Cashing In On a Second Home in Central America: How to Buy, Rent and Profit in the World's Bargain Zone. Tom Hammond Kelly
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An overview of a diverse, fascinating region
Central America is as different as the readers of this book. The region is an absolute paradox. It may be all that you imagine, but surprisingly, it is much more than one could ever embrace. It is more than the long and winding territory that connects North and South America. To the typical North American, the area conjures up vivid and varied images. On the geographical side, a mountainous area with volcanoes, colonial cities, jungles and, of course, bananas and coffee. On the political front, turmoil, dictatorships and instability. On the economic front, rich versus poor, agriculture-based economies and sweatshops where United States garments are manufactured and exported.
It is a complex and fascinating place, home to 41 million people with a total gross domestic product of about $88 billion.
How do you begin to categorize such a dramatic and extraordinary place? For starters, this region geographically encompasses seven countries: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama. These countries have many mysterious cities and fascinating destinations that you could only hope to place on the map in your mind. Where, exactly, are those exotic places on the flight boards at the Miami, Los Angeles and Houston airports? Cities such as Tegucigalpa (Honduras), Liberia (Costa Rica), Belmopan (Belize) and Colon (Panama) … Once you learn where to place the countries on a map, then you’ll realize the geographic diversity that these countries present. Striking and picturesque volcanoes line El Salvador, Guatemala, and Costa Rica. Coastlines range from remarkable and mountainous (Costa Rica) to black volcanic (El Salvador and Guatemala) to low-lying Caribbean. Culturally, Central America is extremely diverse. Guatemala has a strong history of native American Mayan cultures where much of the population is mixed, or mestizo. Some countries, such as Costa Rica, have over 90 percent European ancestry with nearly no mestizo influence. The slave migration from Africa to the Americas resulted in English-speaking areas of African ancestry along the eastern coasts called garifunas. Panama is a true melting pot, with Asian, European and Latin American cultures meeting at a true crossroads of the world.
The economies also differ. Nearly every country has its own currency (El Salvador and Panama utilize the dollar) and relies on agricultural exports such as coffee, bananas and other natural resources. Others have heavy manufacturing maquiladora bases (El Salvador and Honduras) and other countries are discovering tourism as a major source of income (Panama and Costa Rica). Some countries have a stable middle class (Costa Rica and Panama) while others have dramatic differences between rich and poor (nearly every other country in the region).
Once you can recognize differences between countries (if you can tell the difference between each country’s flags and currencies and can point to the location on a map, it’s a good start!), then you need to sift through these markets and make a decision. Where would you buy a second home . . . and why?
Who is buying second homes . . . and why?
According to the U.S. State Department, more than four million Americans live abroad, excluding military and government personnel. Mexico has the largest percentage at 25 percent, or 1 million American transplants, followed by Canada with more than 688,000. Central America is not far behind. In fact, an Urban Land Institute study on tourism developments estimated that up to 100,000 Americans live in Costa Rica alone. What does all this mean? As a North American, you will be in good company in Central America. There are many, many Americans living there full time as well as locals who have spent some time in the United States, either studying or working.
Geography also plays a factor. Major Central American destinations are a mere three-hour flight from international airports in the southern United States, including major hubs such as Miami, Atlanta, Dallas and Houston. All of these cities offer numerous direct flights to Central American places that you can’t pronounce or quite place on the map. The “U.S. connection,” both culturally and geographically, also points to a reason why Central America is so exciting: it feels close to home.
These countries are in the same time zone as many U.S. departure points, making it easy to get to and from home. Network news is broadcast on television via satellite live at the same time as it is in New Orleans or Houston. And it is also comforting to know that you can actually drive to all cities in Central America in a four-or five-day period from the southern United States. (Granted … it’s a long, windy, and bumpy trip and not highly recommended for a variety of reasons we’ll outline later.)
While buying a second home in a foreign land may lead you to initially consider places such as Europe, the South Pacific or Australia, practically speaking, Central America makes sense from a geographic, cultural, and economic standpoint that we’ll explore in later chapters. This proximity has also resulted in Central American countries being a haven for U.S. companies and franchises. Drive in any Central American city and it may resemble a typical U.S. suburb, with every fast food franchise imaginable, warehouse/membership clubs, hotel franchises, rental car agencies, malls and other comforts of home. You can buy peanut butter in Central America and get U.S. brand products at prices similar to what you would find at home! The recent passage of the Central American Free Trade Agreement (CAFTA) means that more products than ever will be available from the United States.
What is driving second-home investment in the region is price. Central America, considered by many to be the “third world,” offers real estate at a fraction of the price found in the United States. Better yet, the geography presents opportunities to own property in beach and mountain locations at prices that haven’t been seen in the United States in more than 30 years. A low cost of living allows you to live like a millionaire on a modest retirement income. Thousands of foreigners are buying second homes because they have found Central America is a place where their dreams can come true—along with a live-in maid, cook, gardener and chauffeur.
Low purchase price is not the only factor driving the second-home boom in the region Many Americans are drawn to Central America because it is an appealing alternative to Mexico or the Caribbean. Mexico, a much larger international second-home market, is an obvious and popular choice for North American citizens buying abroad. (For more information on Mexico, check out the first edition of this series, Cashing In on a Second Home in Mexico). Second-home buyers are oftentimes drawn to Central America because Mexico, for whatever reason, didn’t make their list. While Mexico hotspots such as Los Cabos, San Miguel de Allende, and Ajijic have reached a “critical mass” of North American second-home communities, Central America is just beginning. It’s “the next frontier” in international real estate investment. Some people are simply finding lives that they could not have in Mexico by finding their perfect getaway, or opening small businesses, operating farms or growing crops. Some have been able to integrate more easily into the culture of these countries since they are smaller and more manageable—and it’s just not about money. It’s true that many foreign buyers of second homes are enjoying excellent appreciation rates and are finding the region is a good investment. But many others are learning that Central America is a unique place and are drawn there because it is not Mexico.
In a capsule, Central America is an exotic place. It is different. The risks can be greater because the region is so atypical. Decisions are less obvious and more choices need to be made.
Second homes of any type, taste, and budget are available in Central America. Great urban high-rise developments are common in Panama City and Guatemala City. Attractive beachfront developments are in every market. СКАЧАТЬ