Monday, July 12, 2010
Ecuador’s nicest stretch of coast lies between Canoa and Pedernales
Dear Reader,
As you heard on Friday, I’ve just returned from a scouting trip along Ecuador’s north coast.
Today, you can buy big pieces of oceanfront land for as little as $1,000 per acre. Azuero in Panama, and Costa Rica’s Southern Zone, are both about the same distance from their capital cities and major airports as Ecuador’s north coast. Yet, prices for large pieces of land there are ten times or more what you will pay on Ecuador’s north coast.
I expect real estate prices to rise as accessibility improves and the world catches on to how attractive this coast is. We can cash in.
We call this profiting from the Path of Progress. Anything that improves accessibility of an area increases real estate prices. New highways, bridges, airports, and air routes all have an accessibility effect. Today, we are seeing major infrastructure improvements to, and along, Ecuador’s north coast. If you are serious about finding undervalued real estate opportunities, this stretch of coast should be on your radar.
My favorite stretch of this coast (and where my search focused) is between Canoa and the area just south of Pedernales. This is Ecuador’s nicest and most under-developed section of coast. Here, lush virgin forest carpets undulating, sometimes steep and dramatic, hills. It’s dry season but still the forest canopy is lush and green…almost luminous. Sunlight hits the forest floor like silver swords. Bright-colored butterflies flutter, and hummingbirds hover, as howler monkeys growl in the distance. Anteaters wander with their young in family convoys. At night, big cats roam their territory.
The water is clear and blue. When the sun shines, it almost looks turquoise. This is a rich marine habitat…where humpback whales can be seen with their young. This time of year the local fishermen come home with their pangas (simple, small fishing boats) stacked with wahoo and other exotic fish species…sometimes bigger than the fishermen themselves. This area is rich in nature and beauty.
The play to profit here is to land bank. I see land banking as:“The strategic acquisition of raw land to hold until an anticipated future event will result in an increase in value.”
If you are scouting for land banking opportunities along this coast, here are my top tips for success.
Scouting Tip #1: Know Your Seller
Prices quoted and a willingness to sell are a function of the vendors’ financial position. There are few comps…no real comps, in fact. Asking prices are made up and can double or halve over the course of a five minute conversation. Land sizes are frequently guesses, as the land has never been properly surveyed. Vendors don’t understand the value of their land— but are smart enough to know that if a foreigner is looking at it, there’s a reason.
This is real pioneer country. A place where fortunes can be made or lost.
Doing the right deal here is all about finding the right land…owned by a motivated seller. The motivated sellers are folks who are getting older…who want a few bob and no more hassle…or people with bills to pay.
It’s best to deal with locals who have owned land for generations. The title risks are lower and there’s more scope to do a good deal as the land hasn’t yet been flipped.
Still, if a seller thinks a buyer is committed to one particular property, the goalposts will likely move substantially. Prices and expectations rise. Keep several balls in the air. Competition will keep the seller keen.
Today, cash is king. You’ll do a killer deal with a cash offer and a quick closing.
Scouting Tip #2: High Tide and Low Tide
There is very little beach along this coast at high tide. At low tide, the beaches are wide… but at high tide, there’s only a few spots where you’ll find beach. Visit any piece of land you are seriously considering at high tide. You need to see it at its worst.
Scouting Tip #3: Sea, Land and Air
Take a panga and spend a day studying the land you are considering from the water. The views from the water will complement the perspective you will have from walking the land. I typically like to study land from the air also to ensure a complete perspective.
Scouting Tip #4: Due Diligence
As with any investment, you need to do your own due diligence. You need to make sure that the legal team you select is 100% independent of any other parties in the transaction. You should buy title insurance on the property, and any contract you sign should be contingent on getting that title insurance.
Ronan McMahon
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