Why I'm Investing in Real Estate | Pathfinder International

Saturday, March 06, 2010

Dear Reader,

Today's guest essay is from Gary Scott. Gary is an entrepreneur, author and investment publisher who began writing about multi currency portfolios four decades ago, long before the mainstream press. In the 1990s, Gary started investing in real estate in Ecuador, when it was a little-known place. Today, he operates a hotel and seminar center in Cotacachi, Meson de las Flores. One of the seven trends Gary follows as part of his global investment strategy is real estate investment. Gary tells us below why he believes you can think of real estate as a hard currency--and how his strategy isn't always about percentage points and statistics.

Dear Reader,

A reader recently asked me why I was selling some of my properties in Ecuador. He thought it might have something to do the fact that real estate in Ecuador is dollar-based. In fact, my taking profits on Ecuador real estate has nothing to do with the fact that Ecuador real estate is denominated in US dollars.

I view real estate as a currency and look beyond the currency. I expect real estate to strengthen against any currency with inflation... so the denomination of the currency is not all that important.

There are times when a currency's purchasing power drops so fast that real estate does not keep up. This is rare... and during the lag, there is a really good time to buy real estate.

An example was the meltdown of Ecuador's currency in 2000. The sucre fell from 12,000 sucre per US dollar to 25,000 in just a couple of weeks. Real estate prices did not double anywhere as fast.

I was investing in real estate in Ecuador heavily then, which is one reason I am selling now, as you will see below.

Normally real estate to me is just a view of another currency.

I am heavily weighted in real estate in Ecuador, Florida, Georgia and North Carolina right now for three reasons.

First, I see real estate as a better bet than most currencies at this time. The economic downturn of 2007 and 2008 lowered real estate prices... creating good value. The stock market recovered and has not been such a good value... though it may be correcting now. The real estate market has not recovered to such an extent.

Second, my wife Merri and I have a lot of experience in buying and fixing up real estate and use this experience (and our imagination) to enhance the value of what we buy. We truly enjoy that process and mostly don't enjoy holding, using and/or renting.

I buy and sell real estate in areas that enhance our lifestyle and where we see a bargain. We are continually churning our real estate portfolio. Three years ago, I sold seven condos I bought in Cotacachi while I was buying other condos on the Ecuador beach.

That did not mean I did not like the condos in Cotacachi or did not like Cotacachi anymore. In fact, the next year I bought an office building in Cotacachi, and converted that to condos.

We do not keep real estate that we are not using for long. We buy special properties with a problem... fix the problem... keep the property long enough to have a capital gain instead of income, and take a profit.

In 2005, while I was buying real estate in Ecuador I was also buying condos in Naples, Florida. We lived in the condos part time and sold them in early 2007 (luckily at the top of the market)... and as the Florida market tumbled, we began waiting and watching for more Florida bargains.

Third, this last year we have had special reasons (our grandson and the Florida real estate crash being two of them) to focus on real estate in Florida... but we remain well diversified at the same time. We are especially putting extensive capital into building our Ecuadorian publishing business.

Now Merri is researching Oregon coastal real estate... looking for bargains... not because the Oregon Coast is better than Florida, or Ecuador... but because our next two grandchildren are three and one years old. Thoughts of spending time with them in a few years is enough to draw our attention there now.

Diversifying currencies is important and being concerned about the fate of the US dollar vital... but there is more than to a bottom line than percentage points and statistics.

Real estate, if you like investing in it, can be one of your hard currencies along with your own business or gold. Real estate is a commodity always needed that will fight inflation and can add other forms of richness to our lives as well.

Gary Scott

Why I’m Investing in Real Estate