My dear dudes,
If you subscribed to this blog, you have received awesome photos of the renovation of RP#3. Today, I want to expand more on the topic of real estate. Many of you ask me how can I buy Real Estate so cheap and yet have high appraisals.
Finding the right deals
Well, over the past two years, I have specialized in deep-value RE deals. This is more likely to happen with multi-unit properties, whose owners are often outside of the country (in many cases, I’ve learned that these properties are regarded as “undesirable” or “liabilities” when they are passed down the family). The story is simple: in the 60s and 70s, many Portuguese people emigrated to other countries in Europe (mostly France and Germany) and north America:
(sorry, I could not find a picture in English…). Eventually, they became entitled to property in Portugal, but as they did not plan to come back to Portugal, they are willing to sell.
Finding these deals is not easy. Oftentimes, its impossible to know who the owner of a particular property is. Sometimes neighbors have an idea of who the owner may be, but they have no means to establish contact. Sometimes, neighbors know who the owner is but they won’t tell you. Looking for a deep-value deal takes a lot of time, and time equals money. Knocking door to door is expensive. I’ve had owners who told me “I will never sell”. Others told me they would sell for 10x what the property was actually worth because they were so off the market values (or used to French or German markets, which are much more expensive). I’ve talked to people who did not know they owned anything!
The bottom line is, finding the right deals takes time and money. Maybe you’re not willing to do what I do. However, keep in mind that the deals I’ve got are certainly not the rule, but the exception. And plus, I invest tons of time finding them.
Construction
Portugal is a very old country. In the 15th century, Portugal had half of the world and was the leading economy. The US will be 240 years old in two years from now. Not comparable. In Portugal, I’ve seen Real Estate with over a century! Look at this beauty, for example:
I target Real Estate which is about 70 to 90 years old. Too old for most, probably. Well, I renovate and rehab these properties such that they look brand new. Again, if you subscribed to this blog, you have received awesome photos of the renovation of RP#3. Let me show you another one:
Have a look at these classic tiles. Marvelous huh?
The other point I want to make about Real Estate in Portugal with 60-100 years old is the foundation. Often, the foundation is made out of wood (not concrete):
I love wood, but the problem is that, after 60+ years, it tends to bend and be affected by bugs, which literally eat it out. When you need to replace an entire floor, you’re in trouble, because it is super expensive to do so. Almost happened to me in RP#3, and I will probably be replacing the floors all around in a decade or so. All this to say, cheap Real Estate comes with high maintenance costs. You must be prepared.
Your biggest fan,
Ben