Chapter 4: Landlord. To be, or not to be.

June 26, 2018

 Moving To Mexico:  USAdios

Chapter 4:  Landlord.  To be, or not to be.

I once knew someone whose father was VERY wealthy.  I’m talking #60 on the Forbes 400 List.  Big Boy Business.  That business mogul owned nine homes and he lit a fire in me.  My dream was to own ten.

I’ve always been dreamer.  I’m the kind of person who buys a lottery ticket and I’m surprised when I don’t win.  Mentally, I’ve spent those hundreds of millions of dollars many times.  I have never won more than ten dollars playing the lottery, but I did achieve half of my real estate dream.  My wife and I managed to own five properties before we tired of the hassles that came along with being a landlord.

We made things particularly difficult on ourselves because we purchased Caribbean beach properties prone to storm damage, didn’t do as much research as we should have and did not seek professional help.  Why, oh why didn’t we call the experts at Escape Artist?  The following is an example of how NOT to purchase international real estate.  I hope your experience is much different than ours was.

Ambergris Caye is a lovely island just a short flight from the mainland.  The barrier reef is just offshore and offers incredible diving and fishing.  The water is beautiful and warm, the sand white and soft.  As you sway in your hammock, dangling between two palm trees you imagine yourself in paradise.  After all, Madonna sang about the island in her song, “La Isla Bonita”, right?  She knew a lot about real estate.

 

In 2003, we bought a condo on Ambergris Caye on the fourth day of our first visit there.  It was just a concrete shell and a pile of bricks, but the builder had plans and drawings of what it would become.  We knew very little about the island and nothing about this builder, but some very good friends had recently relocated there from California and raved about the place.  They had opened a restaurant and in a very short amount of time had gotten to know everyone who was anyone on the island.  Our close relationship to them gave us instant status by proxy and this was definitely a selling point for us owning there.

They also knew the builder, owned one of his homes and planned to buy in the new building project so we took their recommendation.  Before we knew it, we had contracted to buy a home just down the beach from our friends’ place on our first visit.  They planned to sell their old place and actually bought a condominium two doors down from ours in the new building.  We felt we’d be safer with our old friends from home on the same beach in Belize.

 

MISTAKE #1:

Listening to friends who did something foolish and encouraged us to do the same. 

We knew next to nothing about Belize, the island of Ambergris Caye or the builder yet we still wrote a large down payment check.  Apparently, our friends had done a similar thing but took it one step further.  They completely relocated to the island, bought a home and a restaurant.  With that kind of commitment, they would be great anchor contacts for us, right?  Wrong.  Like many people in Belize, our friends succumbed to some bad habits and were taking full advantage of the cheap booze, cigarettes and the “wink and nod” pharmacies on the island.  Their days on the island were numbered and they did not last long there.  The days of being introduced to everyone by old friends who were now locals disappeared and with it our VIP experience on the island.

I remember that sad day when I drove by a vacant beach lot near downtown where their old boat lay on its side, rotting and stripped of anything valuable.  I had been in that boat and even skippered it once.  Seeing it dead on land made me feel very alone.

 

MISTAKE #2:

Believing that the island people of Belize had the same concept of time that we did.

Once our condo was completed, we contracted with a local artisan who was famous for building “dreamy” hardwood furniture.

“Six weeks to complete all of it, and then three days to deliver and assemble, right?’  I confirmed our agreement.

“Maybe even less.”  The nice lady at the desk told me.  I paid my deposit and told her we would return in eight weeks to stay in the condo.

About ten weeks later, we confirmed that the furniture was complete via email and flew to Belize to stay in our new condo for the first time.  When we arrived at our front door, we paused.

“This is like opening a gift.”  I said.  Betty nodded.

“A gift to us from us.”  She grinned.  I turned the key and opened the door.  Immediately, we were hit with the smells of new construction.  Concrete, paint, wood and solvents.  It was not a great smell, but I was sure it would fade.  But as we entered we saw a huge pile of what appeared to be lumber.

“Is that our furniture?”  Betty asked.  I walked closer to the pile of wood and stared at it.

“I think so.”  I walked outside to use my cell phone where the reception was better.

 

Without going into too much detail, suffice to say the furniture company had not kept their word.

“We can assemble it in a day.”  The lady told me.

“You said three days before.”  I said.  “And where are we supposed to stay?  I told you we were going to stay in our home this week.  We can’t sleep in this mess.”

“Ummm, yeah.”  She said.  And again, to keep from dragging the details here, the furniture builder kept making promises they never kept.  We wound up staying the entire week at our friends’ place.  When we left, we checked on the furniture.  It was still not complete.

“Island time, mon.”  My buddy said with a grin.  I was trying to keep cool, but I was really upset.

 

 

MISTAKE #3, 4, 5, 6, 7…:

Not thoroughly visiting and exploring Belize before buying there.

The second time we planned on going to the condo my wife became ill and needed to stay home.  I had to handle things alone.  This time the furniture was completed so I finished fitting out the condo with electronics, bedding, linens, kitchen stuff, etc.  It was a huge job sourcing each item and having the larger things delivered.  When it was done I had a couple of days to relax and enjoy the place, so I headed for the beach just off my back porch.

I cracked open a Belikin Lighthouse Ale and as I lay in my hammock on our beach, a flying bug as big as an Oreo cookie landed on my chest and bit me.  I smacked it and it flew away.  That was weird.  I covered myself with a towel, tried to smile and took a snooze.

When I awoke, I found that my beach bag had been stolen.  Beaches in the Caribbean are public to the high-water mark, so strangers walk by what feels like private property all the time.

“Probably just some kids.”  I chuckled to myself.  All the got was some sunscreen, a magazine and some bottled water.  I decided to drive to town to get a bite to eat but when I went to the roadside area of our building, my golf cart was gone.

“Did you lock the steering wheel with that chain the rental guy gave you?”  My friend asked.

“Nope.”  I frowned.  “I didn’t think I needed to do that in our driveway.

“The local kids steal unlocked golf carts.  They start them with a universal key or screwdriver and take them for joyrides.”  My friend told me.  “It’ not a big deal…unless.”

“Unless what?”

“Unless the steal the battery.”

“They do that?”

“Sometimes.  The batteries are very valuable here.”  He said.  “Or they might….”

“Might what?  I asked, getting nervous.

“Well, sometimes the run them on undeveloped beaches and leave them in the water.”  He shrugged.  “No big deal, though.”

“Those carts cost eight grand.”  I snapped.  “What exactly constitutes a big deal around here?”

Fortunately, the cart was found abandoned a couple of miles north and the rental company delivered another one to me.  Major hassle:  avoided.

 

We had just shelled out $265,000 USD on a condo and I wanted to enjoy my first stay in our new home.  It had taken the builder a very long time to complete our unit.  We advanced him $50,000 so he would finish our unit first, not thinking of how much fun it would be listening to the contractor’s tools and blaring radios for another year while the builder struggled to sell, fund and complete the project.  Belizean contractors sometimes work seven days a week so there was little to no respite from their noise, jobsite debris and odd stares as they labored, and we attempted to lounge in the pool.  It felt oddly bourgeoisie to say the least.

Mistake #4:  The beach looked great from a distance.

I headed to the ocean for my first refreshing dip in the sea at our beach.  As I entered the water, my leg sank about a foot into dark and silty muck.  What’s this?  As I struggled to get my foot free of the mud, I began to realize that may be why there were so many long docks on this island.  I had seen many of these docks with ladders and swimming areas at the end.  Perhaps that is where the sand was more “sandy.” I walked to the end of our dock and had a fantastic swim.  The water was clear and warm.  I could do this.

As I walked around on our dock, I saw a woman carrying snorkel gear exiting the sea wiping her face frantically.  I walked to her quickly to see if she needed help.  Her face and upper body were covered in red bumps and she appears dizzy.

“Are you OK?”  I asked.

“I don’t feel very good.  Something stung my face when I was diving.”  She mumbled.  I went to get the groundskeeper at our condo building, a local man who hopefully knew what to do.

“Pica Pica.”  He says, shaking his head.

“Hot sauce?”  I made an odd face.  He explained that Pica Pica are the microscopic offspring of a local jellyfish that releases its eggs in Spring.

“She need Windex.”  Apparently, that is the local cure.  “Come wit me, lady.”  He walked her back to the building to get some window cleaner for her bites.

 

            Mistake #5:  The Ambergris Caye ATM Syndrome

Belizean people are kind and wonderful, but there are also a lot of transient mainland crooks who use their island neighbor like an ATM, robbing people, burglarizing homes and businesses only to return home on the next ferry boat.  The better Ambergris did, the more it became a target for surrounding areas that were not similarly infused with tourism and investment money.

The downtown area had three parallel roads that were unofficially known as Front, Middle and Back Street.

“Never go on Back Street after dark.”  I was told by a local bartender.

“Why not?”  I asked.

“That’s where the locals go.”

“So?”

“They get drunk and fight.  Someone usually gets stabbed.  Best to stay on Front or Middle Street.”  He said.  I never ran into any menacing, knife-wielding thugs on the island but it was common knowledge that local guys preferred to stab each other to settle disputes.  That was a scary thought that plagued my mind when we would leave town and drive the three miles south to our condo on the unlit, unpatrolled dirt road praying our single headlight would stop flickering.

Truthfully, I rarely felt threatened unless it was late, and I was on a beach in town.  Many of the guys selling CD’s and DVD’s on the beach were selling a lot more.   When I would turn their offer down, some of them became pretty aggressive.  They acted as if the money in my pocket belonged in theirs as if I was a walking ATM.

 

            Mistake #6:  Medicine for Golf Carts

I’ll mention just a few more thoughts about the yin and yang of the local custom of using golf carts as transport.  At first, it’s incredibly quaint zipping along sand and dirt roads with no windows or doors.  Then you experience your first traffic jam in town, a line of golf carts a twenty deep all looking for a parking place.  There can be a similar line of traffic leaving town that will perplex you until you see the local police stopping every cart, asking for identification and generally menacing every tourist as they insure each cart has a registration tag.  *Which, by the way, has NOTHING to do with the renter of the cart.

Many of the roads are being cobbled, but the remaining dirt roads can be pretty tough on the sinuses.  Normally, I dealt with the dust fairly well by tying a damp bandana around my face, bad-guy style.  But one time my mother and I both came down with serious sinus infections.  A local doctor was recommended.

“She has delivered every baby on this island.  She’s the best.”  A local lady told us.

We went to her small office off the main road near town where she gave both of us injections and some medication.  Our symptoms never subsided so when I got home, I called my doctor.

“No wonder it didn’t work.”  He said.  “I don’t know what she shot you up with, but this medication is for pink eye, and it’s three years old.”

Jeez.

When we bought our place, it was on a whim.  Many people have a few drinks and get talked into buying a timeshare.  We had friends tempt us to invest in their island and after a few…it seemed like a good idea.  Again, it was 100% our fault because we really did not plan our Belizean purchase.  Belize works out very well for many, just not for us.  That’s why we really blew it by not thoroughly test-driving the island first.

It’s obvious the island was not a fit for our personal tastes.  At least it could be an investment property.  We never even thought about renting the condo out until a local agent approached us.  Renting seemed like a good idea as it would not only generate a little money, it would insure the place was being looked after.  We were warned that the contents of homes that were not occupied soon became the contents of someone else’s home.

 

            Mistake #7:  The Reality of International Rentals

“Little money” is a good way to describe the rents.  We had a brand new, 1,600 square foot, 3-bedroom, 2 bathroom, fully furnished condo that was smack dab on the beach and had a tough time getting $1,200.00 per month in rent.  Deduct 20% for the property manager, the monthly HOA fees, the local “hotel” taxes and insurance and you’re left with a couple of hundred dollars profit which you get to pay income tax on back home.

Then, your tenant breaks his lease.  It happens a lot because people go to Ambergris Caye with a business plan or dream that does not work out.  They simply leave the island with debts unpaid and agreements broken.  They decided not to pay their rent the last month and since it takes 30 days to evict a tenant, they were smart to do this.  They got their last month’s lodging for free, did not pay the power bill, the cable/Internet, etc.

“Don’t worry.”  Your property manager tells you.  “We can pay those bills using their security deposit.”

“Not great, but I guess that’s better than coming out of pocket.”  You reply.  “By the way, did they leave the condo in good condition?”

“That’s what I need to talk to you about.”  She says and promises to email you a list of damages with a proposal for repairs.  “I’m going to need you to send some money to cover the overage.”

 

Then a storm comes.  Most people don’t realize that the Caribbean hurricane season is six months of the year.  While Ambergris Caye does not suffer terribly from really bad storms that often, they happen and even the smaller ones cause incredible damage on an island that is sixteen feet above sea level at its highest point.  We became very familiar with the term “special assessment” which is the HOA’s way of spreading the pain of needed repairs among all the owners of the property.  Storms, along with regular repairs and improvements, pushed our balance sheet into the red every year.

We heard these stories again and again.  We decided to pass on renting our place.

 

            Mistake #8: 

OK, island life is not perfect.  And you’re not going to get rich renting your condo, but it’s an asset that should increase in value over time, so the tiny bit of rental profit offsetting the costs of maintenance and repair can be ignored by keeping the big picture in focus.  The population on the island was exploding so the interest in the island should have driven prices up, right?  Not exactly.

We bought our place in 2003 and sold in 2017.  The “interest” in the island resulted in a condo-building boom.  Competition for buyers drove prices to stagnate a bit and then most people preferred to pay a little more for a new condo, further driving prices of existing homes down.  We finally sold for $325,000, less costs (agent, government taxes and fees, lawyer, etc.) so after 14 years our profit was only about $35,000, hardly a boon for our portfolio.

“Yeah, but you got to use the condo for a long time!”  My agent tried to console me.  “Great memories, right?  Can’t put a price on those.”

Again, not so much.  Flights from San Francisco to Ambergris Caye are very expensive and it’s a full day of travel.  A coach seat will run you about $700.00 and then you need to buy the island-hopper ticket for another $180.00 roundtrip.  *Remember, Ambergris Caye is an island so you must take a local plane from the mainland and this is a separate cost.  For our family or three, the cost of the airfare and taxis to and from the airport (on both sides of the trip) and we were spending about three grand just to get there and back.

There were no direct flights to Belize City, so we would fly from San Francisco to Houston and then to Belize City where we would wait for an hour or so before we could board a 12-passenger, single-prop plane for the fifteen-minute jaunt to the island.  Door-to-door, without delays, the trip took over twelve hours.  It began with the 4 AM wake-up call in California and ended with the 6 PM dinner bell in Belize.

Balancing the cost and the travel time, I’m guessing we visited our condo on Ambergris Caye less than ten times in 14 years.  Looking back, we could have invested the $265,000 and in 14 years it would have more than doubled, even with the 2008 meltdown.  That would have afforded a lot of first class trips to Belize, or anywhere else for that matter.

            Summary:

I can already hear the backlash from people who live on or profit from businesses on Ambergris Caye, but they cannot tell me anything I do know already know.

The truth is, living on a small Belizean island takes patience.  You will learn things slowly and by touch, not word.  Experience must be gained.  Investing on a small Belizean island takes work.  We screwed up and we own that fact.  But our experiences were real, and we hope others can learn from our mistakes.  *Did I mention that our builder used drywall in place of metal HVAC for the ductwork in our air conditioning system?  I’m still not sure how we could have avoided that.

We owned our place there for almost 14 years and when we balanced the good with the bad, we decided to sell.  The scales of keeping the condo tipped in the direction of a bailout.  We decided to pull the ripcord.

It was our fault. We did not do the work up front, so we can’t blame anyone but ourselves.  Belize is a wonderful place full of history, charm and opportunity.  I don’t blame anyone for our mistakes or our experience.  I wish the people of Ambergris Caye nothing but the best, but I doubt I’ll ever visit the island again.  It’s a beautiful place but it just reminds me of how stupid I could be.  Lesson learned.  It’s also very tiny.  We’ve seen everything Ambergris had to offer.

I am reminding myself of this experience because we are now considering leasing our home in California instead of selling.  One reason is the projected direction of the local market in the next decade is up, up and up.  Online research shows that prices in our area have gone up 2.2% in the last 30 days which makes sense as summer tends to be the peak buying season.  *May is reported to be the best month to list a home in our area.  The one-year forecast predicts a 5% increase in local values, the two-year forecast more than doubles that figure and from there the trend continues upwards.  Perhaps, keeping our home in California would be a good investment vehicle for a couple of years and then we could sell it for even more money.

But then I remembered the beach condo we had in the Bahamas.  That’s another story.

 

 

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