One of the most frequent notes I receive from people wanting to move to Ecuador… or move at all or receive debt is… “I’ll do it as soon as I sell my place.”
There are some great property deals in Ecuador.
For example these adobe homes are…
about 1,500 square feet. This is a shot Merri took last September of me with the builder Jorge Quilambaci. Here is the front yard of this house.
The have nice interesting designs and…
are roomy… but…
the asking price is only $85,000.
That house is probably finished now, yet many people who would like to buy it cannot… unless they sell their US or Canadian house.
Here is a tip that can help you sell your property: In tough buyer markets, we have to be creative by spotting distortions.
Here is a true story of how I helped a developer take advantage of distortions during the 1970s economic crunch.
This developer was a Brooklyn Boomer, and at that time a young real estate developer who got into international fund raising to save his neck.
He was sharp, intelligent and successful and in the 1970s he stumbled onto an exciting real estate idea that was bringing him great profits. Manhattan real estate prices were rising strongly in the 70s. The boomer saw that young professionals his age (late 20’s and early 30’s) could no longer afford to live in the better parts of this exclusive island.
He knew they needed to be close to town for their profession, wanted lots of room to raise their families and liked living in a nice setting with good architectural design and all the conveniences of modern living.He filled these needs by converting warehouses in Brooklyn into attractive and spacious condominium living units. The idea worked very well. The warehouses were only short blocks from very nice residential parts of Brooklyn and were capable of providing many large living units. This man’s business prospered and soon he started an even bigger project and then another. He was doing really well.
Then the economy bombed the boomer. He was more than fully committed, over borrowed and needed quick cash to keep his deal going. An oil shortage, a banking crash and really high interest rates were on the verge of shutting him down. For real estate developers the 1970s recession was almost as bad as now.
The developer was caught in a bind having already borrowed as much as he could based upon his previous successes. His financing was all in short term construction loans that were coming due, and he had to refinance at higher and higher rates.
High interest rates hit him doubly. First, his construction loan rates ruined cash flow and ate potential profits. Even worse the high rates increased mortgage payments so young professionals could no longer qualify for mortgages. His bankers were edgy.
At this stage, he consulted me about raising money from Europeans to tide him through his cash crisis.
At his request, I flew to New York and rode with him to the apartments. They were beautiful, so attractively designed that they had been featured in an architectural magazine. “Just the kind of place Europeans love” was my thought, “but how do we get quick financing?”
Perhaps, I thought that it would be better to sell apartments to Europeans rather than ask for loans!
Owning houses is something Europeans readily understand. They have confidence in owning houses. Making loans and investing in equities are not so much their deals.
So we treated the apartments as the investment and placed small, classified ads in the Netherlands, England and Germany.
Here is why. Interest rates on the dollar at that time were at all time highs. Plus the U.S. dollar parity was at an all time low versus the British pound, German mark and Dutch guilder. These Brooklyn condos, seemed really cheap, when converted into foreign currency!
We did not try to sell the condos by mail. The sole object of our first ads was to find Dutch, German and English investors who were interested enough in investing in New York, that they would come and look at the condos.
Our sales package was aimed at getting the investors to Brooklyn, not at selling the condos direct. We wanted centers of influence. The marketing package included a copy of the famous architectural magazine showing the condos as well as details about profit potential of the property and the really low price in European and British currency terms. We kept a clear message that we were offering an investment backed by property ownership and that we wanted to meet the buyers and let them see for themselves.
The American buyers who had been buying from the Brooklyn Bomber were buying homes. These Europeans were making an investment which was very different.
We designed a package so the Europeans could buy an apartment, and immediately lease it to an American buyer – with a lease option.
This helped the Americans who wanted a place to live but currently could not qualify for a mortgage. They could immediately move into the house of their dreams and buy it later when they had a larger income (or when interest rates fell).
The lease on the other hand created immediate income for the European investor and the lease option sales price locked in a capital gain for the European.
The Europeans loved this because they earned income now, appreciation later and the entire package was secured by the real estate itself.
This was a win – win deal all made possible by distortions of currency fluctuations. The weak U.S. dollar made this property seem really cheap to Europeans. Yet the weak dollar pushed up oil prices, and interest rates made the condos really expensive for Americans.
One more point can be gained from this Case Study. The developer’s goal was to sell as many apartments to European investors for cash as fast as he could while the distortion remained. Yet we also set up a limited partnership designed for small investors who could not afford to buy an entire apartment. The partnership took title to one condo at a time and sold units of ownership for as little as U.S. $5,000.
This allowed Europeans to own a part of condo and gave the developer investment packages to sell for all ranges of investors. He sold the apartments for $125,000 to $250,000 to single investors, but with his deal could offer a $5,000 investment.
By taking advantage of this distortion this Brooklyn developer did not bomb out! This gave the Brooklyn Boomer a plan to salvage his tight position then, but also gave him much, much more. Once he had developed a group of real estate investors in Europe he had an entirely new source of financing for the future. As interest rates fell and the leasees began to exercise their options, his European investors saw profits and had extra cash. By developing good will with these investors he maintained a steady source of equity finance that allowed him to outgun other developers in the area.
This led the developer into an international business, with an overseas sales company. He learned how to use the Circle of 100. He paid this sales company generous commissions and built an asset protected cash reserve aboard.
This is a wonderful case where the solution to a short-term problem (that could have bankrupted the developer) created a reliable long-term source of finance, solved his current problem and remained so he could also use it in the future.
He gained a source of money in many currencies and often at competitive interest rates. This source of money was available in good times AND bad, when other developers could not get money at all!
He gained an overseas company with 50% non-U.S. owners so he reduced U.S. tax liability. The assets in this overseas company were also protected from lawsuits and litigation in the U.S.
Distortions in currencies and interest rates around the world can bring an infusion of cash, buyers, different rates of interest, opportunities to reduce tax, eliminate liability. The process can also be a great deal of fun, if you learn how to understand markets abroad and adapt your plans to match the market!
Until then may all you business be good.
Join us in Ecuador or Florida or Both. See the best Ecuador property for you. Find the best real estate offers. Know more of Ecuador. To help you experience a bigger adventure in this wonderful nation, to broaden your horizons, to expand your awareness of all Ecuador offers, we are providing deep discounts in 2010 for those who sign up for multiple tours.
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Join us in 2010. See our winter Ecuador real estate tours below.
Jan. 13-14 Imbabura Real Estate Tour $499 Couple $749
Jan. 15-18 Coastal Real Estate Tour $499 Couple $749
Jan. 19-20 Quito-Mindo Real Estate Tour $499 Couple $749
Jan. 21-23 Cuenca Real Estate Tour $499 Couple $749
Join us in February or March.
Feb. 15-16 Travel to and visit Quito
Feb 17 Travel to Manta
Feb. 18-19 Coastal Real Estate Tour $499 Couple $749 or discounted fee for multiple tours below.
Feb. 20 Travel to Cotacachi
Feb. 21-22 Imbabura Real Estate Tour $499 Couple $749 or discounted fee for multiple tours below.
Feb. 23-24 Quito-Mindo Real Estate Tour $499 Couple $749 or discounted fee for multiple tours below.
Feb. 26-27 Cuenca Real Estate Tour $499 Couple $749 or discounted fee for multiple tours below.
Mar. 15-16 Travel to Quito and Andes
Mar. 17-18 Imbabura Real Estate Tour $499 Couple $749 or discounted fee for multiple tours below.
Mar. 19-20 Cotacachi Shamanic Tour $499 Couple $749 or discounted fee for multiple tours below.
Mar. 22-23 Coastal Real Estate Tour $499 Couple $749 or discounted fee for multiple tours below.
Mar. 25-26 Cuenca Real Estate Tour $499 Couple $749 or discounted fee for multiple tours below.
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