How much house can US$150K buy?
A house in Bali. Photo from MatadorLife.com.
Matador Life had an article a while back called What Can $150K Buy in Real Estate Around the World? The photos were a real eye-opener about the great values available around the world. It’s mainly pictures and figures, but the comments were instructive. There was also a bit of a flame war between people who were willing to move, and those who wouldn’t live anywhere but in the United States.
MSN Money had a related article called Live Like Royalty in a Low-Cost Paradise. Although you don’t have to wait until retirement to enjoy the bargains to be had abroad. This article in particular is good at pointing out the potential pitfalls and necessary traits of a long-term expat.
For me personally, I wouldn’t want to buy property abroad because of worries about how stable my ownership would be, ease of selling it on later, etc. Though I can see the attraction for those who want to take the plunge.
Have any of you bought a house abroad, or know someone who did? What was the experience like? Any tips would be appreciated.
October 2nd, 2009 at 3:36 am
I have thought a lot about it, and almost purchased a home in Mexico and Ecuador at one point. There are two variables that hinder me … and the problem is that there are two.
Anyone who buys a home hopes that the local real estate values will go up over time, so that in the event they need to sell it will be worth more. That is the first variable. And, it happens to be unknown. But I could deal with that after doing my research on a particular geographic area.
The whole thing is exacerbated by another variable that few people consider. When you say $150,000 you are talking American dollars.
I am a Canadian. If I buy a property in Belize for that amount, suppose over 10 years it increases in value by 20%. The only way I get that profit upon selling is if the American dollar stays at par with the Canadian. Based on what the current US administration is doing, there is a very good likelihood of the US dollar dropping 20% over the next 10 years… leaving me with a 0% profit (less, considering commissions, property taxes, maintenance etc.).
I simply cannot predict both variables with any accuracy – the possibility of being way wrong is too high.
So, I’ve decided, I’d rather rent from someone else when I travel, and let them deal with those variables.
October 2nd, 2009 at 3:17 pm
There are far better deals outside your home countries, and less risk too as we’ve seen lately.
I bought a house in Mexico right by the beach for $35,000 five years ago, when I had some money to invest and the U.S. market was looking way too frothy in my eyes. (I was a bit ahead of the curve, but ultimately correct.) I put $10K more into and now it’s a nice little 2BR beach house that has a rental income as well. It’s probably about doubled in value, but there are still houses in that area for less than $60K if you look around. I can get there faster than I can get to the west coast of the U.S., the roads are good, and the beer is cheap. I could sell it faster than I could sell my primary residence if I wanted to. But I don’t. I like going there too much. Here’s the place: https://www.vacationrentals.com/vacation-rentals/5367.html
Rod—you could buy a property denominated in euros, pounds, or baht and it wouldn’t make a difference. Currency fluctuations are a fact of life, even in your own country. If the Canadian dollar is worth 20% less than it was five years ago, your Canadian house is worth less too in real value. People just don’t look at it that way because it’s their home and if they don’t travel or buy imported goods, it’s not as obvious.
October 2nd, 2009 at 4:52 pm
Why buy? Why not rent? It’s comparable in cost, and you don’t have the problem of being stuck with a property. You can always move if you want.
October 3rd, 2009 at 2:19 am
Tim – you obviously got a great deal on a property that has brought you a great deal of enjoyment. That’s worth more than money can buy … and the pics look great! Who knows… I may be contacting you to rent it out 🙂
I do, however, beg to differ with you on your currency comment. I have had numerous very savvy real estate investors bring this factor up with me. The fact is that virtually all property sold in Mexico and Central America is sold in American dollars. Even in Thailand, as Canadian, I may be negotiating in baht, but the buyer is immediately converting that into an American dollar price, and I would face the same issue when selling. Yes, currency fluctuations are a fact of life, but the problem is that they are completely unpredictable. As a real estate investor with numerous properties, I try to stay away from unpredictable variables, and stick with ones that are somewhat more predictable, (like a growing economy, inward migration, favourable demographics and a temporarily depressed market.) However, even if I nail every one of those perfectly, you correctly state that nobody can control currency fluctuation. As much as possible, an investor wants limited wild cards in his or her investment. The currency wild card is just too crazy, and can so easily wipe out profits.
Its different in Canada if I live and buy goods here. True, my Canadian house would be worth less in ‘real’ value if the CDN dollar dropped, but not in relative value, which is mostly what matters if I live in Canada. A drop in CDN dollar value means my real estate would probably increase in price dollar wise, while staying relative to the house I would buy with the profits (or the loaf of bread, or car, or whatever). Not so when I have to swap currencies.
Interesting discussion though! I’m sure I would look at things differently if the whole world sold real estate based on Canadian dollars 🙂