By Don R. Campbell
If You Missed The Introduction to This 6 Part Series – Click Here If not, read on…
Why is it that we are so obsessed in Canada about or economic stats, our Bank of Canada statements, our Interest Rates, our housing stats, yet when we get in an airplane to travel to a tropical paradise we completely ignore all of that (and much more)? I will never understand it, but the fact is it happens even to the best of us. These 6 Rules are designed to help you avoid the horrific mistakes that some have made when flying to a winter get-away only to come back owning a property we didn’t expect to.
Rule #1 – Fly (Twice) Before You Buy!
Sadly, some people never even make it onto an airplane before their brain seizes up and they get sold a ‘dream’ property through pictures and sales pitch. Never buy property at a distance, especially in another country, without seeing it for yourself. You work hard for your money in Canada, why would you throw your money at a potential property without knowing the reality behind the dream? It is important to remember that promoters get paid to sell property – that is their job. Your job is to do your own homework and protect your interests. It does not matter what the other party says – you need to verify the reality of the situation.
The key with visiting a region is that you must visit at least twice: once in the high season and once in the low season. In many countries there is a VAST difference in accessibility (flights, bus travel etc), demand (tropical storm season or too hot), and open amenities (often times half the businesses are shut down during low season).
Think Of How Different Canadian Property Looks in High Season vs Low Season
If you were from outside of Canada and you were thinking of investing in a summer cottage area. You might visit only in the summer time where you would see an area teeming with life. The economic activity would be obvious, the rentals would be hard to find and it would feel like an amazing place to park your money. However, you would only be getting half the picture.
If you took the time to visit in the off-season like November or February, you would start to see the other side of the reality: Huge snow-banks, most businesses shut for the season, very limited number of visitors, potentially difficult access. Your view would now start to change closer to reality and you would investigate much more thoroughly. Visiting twice would ensure you aren’t caught up in the “Holiday Feeling” that drives people to buy in the good season.
Take this a step further – imagine how the view would differ if you visited a tropical or out-of-Canada property in both the high and low season BEFORE you bought. The same due diligence would come into play. You may discover that in ALL seasons the market is strong… In many cases you won’t, but you will not know the absolute truth without actually being there… pictures can be altered, stories can be embellished, but being there in person the true reality (both good and bad), comes into view.
Holiday Brain – A Disease To Avoid
The reason time-share and vacation property sales people locate themselves in the heart of tourist country is that they understand the whole “Holiday Mind-set” psychology that turns a holidayer into an easy target. That is why you see so many of these ‘out-of-country’ properties and time-shares trying to be off-loaded on the internet by purchasers who bought while in the holiday mind-set and then when the reality sunk in, it was too late. Visiting twice will help the reality set in BEFORE the decision is made, thus making your decision better.
If the promoter tells you that you don’t have to visit to check out the property or the region, you have to ask yourself, what are they hiding? Why don’t they want you to do your due diligence?
What To Do During The Visits
When you visit, there are certain steps you should take to complete your due diligence.
A. Feel free to tell the promoter/developer that you are coming but only tell them this the first time (you might get a free hotel stay out of it). The next time you go, do not pre-warn them. Book somewhere else and just show up at the site to see what’s really going on behind the scenes. Bring your camera – you might be shocked at what you find when they’re not prepared for your visit.
B. Check out the location and closeness to local amenities - airport, restaurants, stores, water, etc. Pay very close attention to how easy and how long it takes to get from your house to the potential property… is it easily accessible for a quick 4 – 7 day get away? A three hour bus ride from the airport is NOT compelling to potential renters/tourists. Check out what the water is like; is it good for tourists (or something you would feel comfortable swimming in or drinking)? Are there a lot of attractions/restaurants, stores nearby? How about a medical clinic? What are the medical service options?
IMPORTANT WARNING: Be wary of promised local improvements such as a new airport unless you see actual construction underway. In Tropical countries, I have seen the same airport ‘rumor’ being announced 10 times in 10 years and still no real work ever began.
C. Visit a local realtor to see if a property you are considering was being sold to you in “local” or “foreign” pricing. Sure it may look inexpensive, based on our North American perception, but only by visiting will you know if it truly is a deal or not. The difference between local pricing and ‘foreigner’ pricing is often substantial. There’s a reason that such massive commissions are paid to the promoters in Canada. It is because the ‘foreign’ mark-up on the property sale price is so high. For instance, properties being sold in Canada at $50,000 per acre have been bought for less than $5,000 locally. That is amazing mark-up… and you won’t know about it until you start speaking with a trusted local real estate person, visiting properties for sale and checking out the competition.
Up Next: Rule #2.