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Despite my intended hyperbole in a recent post regarding the upcoming Coastal Law and its possible negative outcome, I really don’t believe that Ortega would allow such foolishness. Too many investors and too much money is involved to mess with the Coastal Law too much. Any law that would stifle growth would also be too damning to Ortega’s reputation as the guy who is going to finally make some lasting changes for the people of Nicaragua, and those changes are going to happen because of tourism.
Visions of hammocks on the beach dance around the heads of millions of burnt out middle-class workers as they sit in front of their computers each day. U.S. workers and those around the world need holidays away from the blue screen to maintain their sanity, and Nicaragua is staged to accommodate them. Most baby boomers believe that the USA is still the greatest country on earth in terms of entrepreneurial opportunity, but that doesn’t necessarily mean they want to live here full time.
According to statistics from AARP, nine percent of the 76 million baby boomers are “affluent,” earning over $150,000 per year. That’s about seven million retirees getting ready to party. The National Association of Realtors recently did a poll that showed 15 percent of baby boomers are interested in buying a second home. It’s not a stretch to think that a bunch of these soon-to-be retirees are going to be looking for the best ROI for their second home, say, somewhere warm and near the ocean, where they have hammocks. Hello Nicaragua. Incidentally, 15 percent of 7 million is over a million people. Tourism and retirees have pumped billions of dollars into the economies of Mexico, Costa Rica, and Panama over the last two decades and it’s time Nicaragua gets in the game.
One of the challenges for anyone interested in playing with the idea of investing in Nicaragua is finding good sources of information about real estate, locations, financing etc., and I recently found an excellent source called Coastal Dreams. Coastal Dreams is a website that has a lot of really good information, things you might not of thought of, helpful hints and could be a real asset for those ready to take investing in Nicaragua seriously.
Nicaragua’s Coastal Law
Investors in ocean front property in Nicaragua might need a pair of binoculars to see the surf, if the upcoming coastal law ends up reflecting the current property title suspensions.
Since 1937, Presidents, Somoza, Ortega (the Marxist one), Chammora, Aleman, Bolanos and now Ortega again, have all had their land reform agendas that have resulted in a hodgepodge of legal ambiguity. Throw in years of squatter’s rights, and Daniel Ortega was correct to announce that his administration would try and sort out the previous potpourri of property laws and create some definitive and reliable statutes. Statutes that international investors were hoping they could rely on to help build the future of tourism and retirement property in Nicaragua.
In an effort to correct the problem however, the administrations’ actions could be the death knell for investors in Nicaragua.
One of the most important issues that the pending new Coastal Law will establish, is how close to the shore (of any body of water) developers can build.
According to a recent article in the Miami Herald,
“In a series of memorandums sent out earlier this year, Attorney General Hernan Estrada ordered a suspension of all property titles within 2,624 feet of any body of water.”
That’s about 800 meters or half of a mile inland from the shoreline. In contrast, the previous restriction created 30 meters or about 96 feet of public beach.
The problem is that most of the ocean front property that has been sold or is currently on the market occupies land within that half-mile. The vast majority of these holding are owned by U.S. investors and are somewhere in a pre-construction stage. This means that if the Ortega administration so desired, and implemented the current suspension, it could effectively block any construction on beach front property within that distance. And that, has a lot of people worried.
Investors who have bought ocean front property in Nicaragua are cautiously hopeful that the new coastal law will be growth positive and reject any “confiscatory” implications. For now, we’ll just have to wait and see.
World Bank & Nicaragua Water/Small Business Funding
The World Bank’s board of Directors announced last week that it had approved “a zero-interest credit for $20 million to support the government of Nicaragua to improve water and sanitation services in rural areas.” An additional $20 million in zero-interest credit will go “to enhance the competitiveness of micro, small, and medium enterprises (MSMEs) and the business climate that affects those firms.”
According to the World Bank Press Release on June 12, 2008, the money earmarked for the development of the water and sanitation infrastructure is focused on improving the access to water in rural and indigenous communities.
The other $20 million for the MSMEs will be “implemented over five years and improve the quality and affordability of services to MSMESs through four components:
- Improvements to the business and investment climate for MSMEs.
- Matching grants for MSMEs to support, inter alia innovations, environmental improvements, and forward and backward linkages.
- Innovative financial services such as a plot partial credit risk guarantee system for MSMEs in coordination with regulated financial institutions.
- Improve strategic, technical and coordination abilities of MIFIC in the field of competitiveness… The primary focus of the projects’ interventions will be on urban MSMEs.”
“Both $20 million zero-interest credits funded by the International Development Association have a reimbursement period of 40 years with a 10-year grace period.”
If the credits are appropriately applied, this is good news for rural communities and small and medium businesses in Nicaragua that desperately need infrastructure assistance.
This is also encouraging news for investors in Nicaragua that rely on the govenments’ involvement to create a stable and reliable economic environment.
With his domestic popularity in decline, President Daniel Ortega should welcome the news too, and view this as a vote of confidence from the World Bank and the international community to continue the policy of opening Nicaragua to direct investment.
Daniel Ortega continues to butt heads with big investors in Nicaragua. This week Ortega’s Sandinista government slapped a lien on the country’s only all inclusive hotel. The Spanish owned Hotel Barcelo Montelimar considered by many as the finest hotel in Nicaragua, says it’s being “harassed” by the Nicaraguan government.
The government claims the owners owe back taxes and that the 1993 purchase price of 3 million dollars for the luxury hotel was “ridiculous.” They may have a point, albeit sour grapes. According the hotel’s web site, “The Barcelo Montelimar Beach Resort and Casino, a five-star Nicaraguan jewel is nestled amid the lush tropical rainforests on the glittering coast of the Pacific Ocean. This magnificent beachfront resort in Playa Montelimar boasts four kilometers of sandy shoreline, 293 guest accommodations, and the largest swimming pool in South America.” Sounds like someone got a killer deal.
The point being made in this week’s headlines is that the sanctity of Nicaragua’s “rule of law” and “judicial security” are being exposed by the government’s actions. On the investor’s side I can see their point. The owners of the hotel bought the property in 1993 when the country was still reeling from the Sandinista/Contra conflict. Back then, only those with a long-term vision and the deep pockets to back it up would even consider investing in Nicaragua’s unripe fruit. Consequently they bought at the right time and most likely weathered years of negative cash flow. Now that the hotel is presumably prosperous and Ortega is desperate for public approval and money he feels justified to challenge the legality of the Barcelo deal.
The Hotel Barcelo’s legal representation are scheduled to appear at a hearing this week at the National Assembly’s Tourist Commission. The results of this meeting and the subsequent decisions made by the government in the case could be a telling factor how other investors in Nicaragua should view the permanence of their speculation.
Nicaragua Investment
Investing in real estate in Nicaragua at this point is speculative. No one is getting rich and probably won’t for a while. Today Nicaragua is more of a lifestyle investment, or an educated long term speculation. I say educated, because there are two solid facts, Baby Boomers are getting older, richer, and are buying second homes, and China, Russia, and India are producing a new and vacation eager middle class. Both groups are, and will continue to look for their best options in fulfilling their desires. Development in Nicaragua is and will continue to happen because there is a market for competitively priced real estate in one of the most beautiful destinations in the world, (see Costa Rica, Panama, Mexico).
Like I and others have written, because it is underdeveloped, Nicaragua’s potential is what makes it so attractive to investors. Its pristine Pacific Coast, the diving off of the Corn Islands on the Atlantic Coast, and its historical treasures Granada and Leon, are just a few of the highlights ready for growth in this beautiful and proud country. Geographically, it’s a short plane ride away from the U.S., and there is enough existing infrastructure to access these areas with little effort.
Recently, I have posted about headlines regarding Nicaragua’s political and economic situation cautioning investors to be aware of the tumultuous atmosphere there. I think it is important for potential investors to know what’s going on, that’s what this blog is about. For example recently I’ve written about the many social issues that threaten the stability of the country, their leader’s volatile history, and that he is currently courting allies that are polarizing to say the least. With that said, Ortega is trying to open up the country for investors with the abilities he has, and, there are many (including the press) in Nicaragua who would benefit from seeing Ortega fail.
There is no denying Nicaragua’s prices are attractive to investors. But If you’re looking to put your life-long savings in an ocean front condo and expect immediate rental income to cover the investment costs, you might look elsewhere for the short-term.
Nicaragua is ready for investment input if you have time, there is a vacuum waiting to be filled and it will happen. The only question, is investing in Nicaragua’s future right for you?
Investing in Nicaragua sometimes means more than just spending money on its real estate. Perhaps the most well known travel writer Arthur Frommer wrote in a recent post that travelers to poor countries like Nicaragua should think about why prices there are so cheap.
Frommer quotes in his post,
“In a devastating article appearing in the current edition of The New York Review of Books (June 12, 2008), Stephen Kinzer points out (in “Life Under the Ortegas,”) that 80% of the Nicaraguan population “subsist on less than two dollars a day.” Twenty-seven percent of the population “is undernourished.”
Kinzer also notes that,
“Nicaragua is among the safest and cheapest places in Central America, and a booming tourist enclave has already emerged around the beach town of San Juan Del Sur. Some entrepreneurs also dream of creating retirement communities to attract middle-class retirees from the United States.”
It’s only natural that when travelers plan a trip, they will try and maximize their vacation experience for as little money as possible. The same principle applies for investing. Therefore, it comes as no surprise that because Nicaragua is comparably poorer, they can offer tropical vacations (or investment opportunities) for less than their regional neighbors. But do these bargains come at the cost of exploiting the Nicaraguan people?
Frommers’ post ends with the question,
“As we lie on the beach and bask in the sun and click our fingers so the waiter will bring another drink, should we travelers pay some thought to the dreadful conditions that brought about our vacation pleasure?”
So what is Frommer saying? Is he suggesting that tourist and investors should pay more and go somewhere else? I don’t think so, but here’s where I have a problem with his post. Clearly, Frommer is suggesting that tourists and investors should think about the “dreadful conditions” that are raised in Kinzer’s article. But thinking about something and doing something are two different things.
My criticism about Frommer’s post is, that as one of the world’s most experienced travelers, he offers no suggestions how to make things better. We’re being called on to “think” about it. Where are the tips for tourists and investors to do their part to make a difference? Thinking is good - doing is better.
I have argued in this blog more than once, that part of what makes Nicaragua an exciting place to invest or vacation in, is the country’s room for growth. For the investor, part of that growth involves responding to the needs of the country on a local level. The term invest, means “to put money to use” and “to furnish with power.” Return on investment happens as a result of growth. So, yes, tourists go to Nicaragua and spend your money, investors you too!
Like Arthur Frommer, I agree that it is important for the visitor and the investor to think about how poor the country is, while you are there. And, here is a list of great non-profits that are helping to improve the living conditions for Nicaraguans in need. Invest in Nicaragua: invest too in its people.
- Mercy Corp
- World Vision
- Wisconsin/Nicaragua, Partners of the Americas Inc.
- Project Concern
- CRS Catholic Relief Service
Invest in Nicaragua by letting me know of any other organizations to add to this list.
Nicaragua’s Ocean Front Property
Whether you are thinking about a long term investment in speculative land or a turn-key resort community, Nicaragua’s ocean front property is low hanging fruit. Here are the top 5 reasons why ocean front property investments on Nicaragua’s Pacific coast are so sweet.
1. Tourism: Nicaragua knows its economic future is in tourism. Whether it’s under Daniel Ortega’s administration or his successor, look for continued investment incentives from this burgeoning market.
2. Safety: Nicaragua is rated the second safest country on the continent after Canada. The U.S. ranks 97th out of 140.
3. Bang for Your Buck: Investment cost compared to U.S. ocean front property. Also to be considered, is the price of home services such as house cleaning among others.
4. U.S. growth potential. Projected to be slowed by debt and the credit crisis for the next 10 years. This U.S. down turn could translates into appreciation potential in Nicaragua from international investment.
5. Destination: Nicaragua is one of the most beautiful destinations in the world. Great Climate, Relaxed Lifestyle
Nicaragua’s Pacific Coast
San Juan Del Sur is host to several dynamic developments and dozens of individual possibilities.
Land information on the southern Pacific coast
Moving up the coast there a few stand out developments, some of which are only a 30 minute drive from Managua and the international airport.
Final Wash
Although recent headlines from Nicaragua reflect the countries fragile political and economic condition, recent headlines from the U.S. aren’t any better. The bottom line that makes investing in Nicaragua (especially its ocean front property) have huge potential, is that international tourism coupled with the aging U.S. population is sure make Nicaragua a “go to” destination in the near future.
There is a lot to consider right now when it comes to investing in Nicaragua. This week’s news out of Nicaragua regarding Daniel Ortega’s alleged involvement with the Armed Revolutionary Forces of Columbia (Farc) is disturbing, considering his past association with violence. As a reminder, Farc is considered by the United States and the European Union as an international terrorist group. The full story could cause investors to pause when considering the political stability of Nicaragua’s current administration and its relationship with the United States and Europe.
On the bright side, for investors whom are aware of the tremendous investment potential in Nicaragua and have not yet made the decision to buy, these headline merely extend the window to get involved at earlier prices. Existing developments need to have a stable political backdrop to sell their product and ongoing negative headlines out of Managua are not helping. This could give the investor a stronger playing hand at the negotiating table.
Whether you are already invested or are taking a wait-and-see stance, Nicaragua is still an investor darling at this point due to its substantial underdeveloped potential. Compared to its regional neighbors, real estate investments in Nicaragua may require a more long-term vision, but the potential is still worth the due diligence.
Thinking about Investing in a luxury waterfront condo in Nicaragua? Plan on visiting a few months or less each year? Here is a question you should ask; what about the rest of the time, can I trust a property management company to maintain the property and keep it occupied with reliable renters? This question is a non issue if you consider investing in a Condo Hotel, or Condotel.
Condotels have been around few years and are an excellent option for some. They also have their limitations. Miami was one of the first destinations to develop the idea that has taken off in popularity as a vacation investment option. Basically, as the owner of the unit, you can stay for a designated amount of time each year. During the remaining time, your investment becomes hotel inventory. As the owner of a product that’s sold, you receive a percentage of the money brought in by the hotel. This return, if steady, can help offset the costs of the investment. Mean while your investment is professionally maintained, which you pay for in a monthly service charge.
One of the main advantages of the Condotel market in Nicaragua, specifically San Juan Del Sur is it’s a comparatively burgeoning investment arena. What that means is you will pay less and get way more for your money. Here’s a general idea. What you will pay for, literally a hotel room in Miami, will buy you a luxury waterfront condo in a resort community in San Juan Del Sur.
Cala Azul is a prime example of a luxury Condo Hotel resort development currently under way in San Juan Del Sur. According to their web site, pre-construction investments starting around $200,000 are still available.
Here’s a short list of some of the advantages and disadvantages for the Condotel investment in Nicaragua.
So Cool:
- Tourism Law 306
- What you get for your money
- No maintenance worries
That Sucks:
- No full time retirement
- May not generate income for awhile
- Personal Limitations i.e. it’s a hotel
In Related News
For the investor who wants a really short vacation stay with a minimal investment, I am developing the idea of the motel/apartment, which I refer to as the Moment. Angel investors, I’m still waiting.
Hey I know!
Got the urge to do something good? Check out Peacepassers.org. They collect and distribute soccer gear to kids in Nicaragua and elsewhere. It could be the best investment you make in Nicaragua this week.
World-Wide Food Crisis
Most headlines out of Nicaragua this week are regarding the food crisis. There are many reasons why there is a world-wide food crisis right now, and they are mostly political – but I won’t open that can of worms in this post. Memo to self: must remember this blog is about investment. The subject does remind me of a comment I heard recently. It went, “politics is about two things – the first is money, and…I can’t remember the second.”
Food Crisis In Nicaragua
I feel strongly that investing in foreign real estate ties an investor to that land in ways other than those that are self-serving. Fundamentally, that tie involves an ability to respond to the needs of the people on that land. That response-ability is an insurance that the investment made, like the people of that country will prosper. One won’t happen without the other. Investment supports people, people make investments grow, and in Nicaragua, both have a lot of room to grow.
Food Crisis Action Plan
One way you can insure that your investment in Nicaraguan real estate stays healthy, is to do your part and insure the people of Nicaragua stay healthy too. Here’s a short list of quality organizations to contact.
If you are considering investing in real estate in Nicaragua consider the “Community RE Fund Program” set up by Coldwell Banker in Nicaragua. According to their web site, “The REfund model encourages every participant in a real estate transaction to contribute funds at the time of closing. Investing that creates value in society and the environment while at the same time being financially profitable.” (read more)
Affiliated with the RE Fund program in Nicaragua, Dos Manos is a collection of non-profit organizations that focuses on children’s needs and education.
Unlike politics, investing in a country is about more than just one thing, today’s headlines make it easy to remember what it is. Do what you can to help with the food crisis in Nicaragua.
Why Nicaragua?
One of the compelling reasons for investing in Nicaragua is its potential for appreciation as the country develops. Because of its tumultuous recent history the country is playing developmental catch-up with its neighbors such as Costa Rica and Mexico. Yet geographically, Nicaragua boasts the same coastline, rainforests, and volcanoes as its neighbors, and lots more of them, including the largest fresh water lake in Central America.
In a recent correspondence with an investment adviser from Mexico, all of the conventional reasons why not to invest in Nicaragua were pointed out. All of which, are exactly why investing in Nicaragua holds so much promise, not only for the eventual return but also the current venture possibilities.
The negative reasons were; lack of infrastructure, limited flights into the country, Ortega’s political associations, a still growing economy and Nicaragua’s lack of exposure on the world market. On the surface these reasons seem valid and could be of concern if you’re looking to buy a vacation condo to use for a couple of weeks a year and need to have access to first world amenities.
Nicaragua is a long term investment, so as long as you are focused on long term appreciation potential and demand you will do ok. On the other hand if you are planning on buying into a brand new development on the coast where there is little to no infrastructure, and hoping to rent it out at near occupancy for premium rent you will be disappointed. Tourism is growing by leaps and bounds in Nicaragua; however, it still is way behind many of its neighbors and will be for some time yet. If you are the type of investor ready to pay top dollar so you can go on vacation and shop at arena sized super markets and shopping malls, indeed Nicaragua may not be right for you.
However, if you are an investor that is looking down the road, Nicaragua is an exciting opportunity. What I’m getting, at is there is at least one other reason that is possibly even more satisfying than Nicaraguan real estate’s potential appreciation. And that is the satisfaction of being on the vanguard of creating something new and watching the possibilities (negatives to some) develop.
It goes back to the investment adage, don’t buy the best house on the block.
From beach front investments on the coast to a grand old colonial city, Granada is currently considered the safest real estate investment in Nicaragua. Granada is located on the massive Lake Cocibolca also referred to as Lake Nicaragua and is just 30 miles from the capital Managua. Granada is the most popular tourist destination in Nicaragua and that alone makes it comparable to Antigua, in near by Guatemala. Other similar characteristics between Granada and Antigua are their shared history as the first two cities established by Europeans in Central America.
Aside from their age and continuous habitation, these two cities share historical, architectural, and cultural value that no other cities in Central America can claim. These attributes make them both attractive investments, whether it’s for a vacation home, or a retirement home.
OK, let’s talk about investment comparisons between these two cultural center pieces of Central America. First, remember the investment adage that, “the greater the risk, the greater the return” this is an important disclaimer because Granada is less developed than Antigua, therefore, there is more risk and so the potential for return is greater.
Here’s a list of comparisons:
Two Old Jewels – One Needs Some Polishing
Antigua is a UNESCO international heritage site (IHS) - Granada has applied and is awaiting approval. This status carries weight because it focuses an international eye on the city, which translates into money from their respective governments for police and infrastructure. In the case of Antigua, which is the jewel of Guatemala, the money it has received certainly has made a difference – and you’re going to pay for it. By all rights considering historical value, Granada should receive the UNESCO designation in the near future. Once UNESCO status is achieved, building regulations will surely become more restrictive similar to those in Antigua. As far as investment potential for the future, Granada has way more room to grow .
Antigua: No Lake
As mentioned, Granada is situated on the largest fresh water lake in Central America. The potential for development around the lake is, well, as big as the lake itself, not to mention the islands within the lake. Being the largest city on the lake and the closest to Managua and the airport, Granada has the potential to service any communities that may spring up around the lake. A comparable and very busy lake city is Panajachel which is the center of activity on Lake Atitlan in Guatemala. Again, if you consider the historical culture of Granada and the value of the lake it sits on, tourism has only begun to reach its potential in Granada. One just needs to count the number of expat communities around lake Atitlan to get an idea of the possibilities around Granada. Yoga retreat anyone?
Property Potential
In my research I found that the average price for a two bedroom home/business in Antigua is north of $200,000 and for a similar property in Granada you’ll pay about half that. It’s all about the lack of property listings in the city of Antigua. The reality is, if you want to live IN Antigua, property is at a premium on a completely different level than you’ll find in Granada. Not to mention the building restrictions. So as far as finding a home or property for sale, coupled with its potential for property appreciation Granada has the edge for the investor willing to take some risk.
There is a lot to know about investing in international real estate, and it’s encouraging when you can point to a precedent that has worked. Antigua has achieved a level of success that is envied by most small cities across Central America. In many ways Granada is lucky because today’s investors know what the potential is for a small historical city. Antigua is the known model for what Granada can become, throw in a lake that links to the Caribbean Ocean and the possibilities are impressive.
Choosing to invest in vacation ocean front property in Nicaragua, Costa Rica, or Mexico presents a staggering variety of opportunities. Vacations are usually synonymous with getting away for a couple of weeks, lounging by a pool or sunbathing on the beach. Investing in a beach front property allows you to enjoy a getaway and still be in your own home. If you invest carefully you benefit when you use your home, and for the rest of the year your getaway property should appreciate in value, and generate rental income. So with this in mind, I’ve created a list of criteria for the Best Vacation Investment Opportunities in Central America and Mexico. These beach front real estate investments are:
- Well established
- Offer Bank Financing
- Rental management
- Walking distance to the beach
- Two bedroom and two bathroom condo or similar
Starting off the list is the Bahia Del Sol located in San Juan Del Sur, Nicaragua. Bahia Del Sol asserts they “take care of everything from construction to furnishings to rental.” With units starting at $176K for a 2bd/2b this development is worth taking a second at.
Seaside Mariana has all the criteria covered and then some. Seaside Mariana is located about an hour from Managua, and the international airport which gives this development easy access once you arrive in Nicaragua.
Gran Pacifica is also located less than an hour away from Managua and the international airport. Gran Pacificas’ web site offers ocean front condos starting at, $134,990 with 50 percent financing available.
So you’re saying, what about investments in Costa Rica, Panama, or Mexico? Well, I submit the best overall long-term investments on ocean front properties considering get-in costs and the potential for appreciation are in Nicaragua. If you know of other developments inside or outside of Nicaragua that can compete with these investment opportunities, I invite you to write a comment and tell us why.
Next Post: Granada vs. Antigua. Perhaps you’re ready to make a bigger commitment and live for an extended period in your new getaway home. If you are considering living away from your primary residence for a few months at a time you might be interested in a location with more culture than waves lapping on the beach.
Defining what you want your investment to do for you.
Before anyone thinks about investing in Nicaragua one needs to ask themselves a few questions.
1. Am I looking at investing in real estate in Nicaragua simply because it is an under developed country with impressive potential for international tourism? A return on my investment is a risk, but foreign investment is gaining momentum in Nicaragua which makes the potential for profit more secure every day.
2. Do I want to invest in a getaway property that can be visited a few weeks out of the year for family vacations? What are the possibilities of having a property management company rent and manage the unit for the rest of the year to generate some income?
3. Do we want a beach front gated-community with a golf course? Or, do we want a location with a more local feel?
4. What about living in Nicaragua for six months of the year? One thing to consider is that life in a small colonial town would provide more social activities than a condo on a stretch of beach.
5. What if we wanted to start a business? Running a restaurant, a small hotel, or a bed and breakfast in a tropical setting is an idea that is really exciting.
All of these questions have become a realization for many foreign investors already in Nicaragua and though out Central America. And, there is still plenty of opportunity for those ready to get involved.
Over the next few posts, I will cover these five options and the reasons why which one might be the best for you. Comparing locations within Nicaragua will give you an idea what each area has to offer. Adding a little twist, I will compare the top investment locations in Nicaragua with some comparable destinations in Central America and Mexico.
For now, let’s start at the beginning of the list and revisit why one would want to invest in Nicaragua in the first place. Many articles have been written about the investment boom in Nicaragua and Nicaragua Real Estate: Navigating the Market is a must read.
Another informative article is the Top 5 Investment Opportunities In Nicaragua. This article gives some actual prices on properties located in the fastest growing areas in Nicaragua.
Next time, the most popular investment vacation spots in Nicaragua.
