Know the Developer
The recent Wall Street Journal article about the $100M scam in Belize a couple of weeks ago is shaking some people’s confidence in the country. But can we paint the entire country for one case of fraud in Belize? I guess the better question is, “Should we?”
Indeed, there are bad apples everywhere, and it seems likely that the Sanctuary Belize project is one such bad apple. But should we throw the baby out with the bathwater? Probably not. Scams happen in every country.
Remember the Bear Mountain Scam in Canada with the NHL players?
Or how about the Mattress Discounter Fraud in the US?
Or the biggest of them all happening right here at home, Bernie Madoff.
Due diligence is critical for our protection no matter where we invest in property. The challenge for global property buyers is to remember that we have to be our own best protector because most foreign countries have far less in the way of consumer protection than we do in North America.
Here’s the synopsis of the story that hit the headlines a couple of Fridays ago. It’s about the giant fraud on the Belize mainland. Let it be a reminder of what you want to avoid.
In U.S. National News
“The Federal Trade Commission announced a law-enforcement action on Thursday against a residential resort development in Belize, calling it “the largest-ever overseas real-estate investment scam” the agency has ever targeted. At a news conference in Washington, the agency said the development, known by names that include Sanctuary Belize, Sanctuary Bay, and the Reserve, bilked about 1,000 investors, mostly Americans, out of over $100 million.” See the full story here.
So, we know that we must be vigilant. But how? “How can I avoid this kind of mistake or scam in the future?”
The best answer is to ask the right questions. Tools like the “15 Questions All Global Property Buyers Need to Ask.” They help us ask questions that we might not think to ask. These 15 Questions are contained in this Global Property Resource Kit as a free download here.
In the end, better due diligence would have served these unfortunate buyers in Belize well. The 3rd of the three simple steps mentioned above is “Know the Developer.” Just this one step alone would have saved these buyers from this massive mistake.
Don’t Jump In Too Quickly
You’re fortunate. You are reading this alert and have access to the right tools to make better decisions. Many of you who have heard me speak, or watched a webinar or two, know I always say that buying a property overseas is like getting married. Very few people meet someone and fly to Vegas that day and get married. Most people meet someone, they date for a while, get engaged, and then after some more time, from months to years, get married. It’s this process and timeline that allows us to get to know the other person, peel away a few layers of the onion, and see if we really like what’s inside, right?
The same is true for buying property overseas. We need to take our time and get to know the developer. We need to give ourselves the opportunity to see the big warning signs.
I’d suggest that you watch out for crash weekends and margarita madness. Fancy parties, cocktails, and more cocktails get us loose and pliable. Sexy sunset cruises and snorkeling on the reef make for a fun exotic and exciting weekend, but they don’t tell us very much about the developer.
Remember, it’s the boring stuff that matters. Things like asking for a copy of the business plan. Looking at financials, or meeting the operational team on the ground. Seeing them in action and delivering the reality of what’s being promised in the marketing materials.
Good marketing is expensive. Glitzy marketing is outrageous. Not that this holds true all the time, but one of the things that always catches my notice is large sums of money spent on marketing and sales. It triggers alarm bells in my mind. It should in yours too. When you spend outrageous amounts of money on marketing, how much is left for building what’s promised?
There was another project a while ago that bilked property buyers and investors out of millions as well. I remember at one property show in London, called, A Place in the Sun, we both had booths. ECI’s booth was 10’ x 10’ (actually 3M x 3M) and was expensive. The show featured thousands of Brits looking for a home in the tropics. So, it made sense for us to be there.
My competitor with some of the best marketing materials I have ever seen had a 20’ x 60’ booth. I have no idea what he paid for that. A ton I’m sure. On top of that, when people visited his property, he gave them helicopter rides out to see his “project” which was an empty field of weeds by the ocean. Helicopter rides!
Look, it’s easy to spend the big bucks on helicopters, huge booths, and the best marketing materials money can buy when you don’t actually build anything. Money that should have been spent on a road so you could drive to the property, electric and water onsite, amenities, and all the promised condos and homes would have been a great use of the money he took from clients, wouldn’t it?
Request a copy of the Global Property Resource Kit and the “15 Questions Global Property Buyers Should Always Ask and Three Simple Steps to Avoid Massive Mistakes Overseas.”
Using the three simple steps, specifically the 3rd section called “Know the Developer,” we can avoid pitfalls that sadly befall many North Americans like what happened at this project in Belize. These are simple, accessible tools. They are handy, relevant and critically important as you can see from this breaking news.
Ask for your copy now and be prepared to ask the right questions when the opportunity to own a spectacular property overseas presents itself. There are many, many beautiful properties and developers out there. You need to know how to sort the wheat from the chaff, and the right tools let you do that. Be in touch.
