One of the biggest obstacles Canadian investors face with international properties is obtaining financing. Jorgensen experienced a litany of financial issues when he began investing in Honduras, but he was able to find some solutions over time.
“Leveraging equity in current assets, (and) then using the funds to purchase the investment property is the most common (solution), followed closely by paying cash from (your) savings,” he reveals. “Vendor financing is sometimes available, particularly on serviced lots and raw land, but improvements, such as home building, will need financing as above, or be paid by cash.
“I usually only leverage the property when a clear income is being, or can be, realized that will carry the debt,” Jorgensen says. “I usually only consider this (for) commercial properties or long term residential rental properties, and only if I need the cash for a specific purpose; otherwise, I just enjoy the cash flow and income they produce.”
Although his portfolio has been profitable, Jorgensen believes his holdings have the potential to boost the Honduran economy. “(They) will provide a much-needed industry that will support local residents, create reasonably-paying jobs for young people, create government revenue to improve public services, improve and expand recreational activities for vacationers and visitors and expand product and service selection to improve living conditions for local residents,” he says.
The Turks and Caicos Islands, located north of the Dominican Republic, is emerging as one of the fastest-growing markets in the Caribbean region.
A rapidly emerging market, Turks and Caicos is only beginning to attract Canadian investors. “Currently, the prices are down to what they were prior to 2008, when the economic situation in most of the world went down,” explains Kathryn Brown, Chief Operating Officer of ERA Coralie Properties.
The numbers tell the real story about the region’s market. “If you want a two-bedroom condominium, you will probably pay between $450,000 and $800,000, depending on where the development is, and the size of the unit,” she says.
Single-family homes are also attractively priced. “If you’re buying a home, you may be able to get a two-bedroom home for $250,000,” says Brown. “Most properties are sold fully furnished. The reason for this is because there is not often enough room to move furniture.”
She also believes the returns will increase in time. “I would say that the properties here can provide Canadians with good returns,” says Brown. “Going forward, the returns will be even better, and our values are already starting to increase.”
Dealing with financial issues
Many countries have stringent rules for conducting business. However, this is not the case in the Turks and Caicos Islands, as there is far less for investors to worry about there.
“We have no taxes,” Brown says. “There is no property tax, income tax, or any other tax. There is, however, a one-time stamp duty that is paid at the time of purchase, depending on the price.”
The Turks and Caicos Islands rely on the British legal system for business dealings, similar to the Canadian system. “We are a British protectorate, which means that we are under British common law,” says Brown. “So when your name is on the deed, this guarantees ownership of property.”
Sourcing finance from financial institutions there is also much easier. “Our banks here are all Canadian banks,” Brown reveals. “Canadians can get access to some of the major Canadian institutions, including Royal Bank, Scotiabank and CIBC.”
The Turks and Caicos Islands weren’t always a popular investment locale. “Ten years ago, most Canadians had never even heard of the Turks and Caicos Islands,” Brown says. “And now, when it’s mentioned, people say the opposite. We have a great reputation, and anyone that comes to visit comes home and tells their friends and family about it.”
Brown is optimistic about the colony’s potential. “I believe that the future of the Turks and Caicos Islands is very bright,” she says. “We are a developing country, and we’re just getting started. We will never be like the Dominican Republic or Jamaica, but the islands are trying to maintain their integrity as being a paradise. And that’s what people expect when they come here.”
From Canadian Real Estate Wealth Magazine, a monthly publication focused on building value through property investment, covering topics such as values and trends, mortgages, investment strategies, surveys of regional markets and general tips for buyers and sellers.