I recently interviewed Mike Cobb, the Chief Executive Office of ECI Development, Ltd. a few weeks ago about what are some of the big issues facing property buyers and investors in Latin America right now. Here is a part of his thoughts.

Q. What do you mean when you say that people need to "thin-slice" Latin America to really get it right?

I think that the most important thing to remember is that Latin America is not just one thing. Latin America is many things. Because Latin America is so many things, the idea that you could describe Latin America as one entity is just not correct. On one hand, you have a country like Nicaragua that's at the low end of the popularity curve because it's not as discovered as other countries. On the other hand, you have popular areas like Cancun or Costa Rica. The way I place countries onto "The Popularity Curve" is by where people take their honeymoons. The factors like these are what give these countries a widely different set of infrastructure and types of hotels. This consequentially means you have a different set of investment possibilities. The chart below says a whole lot in a few words.

Aligning your investment goals with what you can expect is the most important thing. If you want cash flow, buy a condo in an area like the Pacific coast of Costa Rica. For appreciation, own a property in Nicaragua. Nicaragua has a special kind of appreciation "baked in the cake". There exists a misperception factor that makes it a nice appreciation area because its reputation is nothing like the reality. More people are right now starting to discover it. As a result of the increasing popularity, the prices are going up because there is more demand. Nicaragua has this accelerated appreciation because of this misperception factor.

On the other end of the spectrum, you've got places like Costa Rica or Cancun where there are incredible volumes of people visiting as tourists. This popularity leads to higher prices. If you were looking for cash flow, that's what you would find. If you came to an area like this and bought a condo figuring you would get high appreciation, you would likely be very disappointed. On the other hand, if you bought something in Costa Rica and Belize for cash flow, you would be happy.

A country like Belize sits in the ultimate sweet spot of this curve. It sits in the appreciation range of the curve, but is at a point of tourism maturity to get cash flow too. It's still kind of unknown so you can buy with value. But it is not as discovered as Nicaragua. You get the appreciation of the asset and more cash flow than Nicaragua. It's a country where you have your cake and eat it too.

Q. What one mistake causes more headache and heart break than any other?

One of the main things I would always advise potential buyers is for them to maintain a level of thoughtfulness and consciousness during the buying process. Buyers need to ask serious questions and stay vigilant so as to not fall prey to "Margarita Madness." Buyers should take their time, and think things through. All buyers need to be conscientious because when we run on autopilot, that's where the most mistakes are made. People rush in with excitement because they are having super-emotional experiences on their trips, and they end up buying something that's not right for them. Or worse, it turns out to be a scam of some kind. Rapid emotional only buying is what we refer to as "Margarita Madness." You see in this part of the world, real estate is very unregulated. Not deregulated, but unregulated. It's easy to become a scam artist in this region because there are no organizations out there hunting them. There is generally no real estate licensing board so anyone can be a realtor. In Latin America, there really aren't things such as escrow-agents, or escrow systems.

Q. What changes do you see happening to these countries in the next five years?

If you look at GDP growth, the economies of the region have been running at 5% to 10% growth rates for a decade and a half. There countries have very vibrant economies and young populations, which is a great labor demographic. They have no big entitlement systems on the back side. The U.S. has an aging population and a huge entitlement system that has to be paid for. Some estimates are of a 50 trillion dollar unfunded liability. Most countries of Latin America don't really have the bloated social security and medicare systems, which produce such an unfunded liability. And they have a fairly young population, so they can continue growing for a long time. These economies here are poised for long term, sustainable growth and I think it bodes well for the countries and their economies. As far as real estate goes, a country that's growing and stable will continue to produce goods and services that people want and need, good hospitals, restaurants, hotels, roads, internet, and all services that play into a nice quality of life. These countries are doing a great job and they're going to continue to do a great job. It's just going to get better and better because of the demographics inside these countries themselves.

Q. Can you summarize your approach?

For those folks looking for the right opportunities in Latin America, we can help guide you along the way. However, it's important for you to take the time and think carefully about what you want to gain for your personal investment, or what you're looking for in buying a property. Latin America might seem like a uniform piece of the world, but that doesn't necessarily mean each country is going to give you the same results. We are happy to break down some of the differences between some of the areas and then pass along advice you can use as starting points. Once you figure out what you really want, our team is ready to set up a time to speak with you and we can go over what investment or property is right for you.

ECI is a real estate developer focused on building people-centered, vibrant communities in Latin America with North American quality infrastructure and services. With growing businesses in Nicaragua, Costa Rica, Belize, Panama, and Ecuador, ECI has built successful beach & golf resorts, retirement communities, and rentable properties. Mr. Cobb has spoken at hundreds of international conferences about real estate financing and development. Since 2002, Mike, his wife Carol, and 2 daughters, Amanda and Emily, make their home in Central America.