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Discussion in 'Real Estate Investing' started by GlobalWealth, Apr 29, 2015.

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  1. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    After reading @G_Alexander post here - http://www.thefastlaneforum.com/community/threads/stop-paying-rent-live-for-free.51893/ - I thought I would share with you a similar strategy that can be implemented on a more global scale.

    First of all, this is not for everyone. This is for people who are interested in living in multiple countries and have the ability to work from anywhere.

    This is not a get-rich-quick or even a business strategy. This is only for people who have a bit of money to invest and a virtual type income allowing them to work from anywhere in the world.

    If this appeals to you however, I can teach you how to earn 7-10% net cash yield on multiple properties in multiple countries allowing you to live rent free and make a pretty good return at the same time.

    Let me explain....

    First of all, ideally you need cash. It is possible to get loans, but getting a mortgage outside of your home country can be a bit more difficult. Not impossible, but more difficult.

    Secondly, you need the ability to travel to the place that interests you and spend some time on the ground meeting with real estate agents, contractors, property managers, etc. This is not passive getting started. It can be once set up, but requires real work on the front end.

    The lazy need not apply.

    Third, you need to open your mind a bit and get out of your comfort zone. You have have had dreams since you were a kid to live in London, but I can tell you - London is a horrible option for this strategy because you won't get any reasonable rate of return doing what I am suggesting.

    You need to consider places off the beaten path that you may not have previously considered or have been negatively swayed due to mainstream media - Colombia, Serbia, Portugal, Brazil, Lithuania, Hungary, etc are all great option - but not places most have considered.

    And lastly, be prepared for your friends and family to criticized this new life you have created flying to different countries every couple of weeks living in cool locations and experiencing things they would never have the courage or dreams to experience.

    Let's get started.

    First of all, you need to be aware of airbnb(dot)com and booking(dot)com. These are your platforms (there are others as well, but if done properly you won't need others). Also recognize this violates @MJ DeMarco's book's rule of control. Yes, you are somewhat in the hands of these marketplaces, but many of you running Amazon, Etsy, Ebay, Shopify, etc stores are in the same situation. And this is not your primary business model either. This is a way for you to invest in international real estate, live like Richard Branson, and earn some cash in the investment.

    What you are looking for are cities with low wage and cost of living. You can research this on sites like numbeo(dot)com and others. I like numbeo because it allows you to research all aspects of cost of living and compare to other cities. It is very useful.

    You want a a low cost of living city because these cities tend to attract tourists - your target audience. For example, British tourists tend to travel to various Eastern European cities for holiday because their money goes much, much further.

    Anything in Switerland, UK, Norway, Finland, Sweden won't likely be candidates as they are typically very costly locales.

    Next you want to find cities that have relatively high tourist traffic. These places need to have something of interest for visitors. Festivals, arts, architecture, Unesco World Heritage sites, beaches, food culture, etc.

    One way you can check that is to go to airbnb(dot)com and look up your city of interest. Look up 15-20 properties for rent and look at their calendars for the next 2-3 months. Do they have a lot of vacancies, or are they rented out 15+ days per month? You can also get a feel for the pricing in the market for what a 1br, 2br, etc apartment may rent for per night/week/month.

    If craigslist(dot)org is in the city, it is also a good resource to check the rental rates. But typically airbnb is good enough.

    As is the case with much real estate investment advice, location is key. It is especially key in short term rentals. I would pay 2x as much for a center city apartment that is walking distance to local attractions than for an apartment that is 5km away that forces guests to drive or use public transport. Of course yield is key here, but the center city apartment will rent out much easier and will also be an easily saleable asset if you decide to unload the property in the future.

    Next do some research on the local market prices for apartment sales. You can find real estate agent sites or other sites that aggregate real estate for sale in every medium+ sized city in the world (thanks Al Gore for the internet...).

    Start building a spreadsheet to analyze pricing. Depending on where you are in the world will determine the unit, but for argument sake here let's just discuss euro/m2.

    Create a spreadsheet and start analyzing similar properties in the city where you are interested. You will get a feel for the euro/m2 to give you some baseline for measurement.

    Now look at airbnb and see what the average rental rate is per night and the average number of nights those apartments rent for.

    For example, let's say you can buy a 50m2 apartment for eur75,000. That is 1500 eur/m2. If that apartment can rent for 80 eur/night and the average for those type apartments is 15 nights/month then....

    So 80 eur/n X 15 n/m X 12 m = eur14,400 per year. That is your gross income.

    eur14,400 / eur75,000 = 19.2% gross cap rate.

    Of course you will have expenses associated with that but you can count on 40-50% expenses.

    I pay my property manager 25% of gross rents. She handles meeting guests, dealing with any questions, checking them out, checking for damage, collecting deposits, cleaning, all communication, everything. The only extras are hard costs of paper products, soaps, lightbulbs, etc.

    After you factor in utilities, property tax, insurance and holdback funds for future repairs, you can expect to have a total expenditure of around 40-50%.

    Based on 50%, that leaves you with eur7,200 income, or a 9.6% net cash yield.

    That is not uncommon.

    In some cases you won't do that well, in some cases better.

    For example, you may find a place in Florence, Italy you really love and would love to spend time there. After analyzing the numbers you realize you may only get a 6% net cash yield. But if it enhances your quality of life by spending a week per month in Florence, go for it. There is more to life than just money.
    But getting a net cash yield of 6% and a free place to live in Florence is still pretty damn sweet.

    Using your airbnb(dot) come platform, you can basically just block off the days on the calendar as unavailable for when you want to be at your apartment in Florence (or wherever). It takes a bit of preplanning but still pretty simple.

    You can play around with the rates and charge more during holidays or certain events. For example, if you owned an apartment in New Orleans around Bourbon St, I would raise rates significantly during Mardi Gras.

    Of course this is a strategy that cannot be completed overnight, but if it appeals to you I would start researching some place that appeals to you. Maybe it can be a good opportunity.

    One last point to make. I truly believe people nowadays need to consider investing some of their wealth outside of their home country. This strategy is a multifaceted diversification approach allowing you to diversify outside your home currency, diversify into hard assets (real estate), and diversity outside your home country.

    If this lifestyle fits you or inspires you, then you can buy apartment #2, #3, etc and live rent free around the world.

    Feel free to ask me questions.
     
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  2. ilrein
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    ilrein Silver Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    @GlobalWealth love your articles.

    Since Airbnb became a thing, this has been a topic that has been tossed around with my fellow freedom-minded friends.

    What if you could buy properties overseas, have a place to crash when you visit, and just rent it out 95% of the time when you're not there?

    The strategy you describe is a practical one, realistic locations that make great starting points. But when we discuss pure fantasy (or rather, long-term future goals), it's funner to speculate on owning expensive properties and what Airbnb will fetch on those.

    For example, a beachfront home in Hawaii can run between $1-3 million. It could easily fetch $300-400 per day, but of course can you actually rent it out consistently, find a property manager you trust, etc etc

    Nonetheless, definitely a liberating thought. After all, without properties across the globe, how would one justify owning a jet?
     
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  3. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    yes, this is exactly what I am proposing. for example, own 3 properties; Lisbon, Budapest, Denver (just examples). spend a week in Lisbon, then to Budapest, then to Denver. Mix in other travels, business trips, play, etc.

    those may be fun speculations and could possibly work, but not sure airbnb is the right venue.

    for example, I can easily find 1-2 bedroom apartments in various spots in europe for less than eur150k that I can easily rent for eur100-150/n. that will give you a much better return than spending 1mm and renting for 300-400/n.

    for sure that is a great goal and excellent plan. but you don't need to be of the jetsetting variety to implement the strategy I laid out. not exactly for the $9/h stockboy either, but no need for big wealth to live this way.
     
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  4. Vigilante
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    I read the first couple of paragraphs without checking to see who the poster was. I then scrolled up to check on the poster was to see if the rest of the post was worth reading. Since the poster is @GlobalWealth and I know that he has actually done what he has written about, I then went on to read the rest of the post. Interesting topic.
     
  5. Tiago
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    You could use flatbook.co as well for subleasing your apartment.
     
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  6. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    LOL, I was expecting, "I went to see who wrote it and then moved on to another topic...."
     
  7. TedM
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    TedM Silver Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    hmmm. i have 8 kids. i'll need to look for dilapidated-yet-charming castles, i suppose.
     
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  8. ZCP
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    @GlobalWealth awesome post! quick thoughts on US and local tax issues?
     
  9. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    One of my better properties is a large 4 bedroom city center apartment.
     
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  10. Bila
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    @GlobalWealth ...what do you think of Spain ( South ) as an investment right now ? i am seeing crazy prices ( a 2 bedroom, 5mn from the beach for 45 000 EUROS !!) .and it makes it very appealing
     
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  11. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    That is a complicated question and best suited for your cpa/accountant.

    My short answer. You will owe property taxes in most countries. No question. Pay it.

    You MAY owe US taxes (if you are a US person), but that depends on how the "business" is structured.
     
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  12. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    I think parts of Spain are incredible bargains right now. As long as it is in a touristy town that generates reasonable amounts of visitors. check the other airbnb listings in the town.

    I also love Portugal.

    What town in Spain?
     
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  13. ZCP
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    Perfect answer!
    Similar question on liability, insurance, etc.
     
  14. Bila
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    Somwehere in Costa Brava or Costa Del Sol ....I am not sure yet....I just know that i am done with the 6 months winters here ...looking to relocate.

    My friends bought 2 appartments ( at these prices , why not ? ...ther pay Spanish taxes on the rent but not Canadian )
     
  15. TedM
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    TedM Silver Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    an interesting mix of places you suggest here. Albania i've heard a lot about recently as well.

    When you talk about return on cash - unlike most real estate investors in the US, who look at cash-on-cash return and rely on a mortgage, here you are talking about making an outright purchase! That really means a remarkable return if you can get a mortgage.
     
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  16. Bila
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    For this strategy, i would suggest also Morroco ( Marrakech, Tanger)...prices are still reasonable but a lot of hype tourists wise
     
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  17. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    @TedM it is possible to get reasonable mortgages. Just a bit more complicated. But certainly doable.
     
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  18. TedM
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    intriguing. i need to focus on what i am doing now. i'll get back to this thread at some point. thanks again for enlightening us to what is possible.
     
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  19. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    Airbnb has liability coverage for guests and any damage they may create. home owners insurance is easy to get just about anywhere in the world.
     
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  20. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    Albania is super cheap. One of my biz partner's wife is Albanian. I have never been but he loves it there. I would have to research more to see if it attracts enough tourism to be viable for investment though.
     
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    I did not know that, thanks !! Valuable info !
    Rep +
     
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    Great ideas!

    Apart from looking at short term rent vs. purchase prices, do you specifically look into countries that are doing well economically?
    eg I wouldn't buy a piece of real estate in a country like Greece that's doing terrible economically. They could basically double property taxes overnight.

    That said, living in Western Europe and looking at how much our € can buy (nearby) in Eastern/Southern-Europe makes you think twice about sticking to local real estate only.

    Would you favour many small units over a few big ones?

    How do you go about getting the place ready to rent out? Do you outsource and hire a crew, or just do some basic stuff yourself? Just to get an idea of how hands on you do it.
     
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  23. EvanOkanagan
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    Good stuff man.... I remember asking you about this in AZ for the meet up in March, glad you made a post about it! When I have the outright cash I'll be using this strategy.

    How many hours a month would you say you spend on each property?
     
  24. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    Not necessarily. I don't know much about Greece, but for example if you find a Greek town that still gets a lot of foreign tourists but the local economy is not so good, that means property prices can be low, but short term rents are still high.

    Spain and Portugal are great examples. The local economies are shit, but you can get great deals on properties in areas that still attract a lot of tourist traffic.

    Great question. I would suggest using airbnb as a research tool. Look in the area you are interested and see what rents. For example, you can search for properties for 2 people then look at the rental calendar for the top 20 properties. Then search for properties for 6 people and compare.

    My 4br sleeps 10 people and rents an average of 18 n/m, 12 m/y. But the 1br's also do about the same.

    I am very hands on in the beginning. I will bring my tool bag and change lights, repair tile, assemble the furniture, etc. I will meet with cleaning people and am very thorough. After that, my pm handles everything.
     
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  25. GlobalWealth
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    GlobalWealth Platinum Contributor Read The Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    After initial set up, very little. My pm handles everything.
     
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