Part two of the 15 Critical “Must Ask” Questions when Buying Real Estate Overseas will focus on “Buying Community.”   While this seems like a no-brainer to most folks from North America, it really goes to the heart of what “big brother” does for us in North America and just how much we unconsciously depend on him.

Sorry if I offended anyone there, but please be honest and tell me that if you bought a piece of property in Latin America, you would think of asking what could prevent your neighbor from starting a pig farm.  Really!  Would you think to ask to see a copy of the local zoning laws?   You would likely be surprised to find there are none, and that in fact, your neighbors can legally build anything they want next door, as far as the government is concerned.  This is real freedom, isn’t it?

But freedom and responsibility are a double edged sword.  You the buyer must take  responsibility to ask the right questions and get all the information you need to make the right decision for you and your interests.

But how do you know what questions to ask?   How can we know what we don’t know?  Obviously we can’t, but a strong dose of humility goes a long way, as does turning off our filters and confirmation bias.  (These issues were covered in Part One of this series, in the April issue of Hemispheres.)

When buying real estate internationally, you want to buy more than your own property -- you want to "buy community." Owning community gives you a measure of security about not only what your neighbors can do with their property, but also about who will be around -- or more importantly, will anyone be around.

A build requirement on the part of the developer is a key piece of the community puzzle.  Without something to mandate home construction, most projects of Latin America will resemble ghost towns -- a collection of sold, empty lots waiting for their investor buyers to come build a home.  Most won't.  They bought the lot as an investment to flip in a few years.  Maybe they can, maybe they can’t.   But a community is something else entirely. 

"Community" is a tough word to define, but the subjective experience is real, and we know it when we sense it, don’t we?  In fact, this soft, fuzzy feeling is quantified by the free market.  Developments that achieve the sense of friendliness and warmth essential to our concept of "community" sell at higher prices initially, and retain much higher resale values over time.  Their velocity of sales, even in down periods, outpace nearby projects that lack this so-important sense of community.  Case studies abound and several are contained in ECI’s Business Plan.  If you’d like to see these, let me know and I’ll send you the data.

Other factors, too, contribute to community and the financial and personal benefits that accompany it.  Walkability is a huge factor.   So are third spaces where people can meet casually and get to know one another.

Sure, there are a few Jeremiah Johnsons out there, but the vast majority of people want to have other people around to golf with, fish with, play tennis, swim, hike, play cards, share a drink or a meal and a multitude of other activities that we enjoy socially.  But if there are no other homes around, no restaurant or fun places to congregate, no amenities in place to play a round with friends, how will this happen?

"Buy what you see" is an extremely relevant principle here, too.  Don't buy promises, buy current reality.

Over the past decade, I've compiled a list of 15 Critical “Must Ask” Questions when Buying Real Estate Overseas.  Below is "Part 2:  Buy Community."  For "Part 1:  Buy What You See,” and/or if you can’t wait for the third installment in next month's Hemispheres, “Know the Developer,” send me a note and I’ll email you the complete list of 15 Critical “Must Ask” Questions when Buying Real Estate Overseas. 

15 Critical “Must Ask” Questions when Buying Real Estate Overseas, Part 2:  Buy Community

What kind of construction and design standards are in place and enforceable?  Is there a building requirement of any kind?Zoning is almost nonexistent in Latin America. Unless the developer has written and implemented CC&R’s, your neighbors can do whatever they want.  If they do exist, read the CC&R’s and make sure you agree with what is allowed and what is not.  Know what deed restrictions are in place, or you may be unpleasantly surprised by a neighbor whose tastes are radically different than yours. Empty lots on the beach are great for a picnic, but don’t create much of a living environment.  "Community" means having homes around you.  If you want to have neighbors around, be sure that there is a requirement that property owners build a home in order to avoid living in a “ghost town.”

Are there amenities for use by owners and visitors? “Buy what you see” should be the basis for ninety percent of your due diligence evaluation.  Is there a golf course, restaurant, bar, tennis court, fitness center, dock, dive shop -- whatever is on your personal list -- in place and serving clients?  Or are they just promised?  Promises can be all right, but your due diligence should include the verification of hard funds needed to complete the promised infrastructure, amenities, and services.  Without the money, you are buying a dream.  

Are there state-of-the-art telecommunications or fiber optics for fast and reliable worldwide communications?  In a time where we take internet and phone service for granted, and community is being more and more defined on the web, this vital component must be in place, and in place well.  Understand the reality of telecommunications infrastructure. How is the phone service provided?  Can you get the internet bandwidth you need? Is the service flexible and expandable to grow with the future need?

What about the Home Owner’s Association?  Are the fees high enough to cover maintenance of existing and planned infrastructure? Yes, high enough.  You should worry about unrealistically low fees, because they are usually a sales tool to show how cheap the cost of ownership is.  Let’s be honest, nobody likes to pay monthly fees.  However, please realize that fees set too low most likely will lead to unexpected surprise assessments in the future, and/or a drastic rise in HOA fees when the developer is gone, and the true costs of maintenance are carried by property owners. 

What about green belts, common areas, and the future of the development?  True community requires third spaces and places for people to meet and enjoy each other’s company.  Club houses, parks, sidewalks, and maintained open space are critical to foster a spirit of enjoyment for residents.  If public spaces are important to you, be sure they exist and are protected in the master plan.  Remember too that there need to be sufficient resources for the care and maintenance of these areas.  Knowing and agreeing with the vision of a project is important too. Be sure that the developer’s long-term plans align with your goals and desires as a homeowner in that project.  Ask to see a copy of the developer’s business plan, if they have one, and make sure it makes sense over the long run for you.