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A number of readers have recently asked me if flipping is a good way to invest in Ecuador real estate.

We do not like Flipping in Ecuador or anywhere!  The shambles that were created in South Flroida and Arizona and other bubbling real estate markets that burst should attest to the dangers of real estate flipping anywhere.

Flipping is a concept to buy and quickly resell for a great profit… but this is usually pure speculation. Most flippers end up losing a lot or worse, broke!  The risks of real estate flipping in Ecuador are even greater for most Westerners than in the US because the rules… the laws… the customs… the markets are less known.

We believe in value added real estate investing in Ecuador, the USA or wherever you wish to be. Adding value is a service… beyond speculation.

For example, in Cotacachi, we bought this broken down office building that had been empty for years and changed it from this to…

into this…  three wonderful rental units.

cotacachi-ecuador-condo

See other examples of real estate we have fixed up in the US and in Ecuador below.

Real estate… imagination… research for value… creativity… and elbow grease.  These five elements create a powerful, profitable combination… even in…these depressed times.

See how you can use these five qualities to profit in any type of economic situation.

There are many sparks that could cause investing markets to fall again.

Many worry about the spark of European national defaults in Ireland,  Greece, and Spain… but how about the US being the flint?

An excerpt from a recent New York Times article by Marco Garcia entitled “Mounting State Debts Stoke Fears of a Looming Crisis”

The State of Illinois is still paying off billions in bills that it got from schools and social service providers last year. Arizona recently stopped paying for certain organ transplants for people in its Medicaid program. States are releasing prisoners early, more to cut expenses than to reward good behavior. And in Newark, the city laid off 13 percent of its police officers last week.

While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.

Municipal bankruptcies or defaults have been extremely rare — no state has defaulted since the Great Depression, and only a handful of cities have declared bankruptcy or are considering doing so.

But the finances of some state and local governments are so distressed that some analysts say they are reminded of the run-up to the subprime mortgage meltdown or of the debt crisis hitting nations in Europe.

Analysts fear that at some point — no one knows when — investors could balk at lending to the weakest states, setting off a crisis that could spread to the stronger ones, much as the turmoil in Europe has spread from country to country.

Such a default could create a stampede in stock and bond markets.

This is one reason Merri and I like investing in real estate… especially in places like Florida where prices have already fallen dramatically and created value.

The demographics are behind us.

A USA Today article “Where will everybody live?” By Haya El Nasser outlines three significant facts about this.

First, the American population has risen from 200 million to 300 million in 39 years. At present growth rates the next hundred million will come in only 34 years!

Second, today each American owns 20% more developed land (housing, schools, stores, roads) than 20 years ago. By the 1990s 1.7 acres of land was developed for each additional person.

Third. More people need more space.  100 million additional people will need 70 million new homes and 100 billion square feet of non residential space.

Inflation supports our real estate investments.

Construction costs are not going to fall! Normal inflation and increased demand from emerging markets for cement, steel, timber and other basics assure this. Plus environmental concerns will continue to slow acceleration of supplies as well.

Another reason for real estate investments in the US is changing utility. For example my mom’s home which was once the bastion of suburban WASPs is now filled with Mexicans, Chinese, Ukrainians and Romanians.  There are good things and bad things happening there but one thing is clear…everything is changing.  My mother was trapped in a snow storm in her neighborhood several years ago and no one could leave their homes to get to her and her Chinese neighbor came over and carried her to a Christmas party down the street…this might not have happened if the entire structure of the neighborhood had not changed.

Our builder friend tells me that at least half his home buyers are first time immigrants who use a family plan (the whole family comes over pitches in and buys a house). This means that a single house is once again becoming more popular as a place for two, three or even four generations to live together rather than just one.

House lots used to be 5,000 square feet minimum. Now they can be 2,500 square feet. That’s a big change in utility.

Technology is altering the concepts of time and space so…property (like the farms we live on) that was once pretty useless, or land in the desert like the dry part of the land in southeast Oregon suddenly has a new utility. This is especially true for tens of millions of boomers who will be highly mobile when they retire.

In other words demographics are good… technology is good.  Plus a comparison of US property prices in global terms shows that US prices are really low.

Sometimes the forest is hard to see because of the trees and real estate values are hard to see because of local comparables.

Prices of housing in the US may seem high, when you compare them with US house prices of five or ten years ago.

When we compare US real estate prices to those in other industrialized countries like France, England, Denmark and such instead, we can certainly be surprised.  The thought. “We ain’t seen nothing yet” may arise!

With intelligent shopping and research, you can find Ecuador real estate prices that are even lower than in the US. Many Americans are leaving the US and heading south which means Ecuador real estate prices are low as well.

There is another reason that Merri and I like investing into real estate.   This is a local fundamental utility that we can understand and see.

However, we always invest with the understanding that there is always something we do not know.

A December New York Times article “11 Secretive Banking Elite Rules Trading in Derivatives”  by Louise Story shows why we cannot know everything says:

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

Drawn from giants like JPMorgan Chase, Goldman Sachs and Morgan Stanley, the bankers form a powerful committee that helps oversee trading in derivatives, instruments which, like insurance, are used to hedge risk.

In theory, this group exists to safeguard the integrity of the multitrillion-dollar market. In practice, it also defends the dominance of the big banks.

The banks in this group, which is affiliated with a new derivatives clearinghouse, have fought to block other banks from entering the market, and they are also trying to thwart efforts to make full information on prices and fees freely available.

Banks’ influence over this market, and over clearinghouses like the one this select group advises, has costly implications for businesses large and small.

Derivatives are also big business on Wall Street. Banks collect many billions of dollars annually in undisclosed fees associated with these instruments — an amount that almost certainly would be lower if there were more competition and transparent prices.

Just how much derivatives trading costs ordinary Americans is uncertain.

But big banks influence the rules governing derivatives through a variety of industry groups. The banks’ latest point of influence are clearinghouses like ICE Trust, which holds the monthly meetings with the nine bankers in New York.

Even when we use good investment analysts to invest in stocks and bonds, there is a lot more… going on in places we cannot see that we do not know.

This is also true in real estate but less so.  We can see the shops… the rents… the residents… but not future demand.

This is why we do not flip real estate anywhere… especially in Ecuador.  Fixing up… adding value adds one more protection from the unknown.

We believe in value added real estate investing.

Add imagination to your real estate investment and look for good value to begin… then make it even better.

When Merri and I began buying in Ecuador, timing could not have been better. Ecuador was experiencing its worst economic crisis in 70 years which was driving most investors away.

This had created a unique situation where one had access to every creature comfort available in the Western world and old world service at the same time. New cars (used cars cannot be imported into Ecuador to keep smog producers out), T.V., cell phones, computers, the most up to date Internet access and all modern conveniences were easily and readily available. Yet we could also have personal services that were no longer available in the U.S. or Europe except for the very, very multi-millionaire. With wages at 75 cents an hour and real estate costs low, every imaginable domestic service was just plain cheap.

Yet even then we did not just buy and resell.

We purchased a beat up, old hotel in a state of great deterioration.

Cotacachi progress

We spent two years making it beautiful.

We bought seven half finished condos…

and completed them.

Ecuador was not the only place were were taking advantage of turmoil.  We bought this old farm house almost falling down… roof caved in and…

ecuador-florida

made it beautiful.

small-town-usa

Right now, with Florida depressed and Ecuador booming, our current project is in Florida where we purchased 16 acres… with orange groves… and a house in bad repair.

fixer-upper-gary-scott

The process of fixing has begun. First this garage… had a guest house that had been almost…

fixer-upper-gary-scott

abandoned.   Now it looks like…

gary-scott-real-estate

this.  Outside and…

Gary-Scott-guest-house

in.

Gary-scott-fixer-upper

This process fills part of Merri’s and my creative desires as it…

invest-in-real-estate-gary-scott

adds fun and value into out lives.

Real estate… imagination… research for value… creativity… elbow grease create a powerful, profitable combination… even in these depressed times!

There is great change in the world that is almost certain to create inflation that can ruin the finances of a huge number of people. The shift will most likely will come rapidly after some economic spark creates terror that stampedes markets and economies.
There are five ways to survive and profit during this terror in investing markets.

Invest in equities.

Invest in commodities.

Invest in multi currencies.

Invest in your own micro business.

Invest in real estate.

Real estate and micro businesses are Merri’s and my favorite two solutions of the five because we can see the opportunity more clearly…. exert more personal control… add our imagination and build value in our own way.

Plus most of all… for us… real estate investing and fixing up in Ecuador, England, Hong Kong, in the Isle of Man, California, Georgia, Oregon, Dominican Republic, North Carolina and Florida (all the places where we have done this) is fun and fulfilling.

For  us this is a good goal to pursue… earn in fun and fulfilling ways.

Gary

Learn more about Ecuador real estate on an Ecuador real estate tour. See details here.

Read  the entire New York Times article  “11 Secretive Banking Elite Rules Trading in Derivatives

Mounting State Debts Stoke Fears of a Looming Crisis