How To Find Hot International Real Estate Investments with Ronan McMahon

Welcome back to Bacon Wrapped Business. This is Brad Costanzo. And today I am going to continue on a conversational thread that started in a podcast episode just a few previous episodes ago, or as we call them here on Bacon Wrap Business episizzles because they're just too hot. And if you've heard the episode with Andrew Henderson from Nomad Capitalist, this is a perfect segue because what Andrew and I talked about is the possibilities and the benefits of sometimes just living abroad and moving away and structuring your life and your business elsewhere and going where you're treated best. And in this world of increasing ability to work remote, more and more people are understanding that, you know, they're not stuck in one place. And if you're not stuck in one place, you can kind of like start to just pick the place that you want to be. Granted at this time in early 2021 it is, you know, there are still some travel restrictions pandemic related, but those are starting to go away and options are opening up. And today I invited a guest on the show who's going to talk about what it's like to live and invest internationally, especially as it revolves around real estate. So Ronan McMahon is the found I, I want to say you're the, hopefully you're the founder, but also the owner.

Of internationalliving.com founder of real estate Trend Alert. Real Estate Trend Alert International Living is my publisher.

Publisher. Okay, perfect. I wanted to find out about that. And so Real Estate Trend Alert is something that I personally am a paid subscribing member to where he'll explain how they bring really interesting international real estate deals to their members. And I want to just dive in to a conversation that I would want to have about Ronan anyway because this is an area that my wife and I are exploring international living destinations, whether it's for investment, part time living, long term living, et cetera. And I can't think of anybody better to have on the show than Ronan. So Ronan, welcome to Bacon Wrap Business.

Wow. Thanks Brad. Absolute pleasure to be here.

So you're down in Cabo right now?

I'm down in Cabo right now. I've just turned on the aircon, which is just kind of indicating that it's about my time of year to think about moving on from Cabo. So I when you have to turn on the air conditioner, yeah, that's my big push. So I winter in Cabo, I spend the kind of mid summer in Ireland and then I'm in kind of Portugal on, on either end of it. So I kind of work my life and my business around those three bases.

Fantastic. So go into a little bit like give the folks an overview of what real estate trend alert is. I mean I'm a subscriber so I could give them my words, but I'd love to hear it from the horse's mouth.

Yeah, absolutely Brad. What we do is me along with my small team, we travel the world in search of real estate investment opportunities for profit. So we look to identify places where something big is happening, are set to happen, put boots on the ground, see if there's an opportunity to profit and then to recommend actionable deals that fit within that overall strategy. So for example, I know Tulum is a place that's very close to your heart and you'll be visiting again soon. That's a place that's been on my radar for well over a decade now. The big idea there is the pattern, the progress that's been rolling along the Caribbean. From Cancun it hits the Ciancan biosphere. So you've got that kind of supply bottleneck coming in the form of a national park. That's the big idea. The play we've identified and have been recommending is to buy condos there, buy them pre construction with members only discounts and then make them available primarily for short term rental. But lately the way the market has flipped long term has also become extremely, extremely compelling. We identify opportunities that can be part of a big macro development trend but then also in certain moments, at certain times, we find really exciting crisis opportunities. The example there is Europe in 2011, 13 and 15 post the last cris, you know, there we were able to buy condos in Spain for 20% of pre crisis pricing. So you know, the world is such a vast and complex place. You know, if you're mobile, if you're mobile, if you're willing to travel, if you're willing to put boots on the ground, to put in the legwork, there's opportunity to be found somewhere always, you know, no matter what's happening right now.

So you primarily deal with developers and so you're working out deals for these pre development things as well. Do you also find many deals that have to do like that are already pre built, ready to move in, ready to buy now?

So yes, but to a lesser extent. So the thing is that at Rita we kind of club together with our buying powers so. So I have much more negotiating power when I'm talking to a developer who's got three or 400 units than a random individual who has one unit. So the kind of, the economics of the business model makes sense when there's a big volume of relatively homogenous inventory. So there's two scenarios where that can happen. A developer can have that inventory pre, pre development or a bank or a developer can have that completed inventory. Generally if it's completed inventory for our kind of, for our negotiations and our discounting to work, it comes from a bank. So we talk to a bank and you know, a bank who's foreclosed on a project or a community and we come in and make a deal with the bank. Then I guess also in the kind of the broad mix of retive, what I call flash alerts, which is just these one off deals cross my desk. It's in a place that I know I may not necessarily have visited the property, but I know the location, I know the people involved and I write it up and send it out. So for example, just today, just an incredible home outside of San Juan del Sura in Nicaragua. Across my desk, just a kind of a dream mansion perched on a hill above a beautiful surf break and beach. It's all stunning and it can be bought for 280 grand. So you know, it's a mansion. Yeah, I mean so these are the type of kind of one off situations where you've got a motivated seller, often where you maybe have kind of crisis laid non crisis which is unfortunately the situation with Nicaragua at the moment. So it's a broad mix. You know, I guess at the end of the day for a core REITA deal the primary criteria is can we expect to double our money here within five years. So if I expect that we can double our cash invested within five years, it cuts the REIT of muster as a deal. But also kind of post Covid I've developed kind of like another track within RETA which is just incredibly inexpensive homes in stunning locales. You know, this idea that there's not just the making money side of the equation but there's your cost based side of the equation. And I mean you can go to rural France and you can find a beautiful country cottage for $100,000. Just incredible values with really, really low costs of living. And it's just the other side of the, the equation that maybe some people, you know, this was in the wake of the wake of the crisis where people were really, really fearful about how, you know, how things were going to go for them right now.

And what I know, I'm on that, that newsletter as well. Something about a dream home.

What is the, the Instagram site?

Yeah, the Instagram one.

Yeah. So I mean, I set up just literally just a year ago, like internally within my business, we had a Slack thread called Property Porn where basically we just shoot up like these really cool properties that we all, you know, we're all into this stuff. And then I thought, geez, you know, why don't I just put these up on. Put these up on Instagram. So you just started putting them up on Instagram and the thing just blew up. You know, I got to kind of 250,000 subscribers very, very fast. Pret much all organically. Then something. Then I moved from Ireland and I think we did something that messed with the algorithm, but our organic search just seemed. Our organic growth just seemed to completely stall. I think the algorithm thought something happened. Anyway, so the organic growth just stalled. But it was just incredible just to see the kind of the appetite and the, the desire for that.

I love that. It's. Remind me the. So I can put it in the show notes here. So pick up what is the Instagram handle?

Your cheap dream home.

Yeah, that's right. Your cheap dream home. Yeah, it is fun. I like it. It's property porn.

It's.

You look at it like, oh, I could totally live in that.

Yeah. And it's like you see these, these villas and mansions in, in Italy and oh my God, it's like these are George Clooney houses. And you know, we do a mansion Monday feature and you know, Maybe Monday is 370 grand and it's a 16th century villa with, you know, it's just a fabulous escape. And the thing is, it's real, you know, you can have it. You know, I can have it. This is a viable option for us. And you know, I think the way the world has gone, the way work has gone, you know, it really is a viable option for so many people today.

Yeah, I love it. The, the most of the deals that, that Rita looks at for like locations, would you say that they're pretty much concentrated in certain parts of the world? Like for. I've seen several in Latin America, whether it's Latin or South America. You mentioned Portugal, etc. Ireland. Are there many other countries that you take a look at or are there certain geographical concentrations?

Yeah, so there at any given time there tend to be geographical concentrations because that's where we found the opportunity, you know. So say for example, if you. I founded Rita in 2008 and 2008, 2009, a big part of our focus was the northeast of Brazil, for example. We Just had an incredible run of early in pre construction deals in the. In Fortaleza or in Fortaleza and surrounds. Yeah, yeah. So we were buying condos just right on the boardwalk there, kind of ground floor as Fortaleza was taking off. And those were kind of doubling in value during construction. Today there's a big concentration in Tulum and the Riviera Maya. The kind of the really successful resort destinations of Mexico because the short term rental story is, is so compelling. But there's also an interesting kind of industry dynamic which is the construction costs are really low in Mexico. When a developer has strong sales, it can be an incredibly high margin business here. So that basically creates this much bigger pie that I can then go to the developer and say, hey, over here we've got this community of qualified investors, they're standing by, ready to act. But it all comes down to the level of discount that you're willing to pass on to those people.

What is the average discount that RETA members technically get over? What they would get if they just went to the developer on their own?

Yeah. So in the main, our deals come before the retail launches. So we come in first and then the developer launches retail. But typically it will be in excess of kind of 15, 16, 17% to the developer's launch price. Sometimes it's bigger, sometimes it's less. Then sometimes with our bank foreclosure pricing, it is what it is. The banks in some instances just don't negotiate. But there's a very kind of fun dynamic with bank foreclosures in Spain and Portugal, which is that banks tend to pay no commissions to brokers or they pay only tiny commissions to brokers, which is just the stupidest thing imaginable because all you have then is brokers running around the place saying don't buy a bank foreclosure. They're a terrible idea. So that's a kind of an overlooked inventory category that we can help people out with.

That's brilliant. So if you have good relationships with the banks, et cetera, you can get access to deals that brokers aren't out there pushing and driving up the price on.

Exactly. Brokers won't touch them because they don't make any money.

Yeah, I mean, money incentivizes people. Go figure.

Yeah, I mean, but you see in terms of incentives with, with the banks and their foreclosures in Spain and Portugal, everything is messed up. The people who control the inventory are incentivized not to clear it because basically when it's on their books, they get to charge certain things to it. There is just no incentive for it to be moved. So you'll find, I mean, so for example, I've just bought a bank foreclosure in Portugal in the Algarve, in a community called Val Delobo, which is a fabulous high end community right on the beach in the Algarve, great world class golf course. And how I came across that bank foreclosure is I was out for lunch with, with some friends. We basically bumped into a group of bankers we just started, who my contact knew well, we started saying, have you got anything, anything good floating around? And one of them just handed us a bag of keys. I mean something you not like this is how it happens. Handed us a bag of keys for several buildings in Val Delobo and a price list and said go figure it out for yourselves.

No way.

And we went door, we, you know, we went like literally handed you literally, literally. And I mean they're kicking back and you know, drinking the wine over lunch and it's like, you know, don't drop them back to my office until after 4 because I'm gonna be here having lunch until 4. And so.

So you're able to pick up smoking.

Hot deals on those smoking hot deals. But again, it's not shooting fish in a barrel because we looked at about nine or ten propert. There was one standout I partnered up with my contact because we were there at the same time. The asking price on that condo I think was €460,000. We got it for €410,000. There's an identical unit currently listed at €850,000 because it's direct from the bank. We're buying with no money down. So the only cash required is closing costs which are about 8%. And I mean don't get me wrong, we had to buy it without being able to see it properly because the electricity was turned off and just all the stuff you expect with the.

But you got to see it a little bit, just not in all its glory.

Exactly. And the good thing was that this apartment had never been lived in. So it's kind of a bizarre story that it was built, probably delivered 2008, 2009. And what, what happened with the run up of real estate values in Europe in the run up to 2008 and 2009 is that developers stopped selling pre construction. They just got so greedy because they saw every year prices rising by 20, 30%. They said, no, I'm going to wait till delivery. Banks came in, lent all the money all of a sudden they're delivering in 2008, 2009, and the buyers are gone. They're just gone. And they've got condos. So then the condos went into some kind of black hole of the banking system. Then there were these bad banks created in Europe and the assets got moved around and next thing someone else bought the assets. Then an Irish group bought them, then they went bankrupt. So literally this is a condo that was delivered pristine 13 years ago. Never been, never been lived in, never been occupied, but it's just been kind.

Of sitting there for 13 years.

Just sitting there. Just sitting there.

Those are great deals to find though.

Yeah, absolutely. Yeah.

But those are hard to manufacture. The ones that are easier for you to manufacture, I would imagine is going out to the developers and going out to. And I would imagine that one of the key things is finding reputable developers who are, you know, who've got a, especially in Latin America, South America, because there's a lot of, there's a lot of, you know, empty buildings and empty.

Yeah, yeah, there is.

So you have to make sure that you're got a reputable one. But I love the fact that you guys have the ability to, lack of a better word, kickstart a development. Because if I'm a developer and I know that you come to me with, I don't know how big the RETA subscriber base is, but I'm sure it's, you know, tens if not hundreds of thousands of people who are paying attention to this and you say, listen, we can help you get this off the ground, maybe even be able to sell it out. That reduces the risk for the developer. It reduces the risk for the RETA member, It reduces the risk for everybody. So I actually, I love the, I love the overall business model. It's really brilliant that, you know, you build up a valuable list of customers and subscribers of people who want this and then you utilize the power of large numbers and economies of scale to go, you know, get them deals. And at the same time, I know that's probably, you know, part of the business model as well is that, you know, you, I don't know if it's a commission or, you know how it is, but a fee from the developers. So it's a win, win for everybody. And I just remember when I saw this business model, I was like, this is brilliant. Ronan gets to travel to like these amazing places like resort destinations and negotiate beautiful deals and then pass on these deals to people who want them and get paid in the process. So Just like, hats off to you on that.

Yeah, thank you. The, I guess, brilliant. We've kind of stumbled into brilliance, maybe.

Yeah, that's exactly. So you start. You started Rita in. Was it 2008?

Yeah, so I started Rita in 2008. Basically, I had that. This moment, you know, I was in Brazil. Brazil was just northeast of Brazil. Are you familiar with Fortaleza?

So I haven't been to Fortaleza. We almost went, but I've been to Recife, and I've been to, like, Rio and Florianopolis, Sao Paulo and some other places.

Yeah, yeah, yeah. So, you know, the general terrain up in the. Up in the Northeast, and I guess Fortaleza is, you know, it's a major city of 4 million people. It's at the time and maybe probably still it's Brazil's biggest tourism destination, and it's kind of. It's a regional powerhouse. And it was just exploding because the Northeast had been so far behind the south of Brazil. So Brazil was on a tear, and then the Northeast was just doing particularly well because it was on that tear, but also catching up with the South. And I was investing up there. There was. It was just a brilliant moment to be there and to be investing. And then I talked to friends and family, whether it's in Europe or in the States, and it's like, oh, my God, they're afraid money won't come out of the ATM machines. You know, it was just. So that was the moment that I founded REIT in April, April 2008. And the. I guess in response to the opportunity that I was finding.

What was your business before that?

So previous to that, I'd worked with International Living, kind of finding, scouting and finding real estate opportunities. And then from 2004, January 2004 to 2008 or 2008, I'd worked with International Living, scouting out locations for them.

Oh, brilliant. So then and now International Living publishes.

Exactly. Perfect.

Perfect. You know, some of the questions, you know, when it comes to looking at, thinking about buying internationally, obviously there's a lot of things that the average person just. We don't know. We don't know because, I mean, real estate transactions can be complicated just here domestically, but especially investment purchases, although less cost to looking at and thinking about buying internationally, obviously there's a lot of things that the average person just. We don't know. We don't know. Because real estate transactions can be complicated just here domestically, but especially investment purchases, although less complicated.