You are on page 1of 20

2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.


By Robert Koch, AIA Fugleberg Koch



International investments, particularly in real estate, require an assessment of the national condition as a prerequisite to considering any specific real estate investment intent. The quality of real estate assets is tied to location, and location is tied to the political, cultural, financial, and business climate factors in the nation it occupies. For this reason, the first qualifying consideration for international investment should consider the benefits and challenges that reside in the investment area. It controls the security, the liquidity, the performance potential, and the value of the asset as much as any cash flow analysis might project. There are times to buy and times to sell that best serve the investor. There are two separate matters that must be in balance upon entry or exit to assure a sound investment. They are:   Current conditions Future confidence

Current conditions define the quality of the prevailing market, ranging between a buyers’s to a seller’s market. Future confidence is defined by sound projected fundamentals, with growth and security assuring an expanded potential as time progresses. The buyer’s market is characterized by more supply than demand. It is a time when selectively investments can often be acquired at or below replacement values. When reduced prices are driven by downturns in the economic setting, strategic and studied acquisitions may not require market growth to achieve profits. A restoration of market balance alone (between a buyer’s and seller’s market) could advance enhanced yields. A seller’s market is usually defined by less supply than demand. Such markets are often characterized by superior appreciation resulting from a competitive response to a growing number of consumers with limited competition. Not uncommonly, such environments 1

2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 can overheat, encouraging prices to rise rapidly without respect to actual costs. Speculation often becomes over-reaching, and ultimately may lead to a rapid market meltdown. The depth of such a meltdown is usually reflective of the degree of the speculation that preceded the event and the speed of the shift from a seller’s to buyer’s market. It can be further affected by a concurrent decline in the underlying fundamentals of the capital markets or overall political insecurity, should they occur. Future confidence is measured by evaluating fundamental qualities that underpin the economic environment in which the investment is made. These standards are independent of the hard asset investment; however they serve to create the environment that promotes an assurance of growth and return for the investor. Measures that promote future confidence include: A. B. C. D. E. F. G. Growth Security Enterprise Resource Geography Invitation/incentives Currency considerations

The optimum environment for investment is one where future confidence is high and a buyer’s market exists. Both the strength of the buyer’s position and the probable recovery with continued growth can compound to effect exceptional and more substantial results. The optimum environment for investment exit is one where future confidence is high and a seller’s market exists. Such markets may invite little desire to sell as from surface appearances it would appear the value growth potential has more to go. Remember, while some anticipated profits may be left on the table, an assured and reasonable profit with safety may be the better course. Reversal can result from waiting for the highest return that never occurs, leading to declining market conditions or worse. In a buyer’s market where low to moderate future confidence exists, there may be momentary opportunity for the investor. It should be judged for short term opportunity which removes the uncertainty of time and market shifts from the investment equation. A seller’s market, in areas where low to moderate future confidence exists, should be set aside from consideration. There is little likelihood, the investment, even with patience and outstanding operational skill, will rise above the national condition and prove to be a sound investment.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 Consider then the basic measures that effect future confidence and use them to validate the location of the investment prior to the consideration of the investment itself. Together they should paint a picture of reasonable opportunity at acceptable risk. The perfect investment scenario hardly ever exists, and when it does, be careful, you likely missed something critical to your judgment. The near perfect investment opportunity is probably the best. It is grounded in qualities of opportunity and challenge. Program some financial capability to handle risks that may moderate. This will still assure the ultimate investment success even when the unexpected occurs.


Measuring Future Confidence

A. Growth
Investment growth can be found in three distinct areas:  Population increase  Geographic expansion  Increased market share/demand Population Overall population increase for countries directly ties to the rate of new births and immigration (legal and illegal). Internal sector population increases can result from waves of groups aging in place, and/or exceptional population increases in cultural segments of the general population. The US population is at 300 million, and forecast to increase by up to 40 million in the next twelve years, and up to 400 million by 2040. That population change represents more than 30% increase or in excess of 1% per year nationally. Not all geographic areas within the US will grow equally. Twenty markets in the US will capture 60% of that growth, suggesting annual percentage increases in these markets of 2% to 3% per year to fulfill the projection demand. The aging process is shifting large groups of individuals from one stage of life to another. Baby boomers (Post ware children of WWII veterans) are emerging on retirement at a rate of 3 to 7 million per year over the next half decade. Eco-boomers (The grand children of baby boomers) are entering the workforce in massive numbers with new visions, different expectations, and changing lifestyles to consider. Each sub market will


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 see demand increase, even with no general population change, as they will seek new products specific to their needs and wishes. Ethnic and cultural sub markets represent the largest increases projected. Products sensitive to their origins and unique tastes will also enjoy preferred growth potential. Emerging concentrations of these markets often locate around gateway cities where increased concentrations of foreign influences occur. Geographic Diversity The land area of the US is vast and within its borders there are territories (states) the size of many countries and economies around the world. Businesses that start in one locale and succeed often grow by adding new states or regions to their business plan. National branding and franchise techniques allow for such investment with enhanced security based upon established performance in other markets. Investment expansion thus can be achieved by service and product penetration that reach into neighboring sectors for new markets. All such growth remains within the nation, and thus is regulated only by a need for local business licenses related to the venture. Real estate as a fixed asset in a fixed location cannot be moved from one market to another. Nonetheless, in certain destination locations it can attract interest and demand from great distances. In a global economy with world travel becoming easier, the lure of the select locales can find markets great distances away, driven by personal desires for lifestyle combined with business or investment objectives. Market Share New products and services are continuously coming to market. Improved delivery, distinctive offering, and enhanced branding/marketing all can generate increases in market share within an area. Competition thrives in the US, and the standard for survival requires continuous evolution in product and process. As new ideas come to market and are accepted the opportunity to duplicate that success and to over-perform local competition becomes available. US consumers are attracted to the “better mousetrap”. New and better over time will almost always overtake old and tired. Once created however, the ongoing challenge is to maintain and improve position. Real estate investments thus need to consider allocations that allow for proper care, future improvements, and operational excellence if values are to be preserved and improved.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471

B. Security
Security comes in several forms. This measure considers investment, business, and personal protection from uncontrollable harm. The promise of protection is grounded in:    Political stability Public safety Exit options

Political Stability Political stability provides consistent standards, regulated protection, and legal remedies to conflict. The laws and limits of government can assure or compromise investment. Disciplined and responsive governance, providing for public participation, can manage change without injuring the balance between the old and new. The record of political history thus serves to bring confidence related to potential political intervention into private investment initiatives. The US is built upon personal freedoms, the rights of ownership and the rule of law. While the representatives of the population can change as often as required elections dictate, the standards of governance are ongoing. Today’s rights are tomorrow’s rights. A covenant between the government and the individual is sacred and the rights and protections they convey are not subject to whim. State and federal regulatory agencies serve to assure uniform standards of behavior and delivery, offer protection on intellectual property, and act without bias to control undisciplined and illegal behavior. Public Safety Public safety resides in the service providers that serve to protect. From local life safety and emergency teams, to state, national defense, and crises management authorities, a system is in place that offers responsive attention to legitimate issues that could threaten the human and personal property elements of a society. The US infrastructure ranks high in its protective and crisis management capacity for individuals and businesses alike. From strong insurance systems to national subsidies resulting from natural crisis, the mechanism to backstop against the unforeseen is in place and functioning even in difficult times.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 Exit Options Every investment should consider alternative exit options. The ability to freely sell to a world audience assures the widest market for liquidation when necessary. US standards related to ownership transfer are minimally regulated. Broad appeal worldwide to investment in the US offers sound marketability under normal market conditions. Public taking of private property is very controlled and rare. When they exist they are subject to strong property protections and valuation fairness that favor the property owner related to the public interest.

C. Enterprise
The business of business is the foundation of national productivity and the ultimate source of national accomplishment. Notwithstanding major corporate participants, the small business man and his enterprise make up the backbone of the American economy. More are employed, more are served, and more are loyal to the independent businesses of the country than to all the major corporations that appear to overshadow them. What then guides this economy? Research and Invention The protection of intellectual property drives the quest for discovery. While the educational capacity and the technological infrastructure support the objective, private gain remains the compelling motive for business and industry advancement. The industries of the 21st Century are said to be robotics, biological engineering, and information/communication management. On this platform, the US owns international leadership in the top rankings of all sectors. Futurists suggest the compelling venue for the future will be the full integration of these separate sectors into a seamless realm of new applications. This vision is underway, and already producing a new world of science and industry for the future of all mankind. Industry Leadership New products are always in the pipeline for US industry. Built upon research and invention, no enterprise can last long without continuing improvements in the design, fabrication, performance or appeal of the next generation of offering.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 The competitive markets within the US demand this commitment. Their competitive position in the world economy becomes the effective result. As world commerce increases and the concerns of distance shrink with improved communication and travel, a world economy is resulting. This global economy is poised to serve those prepared to invest in it without regard to national boundaries. Production Capacity Idle production is not “no production”. The machinery of industry in the US is poised for action when economic recovery is at hand. Overall productivity performance of the US is at the highest levels globally. As markets expand for goods and services, the idle capacity will again be put to work with no time loss or investment pre-requisite to turn up the engines of commerce. Technological Command Tomorrow’s business will be more advanced, more informed, more productive, and more efficient than today’s. This will result from quality communication infrastructure combined with technology at all levels. A new generation of “Game Boy” trained technicians is leading the evolution from a mechanized economy to technology managed economy. Combined with robotics, all industry will ultimately change and the US will continue to set pace as the world leader.

D. Resource
Every national economy is built upon the resources of that nation and the demand for their product to a world consumer. It can thus be evaluated by considering the following. Educated and Trainable Manpower The nation’s education system, the quality of its faculty, systems and graduates offers the key element for investment to succeed. Growth in the advanced education systems of the US continues unabated by current market events. The Economic Recovery Act has proposed strong subsidy to the public education system, setting the stage for a new focus on science and mathematics as core elements. Thus the education priority for the US remains high and is destined to improve. Nations that concurrently attract well educated foreign nationals for participation in the education and business usually enjoy access to the most preferred workforce available worldwide. The US remains a destination for higher education from all parts of the


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 world, inviting inspection from the brightest and most global members of future workforces worldwide. Natural Resources Mineral and environmental wealth are clearly essential for the engine of industry within any nation. They also serve to assure independent survival when challenged. Mineral wealth for most natural commodities is readily available within the US. Environmentally sensitive mining and processing together with progressive recycling are beginning to allow domestic sources to be competitive with unregulated international alternatives. Food production is critical to every nation, and the farm belts of the US are known for its high production capacity. Agribusiness will continue to keep the US self reliant for basic food products at affordable prices for generations to come. Water for many parts of the world is another key resource consideration. Important to agriculture, human existence, and even recreation, it is an essential asset often overlooked. Combined with quality air environments and strict regulatory controls that protect both assets, the US leads world focus on sustainability measures that protect these essential resources for future generations to come. Energy Availability For much of the world, fossil fuels feed economic expansion. The world has learned of the finite nature of this commodity and the need to vary dependence onto other sources in the future. Demands for sustainable energy have also prompted world action to moderate the carbon footprint of mankind. Alternative energy sources are essential to the future. Nuclear, hydro-electric, solar, wind, geothermal and oceanic current sources are all under advancement to subsidize or supplant the fossil fuel economy. Throughout the US, power availability comes in many forms. An interconnected grid allows generation in one area to serve areas thousands of miles away. The enhancement of this grid, together with fast forward focus on solar and wind generation, are funded priorities within the National Economic Recovery Act. The futures of energy independence together with affordable and sustainable supply are the goals. Energy independency is forecast to be achievable within the next decade, setting the stage for a new internal investments currently traveling abroad.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 Infrastructure The delivery of materials, peoples, information, and utility is essential to a mobile and growing economy. Highways, transportation systems, communication networks, and utility generation/distribution must be reliable and well maintained. The national measures intended to uplift the economy have targeted substantial investments in the upgrade, and an overhaul of the US infrastructure, even though by world standards it maintains a premier position. While making jobs for the near term, these actions are pure investments in the future of national effectiveness and self sufficiency.

E. Geography
The world contains spectacular environments that vary widely. From seaside to mountain top, from freezing to year round summer settings, the quality of the location brings value to investment judgments. Society is moving toward the sun in many parts of the world in search of quality of life issues that improve the human condition. Within the US, that migration also exists. Increases in the south with stable and decreasing populations in the north testify to a repositioning of the economic centers of the country. Traditional gateway cities of the north with valued indigenous resources will always prevail, but growth will largely focus on areas where lifestyle, cost of living, and transportation/connectivity rank supreme. The largest growing states are forecast to be California, Texas, and Florida. That ranking underscores the factors of geography for many decisions makers. Other areas should not however be overlooked. Areas of significant growth can be found in many areas with potentially less competition to contend with. Smaller markets can permit quick entry and dominance for certain investors seeking bigger placements in smaller markets.

F. Invitation/incentives
Nations, with open policies that invite foreign investment and provide a level playing field between local and external enterprise, often work to remove hurdles imposed on external contributors to the national business environment. Combined with investment incentives, a total investment package can emerge with many levels of public enhancement.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 Within the US, certain geographic and activity sectors are judged important to the public interest. Local, state and national incentives are employed to attract targeted investment to these applications. Incentives are offered, such as tax abatement and market protection measures that help recover the initial capital outlay or provide time for stabilization to occur. In select applications, credit enhancement with government guarantees or tax exempt funding instruments are deployed to serve as incentives. Combined, they can be used to improve or activate financial promise in areas of public need. Tax abatement The US uses taxes to shoulder costs of public services and government. Property tax holidays, tax credits on future income, and tax exempt quasi-public bond funding capacities are three major areas where governments financially encourages desired objectives. In certain instances benevolent land leases, land sales, and even land grants also can come into play to promote specific locations ahead of others Credit enhancement The US Federal government offers financial support for selective enterprise by employing a Federal guarantee to permit business and real estate loans for such agendas. The Small Business Association (SBA) and the programs of Housing and Urban Development (HUD) offer a variety of credit guarantees to be funded by bank or Federal agencies that limit borrower’s risk and bring preferred terms to the loan facility. Market protection Land use governs the ability to place any enterprise within a defined jurisdiction. The allocation of land use via local zoning referendum for certain uses sought by public authority can be structured to allow for a period that might limit competitive land use from occurring for a designated period of time. Immigration policies With certain financial investments related to new businesses that create jobs, the US Federal Government (with proper character credential) offers investment Visa’s to foreign individuals. Such Visas allow for permanent status and can lead to future citizen status if elected by the investor.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471

G. Currency considerations
The international exchange rate of currency in constant flux can provide opportunity windows for the transfer of funds between countries. Buying and selling environments for currency alone can supplement the investment return when sequenced with highs and lows in the exchange rates. Currencies that freely trade on world exchanges like the US dollar assure the liquid state of the earnings to move when desired to other destinations outside the investment country.


What Kind of Investment Options Exist?

With each market condition there are various real estate investment options that work best. Some come in the form of land, some as buildings, and finally others as operating businesses. Consider the following options: Preferred Acquisitions The current economic state of the US economy has placed credit availability at a long time low. With most properties in the US funded by mortgage loans, the term and conditions of those credits are effectively falling into non-compliance status triggering loan pay down or pay off mandates. With an inability to replace such credits with new loans, borrowers and banks together are facing regulatory crisis. This condition leads to a “buyer’s market” where cash offers without credit conditions can negotiation frequently for “below cost” acquisitions of either the property or the “paper” (loan instrument) as best serves the purchaser. Often referred to as “distressed assets”, their distressed status can generally be categorized by one or more of the following four causes:   

The distressed property - A real estate product whose performance in the market is below projected intent and whose cash flow is insufficient to serve the credit demands of the asset. The distressed owner - A property owner’s liquidity, for reasons other than the subject property, may cause him to default on the mortgage. The distressed lender - A lender (or occasionally an equity participant) whose loan performance demands the sale of the credit or foreclosure on the original borrower, usually seeks to liquidate the asset in favor of some financial restoration.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471  The distressed condition - Under rare circumstance, properties are lost to tax defaults and can be acquired for the tax deficiency from government foreclosure proceedings.

The distressed property would likely require extreme patience or repositioning. The default condition may well be prompted by poor market evaluation, poor site, poor timing, or poor execution. In general this option should be approached with great caution, as overcoming the critical deficiencies could be a daunting challenge. The distressed owner seeks a sale to remove the demands of credit that challenge operating stability. Sale of the asset could consider the abandoning of equity just to be free from the negative cash flow attached to the loan. When the owner has multiple properties, the sale of some may be critical to retention of the remainder. Prior to mortgage default, most owners would seek to negotiate a “deed in lieu of foreclosure” with the lender to protect reserves; or to file for reorganization bankruptcy to forestall foreclosure action while seeking a financial remedy. The distressed owner thus usually seeks to avoid a sale for less than the outstanding debt. That amount therefore is an effective floor to transaction potential. The distressed lender currently represents the most attractive seller. Such “vulture acquisitions” seek the lender who is often in control of the property, having already removed the original owner and equity interest, and is potentially prepared to consider a “short sale” (a sale of the asset for less than the loan obligation) to liquidate the property quickly. Banks and other lenders usually do not wish to own the asset they have loaned on. Those regulated under Federal Charter, are effectively encouraged to liquidate the property, take losses and move on. Under certain current conditions the bank might also seek timing to allow partial recovery through the Bank Bail Out provisions of the National Economic Recovery Act. In effect, the Bank Bail Out indirectly funds the purchase discount in favor of the Buyer in some “short sale” transactions. Under these conditions currently, strong liquidity of the Buyer can often result in the very favorable pricing, often with many candidate properties to choose from. Proper assessment prior to the acquisition of the any asset is always essential to the options mentioned. The quality of the asset and the purchase price together with the probability of future recovery will determine the expected strength of the investment opportunity. The distressed condition, while rare, represents a perennial investment option in all markets, good and bad. Properties fall into tax default because of financial problems, 12

2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 death without probate, abandonment, and other like events. Such defaults result in the sale of “tax certificates” for the property from governmental authority. These certificates earn excellent interest and enjoy prime security. If after three years the certificates have not been repaid (with interest), the property is taken by the governmental authority and sold on the courthouse steps to the highest bidder. The tax certificate is the first to be repaid with interest. The prime mortgage(s) follow if bid results permit. The owner only receives any remaining funds if the high bid exceeds the sum of recorded obligations. Should no bid overreach the tax certificates, the owner of the certificate is awarded clear title to the property for the tax payments made plus accrued interest. Clearly this can provide an exceptional yield, if such a final action is undertaken. New Development In every down market there are up market conditions. With the US there are economic centers that have withstood the current crisis or are already on the rise. These locations are capable of moving forward with effectiveness even though they may currently be confined by credit and liquidity limitations. These opportunities are usually geographic in nature. They can also be defined by market sectors. Opportunities that combine demands in market sector and geographic locations can often justify new development even in less favorable economic conditions. Cost advantages currently for land and construction contribute to the potential margin new development could obtain. Current construction pricing is running at 15% below prior costs as little as a year ago. A lack of product development resulting from the current financial constraints, offers little likelihood of new competition being advanced for a period of time. This effectively offers protection during initial absorption and stabilization of new developments promptly serving the market sectors deemed worthy. In the US, a number of communities and market sectors exhibit strong current promise. By example, rental housing in select locations remains in strong demand. With 18 to 24 months required to advance from vision to operational completion, any project begun during this idle period will be entering the market within an even stronger national economy. Venture Capital Many businesses thrive during difficult times. They are driven by demands that are not as sensitive to or are enhanced by slow economies. Child care, convenience retail, and franchise food and beverage operations are examples of such businesses. Slow markets 13

2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 place higher demands on their product, and lower expansion costs (land and building) permit more cost effective investments to result. Such business ventures are real estate based but valued on the real estate and the operating entity within. Opportunities arise either out of “build to suit” lease programs with corporately guaranteed leases to underwrite the investment; or out of franchise entitlements that result in business and real estate ownership. The latter can also be used to advance investment visa status if approved. Capital markets needing relief also contain certain real estate backed receivables, originally fashioned as mortgages. The acquisition of such mortgages under a discounted basis has the net effect of raising the yield of the instrument above the rates they were originally fashioned under. With quality assets and mature credits that have performance history, acquiring such receivables can also provide strong returns with manageable risks.


What Locations Should be Considered?

The geography of the US is expansive. From coast to coast, from North to South, the variety is as great as the continent itself. Every state and region is near a country in itself with economies managed with some independence to the national condition. Not all locales are equal. A few have proven to be long term growth oriented and have successfully positioned themselves for the years ahead. Within the US there are 20 such activity zones that are projected to capture over 60% of the nation’s growth (100 million) in the next thirty years. Many also provide other qualities that invite inspection. While all are thriving business centers with excellent connectivity to the nation and the world population, certain locales in the “sun belt” can also offer quality of life considerations that fill business visits with opportunity for personal pleasure and relaxation. Each area is built upon business and industry platforms that are unique. Their combination of business focus dictates the demands and opportunities that can exist. A selection of location for investment therefore might consider:   The area growth potential, The environmental quality of life,


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471   The business climate – invitation and investor understanding, and The transportation convenience to support visitation.


What Real Estate Investment Segments Could Be Considered?

Every real estate sector rises and falls at different times and under differing conditions. While the cycle of each sector can be effected by common economic denominators, they often respond in differing degrees of urgency and at different degrees of scope. The demand generators come from various areas. They could be:  Migratory patterns of the general population  Job opportunity tied to regional resources  Population aging and their impact on shifting consumer demands  Environmental and regulatory forces on product offerings  Immigration concentrations in gateway locations  Re-definition of the family unit  Changing lifestyles Examples of these shifts in demand and their resulting offerings include:       The current economic environment is causing more families to rely upon multiple jobs to support household needs. In turn this is elevating dependency upon time efficient services and family support systems. The expanded costs of medical services from full service hospitals. The aging population of post war baby boomers is shifting greater needs to locations, services, and accommodations suited to their limited accessibility and lifestyle needs. Increases in minority populations are shifting the cultural priorities of taste, location, living standards. Emerging, mobile, and technical prolific young adult populations are redefining family, work, and recreation away from traditional patterns. Environmental legislation prompting obsolete status to much of the built inventory.

The business sectors best poised to capitalize on these rapidly changing conditions include:    Out-sourced medical industries from pharmacy to clinics providing targeted medical services. Convenience retail offering quick and easy necessity shopping Child care for double income households


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471     Private education for a “new skill” work environment Family priced restaurants Energy efficient and environmentally responsible product replacements Housing targeted at specialty groups underserved by current inventory


What Investment Parameters Are Most Appropriate to You?

The investor should consider several questions to guide the investment decision. They form basic objectives that can serve to measure the appropriateness of the option at hand. These questions can direct the focus of the investment search and limit wasteful energy following less appropriate choices. Consider the following questions to define preferred investment parameters:  How much should I be prepared to invest? In almost every market and at every level there are investment options. Notwithstanding the current economic environment and the unique options it advances, the opportunity to buy or sell in the US is always there. The scope of investment is a personal one reflecting the capacity and comfort concerns of the investor. The scale of the investment should consider the logistics and distance imposed by international real estate investment. Certain personal costs in travel and consulting will companion almost every transaction. As a fixed and added expense, they should be considered and only be engaged if the outcome warrants it.  What time parameters are comfortable? Timing relates to the calendar objectives that would best serve the commencement of serious inspection. Driven by personal comfort and based upon informed opinions about the investment destination, this choice should reflect the timing the investor would consider appropriate. No false urgency need apply unless or until the investor finds the opportunity worthy of current or immediate action.  What is the preferred term of the investment period? What length of time is seen as preferred? Should it be a short term or a long term investment? If long term, what investment time length would be most comfortable? All of these questions deserve consideration as part of the issue of urgency or patience assigned to the investment.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471  What risk/reward parameters are acceptable? Risks and rewards move in complementary directions, the greater the risk the greater the reward with success. Higher risk should appropriately result in higher rewards, and conversely safer investments will likely yield moderated performance. The risk parameters are for the investor to decide based upon exposure and returns with proper balance. Understand the true risks, even those not stated. Affirm the true reward, not those just represented. Some rewards will be financial; others could be personal. Blend them to find the final formula that motivates the transaction or sets it aide.  What kind of investment return is sought? Investments can produce returns from appreciation, value enhancement, or improvements, or operating revenue. o If the intent is to buy and sell only, then net gain will result from purchase and sale transactions that respond to market improvements. Profits from such investments lasting six months or greater are potentially subject to lower income tax provisions (capital gains). o If the intent is to advance value through entitlement and/or property improvements, the investment will require added time and capital to achieve the improved status. Development assistance through independent consultants may be needed to achieve results and assure the improved property sale. o If the intent is to further the land improvements into an operating enterprise, business systems will need to be put in place and personnel trained to activate the operation. Ongoing revenues or ultimate business and real estate results usually are also reflective of the operating performance of the enterprise. Each of these options can be combined or sequenced independently. A decision to proceed with one can be later complemented with a decision to advance to another. Such stepped approaches allow for measured risk with each step and exit flexibility accordingly.  What form of return and/or exit is desired? o Some real estate assets are bought whole and sold whole. o Some real estate assets are bought whole, subdivided, and sold incrementally. o Some real estate assets can be bought and leased under various formulations. o Some real estate assets can be invested into businesses enterprise. o All real estate assets are fee simple and can be handed down to another generation with managed results.

With each choice there exists an exit option. As every investment decision requires examination of entry strategies, they also require an exploration of exit strategies that consider worst to best case scenarios. Every investment plan in real estate requires both evaluations to occur prior to entry.


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 Timing is essential to optimum performance at exit. The ability to retain ownership comfortably till market conditions are optimum promotes the highest and best return on investment. Hard assets such as real estate protect and improve in value over time. Properly timed, well placed geographically and with proper entitlements, they will always command preferred returns to the prudent and well guided investor.  Is credit or leverage acceptable to the acquisition and operational options to be considered? Religious beliefs, cultural convention, and risk adversity can encourage all cash investments to result. Initial cash acquisitions can strengthen negotiating terms effectively and remove transactional urgency going forward. Leveraged transactions with proper management can improve return on equity (ROE) yields. With sufficient capital, credit is available for real estate products in the US. Mortgages will demand underwriting and personal guarantees in most instances. With business investments, they can dramatically limit the investment capital required. Investment Visa’s can selectively be funded by cash and/or credit facility. Properly managed debt can be a way to control the use of borrowed funds with credit authorities functioning to value and approve distributions on the investor’s behalf as project progress for new development is undertaken. Upon construction completion the credit facility can be retained or funded out with cash or replacement credit (usually at improved terms) at the investor’s option. When credit is deployed, cash reserves to carry the credit facility should be set aside to assure comfort over short term delays or difficulties that may arise.


What Kinds of Investments Should Be Considered?

There are a variety of real estate products worth considering in today’s market. Responsive to the preceding questions, they could include:       Land acquisition, with or without entitlements Land acquisition and development to entitle, improve, and/or subdivid sites Select improved property acquisitions Targeted new development initiatives Targeted new business operations within real estate assets Qualified real estate receivables that offer good returns without property ownership


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471

VII. What Form Should the Investment Take?
The purchase of real estate product can be accommodated with a variety of ownership and investment arrangements. The final choice should consider risk, taxation, transferability, and partnering concerns as defined by agreement with each investment option. Your legal council would offer the benefits of each and advise on the most appropriate mechanism to employ. They could include:      Personal ownership Limited partnership General partnership Investment agreement Corporate venture

All forms except the first can be configured under “limited liability” provisions of law to restrict personal exposure to qualified risks.

VIII. Other Sensitivities
In addition to the investment asset, considerations of taxation, inflation, and fund repatriation all need review and guidance. Each investor and each investment will result in parameters that will vary based upon these concerns. Personal council with legal and financial advocates can assist in the preparation of investment understandings and investment vehicles that best serve the interest of the total venture and the participants within. No investment should be pursued without independent verification of the representations made and the investment relationships embedded in the transaction. The selection of all consultants should be grounded in personal trust. Proper investments will always positively respond to caution and professional review.



Real estate is traditionally one of the most secure investments. Well identified, improved, and maintained it can result in short term gains or long term income. As and when the international investment climate appears worth pursuing, proceed to select


2555 Temple Trail. Winter Park, FL 32789 . Tel:407.629.0595 Fax:407.628.1471 relationships, investment options, and transaction arrangements carefully. A successful outcome will always occur when all parties enjoy common goals and investment objectives. Remember the golden rule, “He with the gold, writes the rules.” As investors you have the right and responsibility to set standards of care in your investment and to expect quality support and representation from those you align with. With careful planning and consideration, any market can offer promise and performance when managed by professionals with shared vision and a history of respected business conduct.

For Information in Latin America Please Contact Arch. Juan Castanos At: e-mail: