I met Mike Cobb a number of years ago when I was near the end of the road on the west coast of the Azuero Penninsula. Way away from most of civilization but a future area that will one day be another piece of paradise in Panama. Michael Cobb is chairman and CEO of ECI Development, a company already serving the needs of retiring baby boomers with retirement communities in Belize, Nicaragua, Costa Rica and soon in Ecuador as well.
Here is a three part series that is very well thought out and comes from a developer who knows.
Everyone buying property outside of North America needs to remember the famous words of Dorothy to Toto after being dropped into Oz, “I don’t think we are in Kansas anymore.”
When going offshore, especially to places that feel familiar, we must be very, very careful. In fact, the more familiar it seems, the more caution we should apply. But how do we do that?
Take a look at a favorite saying of mine, “I don’t know what I don’t know.”
Please stop and reread that….
Really! How could we know what we don’t know? We can’t, obviously, but we can be open to new possibilities and realities that vary greatly from our assumptions.
So if you can’t know what you can’t know — what can you do? Over the years, I’ve discovered that the key to living and doing business, successfully and happily, in Latin America is to adjust our own beliefs, habits and assumptions.
So What Can You Do?
The analogy that makes sense here is one of a radar screen. Picture yourself tracking blinking lights that suddenly appear, move at varying speeds toward the center of the screen, and disappear again. A small radar screen would be easy to manage. In the world of “North American normal,” we where to expect the lights to show up, where they’re going, and which ones needed the most attention.
But overseas, a larger radar screen serves us better. It makes sense to expand our field of attention greatly, so that we pick up anomalies when they first arrive at the edge of the screen, before they get close to the critical center. Give yourself time and space to examine this data, process it, and then understand it.
Humility is the one attitude that really helps us to be open to the fact that we don’t know what we don’t know. It gives us a willingness to listen, hear which our assumptions don’t make sense in the current situation, acknowledge it and try to fit that information into our analysis. Humility also allows us to let others with more experience guide us through unknown territory.
In fact, we have just two choices: Humility or tuition. Follow someone who knows the territory, or pay the price to learn from your own experience.
The other piece of this puzzle is our assumptions, as I mentioned above. Have you seen the word “assume” defined as making an ass out of you and me? Ass-u-me. When we leave our home country, we bring our assumptions with us. We have to, because they are part and parcel of who we are.
Assumptions are like filters. In the back of the brain, right at the top of the spinal cord, resides a part called the thalamus. This is one of the oldest parts of the brain and it is the brain’s chief filtering mechanism. It hears and senses everything. Literally everything. Billions of sensations per second, yet our conscious mind receives only about one percent of that information, because that is all the conscious “I” can handle and process.
A good example is when you have a small baby in the house. It is possible to sleep through a raging thunderstorm, but a tiny squeak from a newborn will rouse the mother instantly (and dad sometimes). This is the Thalamus hard at work, sorting out the needed info from the not needed. This filtering mechanism lets us live our lives. If we had to pay attention to every noise, movement, sensation around us, we’d be overwhelmed. So we filter.
But this filtering mechanism can be an Achilles Heel unless we understand that we are indeed filtering and are prepared to try and turn it off as necessary. It’s not easy to turn the filters off, to live “on your toes,” and be ready to see something that doesn’t make sense. In fact, it can be hard work. But it is necessary, if we want to make wise property ownership decisions overseas.
When you see it, turn off your habit of believing what you want and expect to be true, acknowledge it, and respect what your logic says. Push your radar screen out further. Give yourself time and space from the awesome emotional experience of palm trees, margaritas, and friendly sales guys. Process the hard data and do your homework. Look for evidence that contradicts what you want to believe.
Finding the Properties That Are Right for You
The bottom line is that there are numerous, wonderful properties out there — and some of them are right for you. But you are in a different country, with different rules. There is no big brother looking out for you, hooray, so be sure you are smartly looking out for yourself.
An educated buyer is a happy owner. The answers to the questions below should be an important part of your property selection process. There are no “right” or “wrong” answers, but we’ve found that the things people take for granted or assume are standards in North America, may not be in Latin America. Be sure you know the answers to the following questions and make conscious decisions about what levels of creature comforts are mandatory, and which may be optional for you.
The 15 Critical “Must Ask” Questions when Buying Real Estate Overseas
These 15 questions are critical for excellent and comprehensive due diligence. I’ve broken them into three main areas:
- Buy what you see.
- Own community.
- Know the developer.
The first set below deal with “Buy what you see.” The President of ECI Development has a saying, “You get what you inspect, not what you expect.” Promises are easy to make and difficult to deliver. Be sure you are dealing with existing reality. These first critical due diligence questions are below.
Due Diligence, Part 1: Buy What You See
Is there year-round access to the property? What is the drive time from shopping, dining, and the airport?
Not all roads are accessible year-round in the region. Steams that during the dry season barely flow or don’t at all, can be raging torrents half the year. Know the road condition in rainy season. Proximity to services is very important. The key factor is the time to reach the destination, not the miles. Ten miles on a rough dirt road in rainy season can easily take an hour or more.
What road and public infrastructure exists? Does the current infrastructure include underground utilities, paved streets and sidewalks?
Do not take for granted that a developer will provide paved roads, street lights or state-of-the-art telecommunications. If these are not in place when you buy your property, they might never be. Rarely, if ever, does the government or utility company provide these services to a developer. If the sales agent says, “It’s coming,” verify that the developer has the funds to meet his promises. Ask to see a copy of his most recent bank statement showing the millions of dollars it will take to build the infrastructure. Bottom line: Buy what you see! Be sure that the price you pay is indicative of existing reality.
Is there enough fresh water and water pressure?
Sometimes it’s the smallest of things that adds greatly to the quality of life. Water pressure is one of them and it must be planned for and paid for. Either the developer has planned and paid for this part of the infrastructure, or the lot owner will bear this cost with the addition of storage tanks and pressurizing systems. If you are considering an existing home or condominium, turn on all the faucets, inside and out, and the showers, and then flush the toilets. Is there sufficient pressure?
Is the house or condominium plumbed with hot water? Not a silly question. Look under the sinks to see if there is hot and cold service. In many cases, a splitter is used from the cold water pipe to provide water to both faucets. The cost to retrofit a concrete home for hot water to the bathrooms can be high. If you are having a home built, be sure to triple check the plans for a hot and cold service to all bathrooms and fixtures. Architects and builders may design to local standards, and unless you catch this upfront, change orders become prohibitively expensive.
How far is it to major medical care? How long in dry season, and how long in rainy season?Major medical care is critical. Most major Latin American cities have state-of-the-art hospitals. In fact, in many cases these facilities can eclipse regional US hospitals with newer more modern equipment approved for use in Europe, but not yet passed by the FDA. Be sure to visit the medical facilities as part of your due diligence process. Remember too, it is not how many miles to a major medical facility, but how many minutes by car in both the wet and dry seasons that really counts.
Coming Up: To read the rest of Mike Cobb’s 15 Must-Ask Questions for Buying Real Estate Overseas, stay tuned. The other two topics, “Own Community,” and “Know the Developer” will be presented in subsequent issues of Hemispheres.
Or, to receive the complete list of all 15 questions, use the link below to request the full list from the author.
Michael Cobb is chairman and CEO of ECI Development, a company already serving the needs of retiring baby boomers with retirement communities in Belize, Nicaragua and soon Costa Rica. To learn more about investment opportunities in ECI and its communities, or receive your copy of 15 Must-Ask Questions for Buying Real Estate Overseas, contact Mike here.