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Get Rich…Slowly…
by Kathleen Peddicord
"If I Had It All To Do Over Again…"
"If you had to start over at this point in your life, rebuild all your net worth again, knowing what you know now, what would you do?"
We enjoyed a long weekend in Medellin, Colombia, Lief, me, and the kids. Saturday night, a local friend, a young expat who's been living in Medellin for three years, came by for drinks. It was he who posed the question to Lief.
Lief didn't hesitate with his reply:
"If I had to start over today," Lief said, "I'd scrape together whatever nest egg I could, and I'd invest in a rental property, something that would generate enough cash flow to pay my bills. I'd live as cheap as I could and put aside every dollar of rental cash flow I could until I had accumulated enough to purchase a second rental property…and so on.
"After I'd built a small portfolio of cash-flowing rental investments, I'd make an agricultural buy—timber, say, though that is a very long-term investment. You can get much nearer-term yields from coconuts, coffee, cocoa, and bamboo, all of which I'm either already invested in or looking at closely right now.
"If it were just me, I'd continue living super-cheap, saving every possible dollar for additional cash-flowing investments. However, it's not just me. My lovely wife makes sure that at least some of my income is diverted into non-cash flow-producing investments—like summer vacations and new living room furniture," Lief continued with a smile in my direction.
"Where would you make your first buy?" our friend wondered next.
"If I were making the first investment of my career right now," Lief replied, "I'd be shopping in Panama City or here in Medellin. Both are good markets for generating rental cash flow."
"I want to get rich," our young friend interjected. "Where could I make more money quicker? In Panama City or Medellin?"
Lief and I looked at each other.
"It's not easy to get rich quick investing in foreign real estate," I offered. "Frankly, I don't believe it's easy to get rich quick investing in anything, but focusing your investment efforts on foreign property means adopting a long-term perspective."
"Right," Lief agreed. "It's very possible to realize an immediate return from a foreign property investment. That's one reason I recommend rental properties—you can get a cash return right away. However, rental cash flow isn't going to make you rich, at least not quickly. And the return from an agricultural investment is even less immediate. It takes 20 years to realize the return from an investment in teak, for example. So you're making those kinds of buys for different reasons—for diversification and, mostly, to build legacy wealth.
"But none of this is a formula for getting rich in a year or two or even three, thinking realistically. Global property investing is a way to get rich slowly. However, it's real wealth, not paper wealth. It might take you five or seven years or longer to build a portfolio. I've been at this for more than two decades now. I've built wealth, yes, but I didn't do it quickly.
"When I was closer to your age," Lief continued for our young friend, "I shared your eagerness. Like you, I wanted to get rich quick. That thinking led to the biggest mistakes of my investment career. I think of those now as my 'greed' buys, and they cost me big-time.
"Now I'm not tempted by the idea of striking it rich or hitting it big time. Now I'm very happy to buy for a reasonable annual return. I look for a minimum of 5% to 8%."
"Is that what you'd be looking for in Panama City or Medellin if you bought today?" our friend asked.
"One reason I like those markets is because it's possible in both of them to beat my minimum return expectation. Buy the right thing for the right price in either city, and you could see annual cash flow of 10% to 15%. In today's world, that's nothing to sneeze at."
"Where do you see bigger upside potential?" our friend continued.
"I see Medellin as a market for steady growth. Property values have appreciated in the three years since we invested here, and I believe they will continue to do so, but, again, at a slow, steady rate.
"Panama City, on the other hand, is a boom town. It has seen one boom, which was followed by the slowdown of 2008/2009. Now I think we're leading up to another boom. About two years ago, prices in Panama City began appreciating again, slowly. When the Canal expansion project is finalized, though, I think we'll see another pop. This will happen in 2015, and not only Panama City but the entire country will benefit. The Canal expansion is a big deal.
"I see more dramatic upside potential in Panama than in Medellin for two other reasons, as well. First, Medellin is still suffering from the Escobar Factor. This misperception will continue to keep the average foreign retail investor away for some time. We still get readers asking about Noriega in Panama, so Medellin's got a ways to go before it will shed this stigma.
"The other reason Panama offers more upside is because it's still the Wild West. Real estate in Panama, including in Panama City, is a cowboy's marketplace. In Medellin, on the other hand, the real estate industry is more developed, more sophisticated, and more controlled. Prices in Panama are all over the place. It's impossible to say what something 'should' cost. It's a free-for-all. That kind of chaos creates opportunity."
Kathleen Peddicord
Tags: 'Colombia''investment'agriculturecashflowPanamarental income
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Kathleen Peddicord has covered the live, retire, and do business overseas beat for more than 30 years and is considered the world's foremost authority on these subjects. She has traveled to more than 75 countries, invested in real estate in 21, established businesses in 7, renovated historic properties in 6, and educated her children in 4.
Kathleen has moved children, staff, enterprises, household goods, and pets across three continents, from the East Coast of the United States to Waterford, Ireland... then to Paris, France... next to Panama City, where she has based her Live and Invest Overseas business. Most recently, Kathleen and her husband Lief Simon are dividing their time between Panama and Paris.
Kathleen was a partner with Agora Publishing's International Living group for 23 years. In that capacity, she opened her first office overseas, in Waterford, Ireland, where she managed a staff of up to 30 employees for more than 10 years. Kathleen also opened, staffed, and operated International Living publishing and real estate marketing offices in Panama City, Panama; Granada, Nicaragua; Roatan, Honduras; San Miguel de Allende, Mexico; Quito, Ecuador; and Paris, France.
Kathleen moved on from her role with Agora in 2007 and launched her Live and Invest Overseas group in 2008. In the years since, she has built Live and Invest Overseas into a successful, recognized, and respected multi-million-dollar business that employs a staff of 35 in Panama City and dozens of writers and other resources around the world.
Kathleen has been quoted by The New York Times, Money magazine, MSNBC, Yahoo Finance, the AARP, and beyond. She has appeared often on radio and television (including Bloomberg and CNBC) and speaks regularly on topics to do with living, retiring, investing, and doing business around the world.
In addition to her own daily e-letter, the Overseas Opportunity Letter, with a circulation of more than 300,000 readers, Kathleen writes regularly for U.S. News & World Report and Forbes.
Her newest book, "How to Retire Overseas: Everything You Need to Know to Live Well (for Less) Abroad," published by Penguin Random House, is the culmination of decades of personal experience living and investing around the world.
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