Why 2023 is the Best Time to Buy International Real Estate | Tim Hubbard

Well, they just keep raising interest rates in the US don't they? And as that makes it more expensive for us as real estate investors to take out a loan and purchase a property, it's also affecting the rest of the whole world and it's creating a lot of international opportunities. So I want to talk about that a little bit more this week.

Welcome to Short Term Rental Riches. We'll discuss investing in real estate, but with a specific focus on short term rentals. Quick, actionable items to acquire, manage and scale your portfolio. I'm your host, Tim Hubbard.

Welcome back to the Short Term Rental Riches podcast. We're living in really interesting times right now. The economy, it's like every week we get some new news and things are going up and down. One of those things that are going up, as we all know, our interest rates and it's affecting the whole world. So I want to talk about that and how we have a lot of opportunities outside of the US Currently. As many of you know, I've spent a lot of time outside of the US Spend most of my time in Brazil and Colombia, and I have for the last six years. But I've also been traveling for a really long time, like 20 years, as much as I possibly can. That's how I got into real estate. In the beginning. I wanted passive income so that I could do that. I remember going to Europe years ago and I took out €300 out of the ATM and it cost me 450American dollars. So the exchange rate at that time was about €1 to A$50. That means that it costs $1.50 to buy €1. So it was really expensive at those times. Especially as a broke backpacker traveling around, I had to think twice if I wanted to buy those beers in the bar because a $6 beer was like 10 bucks back then. So exchange rates, they really affect us as travelers, but they also are very important when it comes to international investment opportunities. And as many of you know, if you've listened to the podcast for a while, I do own property in Colombia and Brazil. So I want to break down this week some of the opportunities that we have. Opportunities for Plan Bs. If you hear so you know, buying another residence, buying a vacation rental residence in another country, this is very helpful for diversifying. In my lifetime, the dollar has never been this strong. So I want to try to break this down as simply as I can. It is a complicated subject because we're talking about macroeconomics and there's a lot of inputs that go into macroeconomics and one of those are interest rates and our global economy. So as we raise interest rates in the US The US if you're not aware, is what the rest of the world primarily uses to trade. It is the global currency is reserve currency of the world. And so a lot of other countries are using US Dollars to purchase goods, to purchase commodities. And as the US Dollar gets more expensive, as it does when we raise interest rates, that means that it gets more expensive for the rest of the world that needs those dollars. In other words, there's more demand on the US Dollar right now. And just like when there's more demand on a rental property, the price of that goes up, right? So for those of us in the the U.S. we're on the right side, the beneficial side, I should say of this. But for the rest of the world, things are getting tougher. And for those countries that are much more reliant on the U.S. well, it's getting even more difficult for them. So here in Colombia at the moment, and I just pulled up a chart with the Colombian peso versus the US dollar, and if you look over the last 10 years, I use a website called xc.com to look up, they do a really good job of just allowing you to convert currencies easily. So if you're traveling around, which right now is a good time for international travel, right, it's cheaper for us that are earning US dollars. But if you pull up a chart on xe.com, you'll see that the Colombian peso has lost, like, 130% to the US dollar in the last 10 years.

So that's crazy, right? That means that if you wanted to buy a property in Colombia, it's going to be way, way cheaper than it would have been 10 years ago. The real estate prices here in Medellin, for example, have definitely not gone down 130%. They've actually gone up quite a bit. So we get to buy that same real estate, as an example, with a much more powerful dollar costing us less in the end. Now, this isn't to say that things can't flip around. You know, the whole world is using these fiat currencies that aren't really backed by anything anymore. Our US Dollar used to be backed by gold, and they took it off the gold standard. And that's when we just started printing a whole bunch of money, because we can, right? We don't have to have that big reserve, but this is having serious impacts on the rest of the world. If you want a great explanation, you can check out a guy named Brent Johnson. There's lots of YouTube videos out there about his milkshake theory. And basically what it says is that as our US Dollar gets more expensive and the same amount of people need our US dollar for trading, they rush into our US dollar putting more demand on it, which increases the value of our US dollar. So to break it down another way, if, if Colombia, for example, owes the US $1,000 in US dollars and they're going to exchange their pesos today for those dollars, then they would have today's exchange rate. But what happens if the getting more valuable and in one month they go to pay a little bit more of that thousand dollar debt, but the Colombian pesos dropped another 5% in comparison to the dollar. Well, that means that debt just got 5% more expensive. So in order to preserve wealth, to preserve purchasing power, people are rushing into, countries are rushing into the US dollar to buy dollars to be able to pay back these debts with the value of today's dollar and not a dollar in the future, that's more expensive. So again, I know this is a complicated subject and I am not the best person to explain this, but I want to talk about the opportunities here. So we can leave the US if we're earning US Dollars and we can move to lots of places around the world that are much cheaper for us to live now than they were just six months ago. Now, not to say this can't change and it can't go back the other direction, but for a lot of us, we can work remotely now, right? And so this is putting a lot of demand on international short term rentals. I have never seen so many people down here in Colombia. And I'm excited to to say that I did acquire a lot, two and a half acres with a good friend of mine here in Medellin. And we're going through architectural plans right now to develop some short term rentals and a couple of homes on that lot. The nice thing about this lot is that we're actually going to be able to charge dollars. So we can construct in pesos, but we can charge in dollars. Now that's not an opportunity that's available everywhere. But if you do your research, I think you will find that it is available in a lot of different places. So I want to get to the risks of investing internationally and there are a lot of them. So this is not like just, you know, you pick a place on a map and you decide to invest there. There's a lot that goes into this, but it can provide a lot of diversification. And if there was ever a time, ever a time for you to invest outside of the U.S. most of the listeners this podcast are in the U.S. well, that time is now or it's in the near future. So just to recap here, as we continue to raise interest rates in the U.S. that puts more demand on the U.S. dollar, making the U.S. dollar stronger. That means if we're exchanging our dollars for other currencies like the Colombian pesos, well, we're getting more of those pesos. And at the same time, the cost of everyday living in Colombia, for example, is not changing that much. So if we go out and we buy a dinner at a restaurant, that price of that dinner is not changing because the value of our dollar is changing. And so I was just in Europe and same thing there. It's a one to one ratio almost. So it's cheaper for us to invest internationally now, cheaper for us to live internationally. It's a great backup plan. If you happen to have money lying around or you ever wanted that plan B property outside, whether it's in Mexico, check out xe.com and you can see the differences between the US dollar and the exchange rates. Not all of them have lost a lot of value against the US dollar. Brazil, for example, is very self sufficient. They have a ton of their own commodities, they're less reliant on the US dollar. And so they have not lost a lot of value, but a lot, a lot of countries have. If you do decide to just investigate buying property outside of the U.S. i really recommend that you go back and check out a couple of my prior episodes, episode 79 and talk about buying property in Brazil. And also a lot of the things, just the general things that you need to look out for if you're investing internationally. I really recommend having a lawyer that speaks your language. Language again is another thing that you need to be considerate of. Is it something you're comfortable with? Whether politics can change? All of these things are real significant risks. So make sure that you really think those through. You can also check out episode 66. I talk about more tips there. So if you ever want to explore outside of the US and you have it now, well, it's going to be cheaper for you. If you ever wanted a plan B option outside the US it's very likely going to be cheaper for you as well. But make sure you do your homework. And if you want to just sit on the sidelines and not lose a ton of value from your US dollars, well, one thing that you can do is buy some U.S. treasuries. So as the interest rates go up, that means the interest that we can earn goes up on a lot of investments, including U.S. treasuries. And so those are one of the safest options you can do. Check that out if you've got some cash laying around. I hope that gave you a little insight. If there was ever a place that you were just interested in traveling to or checking out, well, it's probably cheaper than it was a year ago now. So I hope you're doing well out there. I hope that gave you a little insight and I hope it reminded you that there really is two sides to to every story here. So as it gets more expensive in the U.S. it's also getting cheaper for us outside the U.S. until next time, I hope you have a fabulous week.

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