15 Critical "Must Ask" Questions when Buying Real Estate Overseas

By Mike Cobb

Everyone buying property outside of North America needs to remember the famous words of Dorothy to Toto after being dropped into Oz, "I don't think we are in Kansas anymore." When going offshore, especially to places that feel familiar, we must be very, very careful. In fact, the more familiar it seems, the more caution we should apply. But how do we do that?

Take a look at a favorite saying of mine, "I don't know what I don't know."

Please stop and reread that...

Really! But how can we know what we don't know? We can't obviously, but we can be open to new possibilities and realities that vary greatly from our assumptions. The analogy that makes sense here is one of a radar screen. A small radar screen is easy to manage. In the world of "North American normal" we can get away with that. But overseas, a larger radar screen serves us well. It makes sense to expand it greatly so that anomalies are picked up way out, not close in. Give yourself time and space to examine this data, process it, and then understand it.

Humility is the one attribute that really helps us to be open to the fact that we don't know what we don't know. It gives us a willingness to listen, hear what doesn't make sense, acknowledge it and try to fit it into our analysis. It also allows us to let others with more experience guide us in unknown territory. The choice is really humility or tuition.

The other piece of this puzzle is our assumptions mentioned above. Have you seen the word "assume" defined as making an ass out of you and me? Ass - u - me. When we come to Latin America we bring our assumptions with us. We have to because they are part and parcel of who we are.

Assumptions are like filters. In the back of the brain, right at the top of the spinal cord, resides a special part called the Thalamus. This is one of the oldest parts of the brain and it is the brain's chief filtering mechanism. It hears and senses everything. Literally everything. Billions of sensations per second, yet out conscious mind gets only about 1% of that information because that is all the conscious "I" can handle and process.

A good example is when you have a small baby in the house. It is possible to sleep through a raging thunderstorm, but a tiny squeak from a newborn will rouse the mother instantly (and dad sometimes). This is the Thalamus hard at work, sorting out the needed info from the not needed. This filtering mechanism lets us live our lives. If we had to pay attention to every noise, movement, sensation around us, we'd be overwhelmed. So we filter.

Belize1But this filtering mechanism can be an Achilles Heel unless we understand that we are indeed filtering and are prepared to try and turn it off as best we can. But it's not easy to turn the filters off, live "on your toes," and be ready to see something that doesn't make sense. In fact, it can be hard work. But it is necessary to if we want to make wise property ownership decisions overseas.

When you see it, turn off your confirmation bias, acknowledge it, and respect what your logic says. Push your radar screen out further. Give yourself time and space from the awesome emotional experience of palm trees, margaritas, and friendly sales guys. Process the hard data and do your homework. Look for evidence that contradicts what you want to believe.

The bottom line is that there are numerous wonderful properties out there and some of them are right for you. But you are in a different country, with different rules. There is no big brother looking out for you, hooray, so be sure you are smartly looking out for yourself.

An educated buyer is a happy owner. The answers to the questions below should be an important part of your property selection process. There are no "right" or "wrong" answers, but we've found that the things people take for granted or assume are standards in North America, may not be in Latin America. Be sure you know the answers to the following questions and make conscious decisions about what levels of creature comforts are mandatory and which may be optional.

The 15 Critical "Must Ask" Questions when Buying Real Estate Overseas needed for excellent and comprehensive due diligence are broken into three main areas:

1. Buy what you see
2. Own community
3. Know the developer

The first set below deal with "Buy what you see." The President of ECI Development has a saying, "You get what you inspect, not what you expect." Promises are easy to make and difficult to deliver. Be sure you are dealing with existing reality. These first critical due diligence questions are below.

The other two areas, "Own Community, and "Know the Developer" will be presented in subsequent issues of To the Point. If you would like to receive the complete list of all 15 questions, e-mail me now at mcobb@ecidevelopment.com and I'll send them over. But please be sure to also read the next two installments for commentary background when they are presented there.

Buy what you see

Is there year around access to the property? What is the drive time from shopping, dining, and the airport?

Not all roads are accessible year around in the region. Steams that barely flow or don't at all, can be raging torrents half the year. Know the road condition in rainy season. Proximity to services is very important. The key factor is the time to reach the destination not the miles. 10 miles on a rough dirt road in rainy season can easily take an hour or more.

What road and public infrastructure exists? Does the current infrastructure include underground utilities, paved streets and sidewalks?

Belize3

Do not take for granted paved roads, street lights or state of the art telecommunications. If these are not in place when you buy your property, they might never be. Rarely, if ever, does the government or utility company provide these services to a developer. If the sales agent says, "it's coming," verify that the developer has the funds to meet his promises. Ask to see a copy of his most recent bank statement showing the millions of dollars it will take to build the infrastructure. Bottom line: Buy what you see! Be sure that the price you pay is indicative of existing reality.

Is there enough fresh water and water pressure?

Sometimes it's the smallest of things that adds greatly to the quality of life. Water pressure is one of them and it must be planned for and paid for. Either the developer has planned and paid for this part of the infrastructure or the lot owner will bear this cost with the addition of storage tanks and pressurizing systems. If you are considering an existing home or condominium, turn on all the faucets, inside and out, the showers, and then flush the toilets. Is there sufficient pressure?

Is the house or condominium plumbed with hot water?

Not a silly question. Look under the sinks to see if there is hot and cold service. In many cases, a splitter is used from the cold service to provide water to both faucets. The cost to retrofit a concrete home for hot water to the bathrooms can be high. If you are having a home built, be sure to triple check the plans for a hot and cold service to all bathrooms and fixtures. Architects and builders may design "local" and unless you catch this upfront, change orders become prohibitively expensive.

How far is it to major medical care? How long in dry season, how long in rainy season?

Major medical care is critical. Most major Latin American cities have state-of-the-art hospitals. In fact, in many cases these facilities can eclipse regional U.S. hospitals with newer more modern equipment approved for use by the Europeans but not yet passed by the FDA. Be sure to visit the medical facilities as part of your due diligence process. Remember too, it is not how many miles to a major medical facility, but how many minutes by car in both the wet and dry seasons that really counts.

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