that information if you doubt there's a real estate bubble down here ready to blow Come on down and buy into it. Hey, there's a ton of upscale projects You can get into down here with no money down but back to our desperate sellers Like I said, you're not gonna find them on the internet And you're not gonna find them by calling up century 21 or remax or any of the local real estate agents Look what mike said about columbia if you can't speak spanish and you're a gringo

[22:09] You'll pay gringo prices which start at twice with the locals pay So then you might ask why do desperate sellers often advertise on supermarket bulletin boards? Because that's one place they let you advertise for free and desperate sellers. Well, they haven't got any cash. That's why they're desperate Oh, and here's another way to find desperate sellers when you're driving around and you see for sale signs That's se vende in spanish Just pay attention as to how dilapidated the sign is Because you know when a sign first goes up It's brand spanking new and nice and straight and glistening and shiny But after six months eight months 10 months a year year and a half two years Well, the sign loses its luster starts tipping gets sunbaked cracked and often loaded with bird shit

[22:55] Now desperate sellers being well desperate. They do not as a rule buy new signs clean them up or repaint them This is latin america, you know details details So you can watch the signs deteriorate along with the real estate And here's a tip do pay attention to the gardening or lack of gardening too another telltale sign of a desperate seller Okay Let's move on How about another expat third world off the gringo tourist trail story that could make you crack a smile or shed a tear depending? Now the other day I was talking to john gault and he said something funny happened He was in a very upscale shopping center at a very nice restaurant And he saw some people who were dining like they were royalty that happened to be connected to the us embassy No surprise there and as john gault will sometimes do he weaseled his way into the conversation as I often try to do myself

[23:48] Gathering as much information from the enemy as we can Anyway gently probing into what they were doing down here in latin america under us government contract He found they were down here acting as high-level administrators fighting the war on drugs That was lost a long time ago. In fact before it even started and as it turned out They were talking about how the us spends a few hundred billion with a b dollars a year in latin america alone Continuously fighting that lost war and then john gault said to me. I just don't get it. Where's that money going? I don't see any improvements anywhere Do you? We figured it just went into one big infinitely corrupt black hole And left the question hanging however Just a day or two later. I ran into an old buddy of mine motorcycle mike who you might remember

[24:39] What's the focus of a story? I told maybe three or four years ago on the show a guy who's the central american Maintenance manager for a huge us helicopter firm Anyway, I hadn't seen him for a couple of years and I knew he hangs around san salvador the capital of el salvador Because he's got a beautiful condo there in the zona rosa. So anyway, I saw motorcycle mike They call him that because he's a big harley driver tattoos and all ex-marine muscles on top of muscles hell of a nice guy When I asked him what he's been doing He said for the last year he's been in and out of airports all over latin america But mostly he said at the airports in mexico and peru He said you see the us had donated a hundred or so brand new helicopters to certain latin countries To fight that oh so successful drug war and then he says, you know when the us

[25:28] Donates equipment like that somebody's got to get to maintenance contract and that was me and my company That's when he made the ugliest face I had ever seen him make in my life and he can make ugly faces And then he said johnny don't ever sign a contract with a latin american government because you know what I spent over a year Going back and forth from airport to airport and guess what we had a contract But never got paid and it was such a big cascade of screw-ups. We never will either So from what I could gather he and his crew got paid for expenses along the way I never got the big chunk of dough that was written into the contract I said mike are you telling me that the us reneged on a contract? He said no, that was part of the cascade of screw-ups the us donated the helicopters But the latin countries were on the hook for the maintenance contracts

[26:15] So big mike got stiffed in a big way and you might remember from another past expat file show I mentioned how I got stiffed by a latin government in a much smaller way I got stiffed after doing a radio voiceover for a government tourist program that got played over and over on latin american air flights Now I mentioned that story to mike, but it didn't make him feel much better So what's the point? Well, remember I said that john gault mentioned a few hundred billion dollars donated to latin countries each year To fight that war the war that every idiot cretin and geek knew we lost a long time ago Now we were wondering where all that money went, right? So let's take a hundred military helicopters. For instance, they come in at around 10 to 25 million bucks a piece

[27:03] Then you've got tens of millions of dollars worth of replacement parts at every airport Then there's the training and support staff and all those government and military pus-brained wonks flying back and forth First class staying in four star hotels and eating at upscale restaurants on your dime because that's what high level government administrators and contractors do Especially down here in the third world where it's out of sight out of mind So the question is after hearing all that did you crack a smile or shed a tear? South of the border You've been listening to the expat files living in latin america coming to you twice a week from somewhere south of the border Email me the expat files at gmail.com And if you want me to help you sort out your own latin american plans schedule a one-on-one consult with me

[27:52] Just send an email and let me know at the expat files at gmail.com. No, it's famous