I am a big fan of investing in real estate. I am often asked by clients living and working in this region how they can invest in real estate, and unfortunately it is never as cut and dry here as it is in many other places, for reasons I will discuss below. That said, if you are living in this region long term, and would like to diversify your investment portfolio to include some real estate, what should you do?
First off, the reason I love real estate is because you can actually “have” something real, and in many cases something you can even use yourself. In terms of the laws of supply and demand, God isn’t making any more of the stuff, so it is a pretty sure bet that it will appreciate over time. As long as you don’t leverage it or buy it under dodgy or questionable circumstances and you hold a proper title, it cannot be taken away from you usually. In the long run, even though it is not very liquid, land or property, as long as it not bought in the midst of a bubble, is one of the safest asset classes on the planet and the upside can be astronomical.
In Myanmar it is not legal for foreigners to own land. This is the law and I could not, should not, and never will advise anyone to break the law, ever. For those with deep pockets, there are business opportunities where you can legally get government approval to have a joint venture own or lease land for a specified period of time, but this is not personal ownership in the Western sense of the world. Unfortunately that is just the way it is.
So what can an average Joe do about diversifying their portfolio if they are likely to spend the next 10-20 years in Myanmar or a similar country that prohibits foreign ownership of land? One option is to use real estate funds, and if you have read many of my previous articles you know I generally advise avoiding them like the plague. If there is a run on the fund, i.e. everyone asks for their money back at the same time, then the manager may be forced to liquidate properties at fire sale prices and you lose simply because of the actions of other investors. That pretty much negates the glowing recommendation of the safety of real estate that I just wrote about above, doesn’t it?
Well, there is a very easy and frequently overlooked option. Buy real estate somewhere else. There are many places in the world that allow foreign ownership of land, and many are in places that not only would make great holiday destinations for your family, but also offer great opportunities for appreciation. Many places will even extend credit to foreigners to build if they first purchase land to use as collateral. A friend of mine just recently got back from a trip to Fiji where they will do this. In the end he didn’t like the plots he was looking at, but that is just one example.
I myself am considering a trip to Ecuador in the near future to look at land. Foreigners there can hold the title in their own name, and there are many towns with great surfing waves that have plots very near to the beach at extremely low prices. As with most of the developing world, families have more children and therefore population growth tends to be faster, which in my opinion is a reason to avoid the developed world.
Whatever your budget is, you can diversify the same amount across more properties or even countries by choosing the developing world over the developed. The downside is that there is usually a weaker legal structure, but that personally doesn’t bother me so long as I am able to diversify. Don’t rule out direct real estate investment just because you live in a country that doesn’t allow you to own land as a foreigner. Just broaden your horizons. Your net worth will thank you for it.
David Mayes MBA provides wealth management services to expatriates throughout Southeast Asia, focusing on UK Pension Transfers. He can be reached at david.m@faramond.com. Faramond UK is regulated by the FCA and provides advice on pensions and taxation.
