As I write, I’m packing for a scouting trip to Croatia and Montenegro. I’ll be visiting the former Venetian towns of the Adriatic coast, with their polished white stone, dreamy courtyards, romantic balconies, piazzas and piazzettas, and elaborately carved Gothic windows.
Why am I going? Because I hear things… I first visited Croatia in 2005, just as real estate prices in the city of Dubrovnik were taking off. In the years since, the coastal cities have seen years of steady price growth. And now, there are murmurs about Montenegro, which shares the same stunning Adriatic coast.
Around the Bay of Kotor I hear there’s a drive on to turn this into the main Adriatic destination for the superrich, another Monaco and super-yacht destination. Yet, right now, real estate there is still remarkably affordable, even in the UNESCO-protected Old Town of Kotor with origins that stretch back over 2,000 years.
Montenegro is pipped to be the next country to join the EU, with membership negotiations progressing since 2012. Membership would be huge for this little country. And it’s clear what Montenegro’s aspirations are. It already uses the euro as its currency. By the way, as I write, the value of the euro is sinking against the U.S. dollar, even dropping below the dollar parity level. This is handing U.S. citizens more buying power in Europe than ever before.
What does this mean? It means I ought to spend some time in Montenegro…
I do these sort of trips all the time. I follow the word on the grapevine and shake at its root.
It’s how I identify the places where we can buy low in a market that’s set to take off or undergo a massive transformation. It’s how I found opportunities in places like Cabo San Lucas on Mexico’s Baja California Sur, the beach town of Lagos on Portugal’s Algarve, and the peninsula of Placencia in Belize…places where members of my Real Estate Trend Alert have done well because they bought ahead of a transformation.
I’ve made it my mission to identify such transformations across the world. From billion-dollar investments in airports, highways, and other infrastructure, to upticks in tourism and smart government policy that can attract mobile people.
I’ve made it my business to be in the right places at the right time, and to get the right real estate deals. I’ve pounded pavements from Chiang Mai to Cancun, Cabo to the Costa del Sol…
To profit from a major transformation, first you need to see it. Take the bird’s-eye macro view. Then get ahead of it.
But you don’t need to be a total pioneer, learn a foreign language or do wild land deals in some jungle. I like to wait until the momentum is clearly there, until the road is built, the airport is getting flights. I want to see the demand for myself…get boots on the ground, sometimes for months, even years before I act on, or recommend, any deal.
I like to see the upswing underway. This eliminates most of the risk that comes with buying too early. The key then is to find the right real estate and do the right deal.
I’m looking forward to what I uncover in Montenegro. But my travel doesn’t stop there. This is going to be one of my biggest scouting trips yet. A mega trip that will take in Dublin, Belfast, London, Amsterdam, Croatia, Montenegro, Portugal, Scotland, Playa del Carmen on Mexico’s Riviera Maya, and Panama.
My goal is to understand what’s going on in the world, where the hottest opportunities are emerging, and what it means for where we should be putting our money.
Your Real Estate Questions Answered
Gary says: Hi Ronan, you’ve highlighted real estate as a hedge against rising inflation. Is there any type of real estate that can hold its value particularly well?
Ronan says: Hi Gary. In my opinion, real estate is the ultimate hedge against rising inflation.
First, property values over time tend to stay on a steady upward curve. When prices do fall, for example like they did in 2008, they were back to pre-crash prices in less than a decade—a lot sooner for desirable real estate.
Second, the income you can create from real estate also generally rises with inflation. This works especially well when renting short-term or with shorter leases, as it’s easier to increase rates.
Another benefit of real estate is that you can finance it with a mortgage. Then, as home prices rise over time, it lowers the loan-to-value of any mortgage debt, acting as a natural discount. In other words, with a fixed-rate mortgage, you could own something more valuable while still paying the same.
As for which property type is the best to hedge against inflation, I’d focus on finding something rare and in demand, that will always be desireable. These are important factors I look for with deals I bring members of my Real Estate Trend Alert group.
More importantly still, I look to buy for the right price to begin with. Because when you buy well, the value of your home can not only match inflation, but even exceed it.
Editor’s Note: Ronan McMahon is the editor of Real Estate Trend Alert and a contributing editor to IL. Email Ronan with your real estate questions and comments at mailbag@internationalliving. com. We may publish your question along with Ronan’s reply in IL Postcards or here in IL magazine.