CHILE UPDATES #19
Thank Goodness for Market Anomolies
Thank Goodness for Market Anomolies
The photo above shows a fairly unknown stretch of the central Chilean coastline that I frequent on a regular basis these days. It took me about two years of scouting the central regions to happen upon this area but when I finally did, I knew I’d come across something interesting.
From the looks of the photo, you’d probably expect this place to be a ways away from civilization but that’s not the truth. There’s actually a town of about 50,000 just 10 minute down the roadwith a number of cafes, supermarkets, and banks near the main square. There are also a lot more jobs here than there are in most other similarly sized towns, jobs that pay quite a bit more than the average Chilean salary.
What stuck out to me the most though when I first came across this place was the discrepancy inproperty prices in relation to other local markets. Due to the town’s demographics, residential and commercial properties close to the downtown here sell for a big premium compared with similar properties in larger towns and cities in the region. At the same time, rural building lots 15 or 20 minutes from town can be found for next to nothing, or at least much less than they would go for on the outskirts of other similarly sized or larger towns and cities.
Over the last year, I’ve helped a number of friends, family members, and clients pick up properties in different areas outside of this town and the strategy has been working out even better than I originally expected. About 4 months after personally picking up a small beach lot in the area, I was offered 50% more than I had paid for it. I wasn’t crazy about letting it go but figured there would always be more opportunities down the road.
At about the same time, we got an offer on another property that I had just helped a client purchase. The offer was for 30% more than they had paid and it happened almost immediately after closing. In this case the new owner declined, due to the location and plans for future personal use.
Situations like these sometimes sound ridiculous to outsiders. Why didn’t these secondary buyers just put in a slightly higher bid to the original sellers? In most cases, it all comes back to market knowledge and contacts. The real estate industry is fragmented in many parts of rural Chile and it can take years to start getting leads on the best deals. This means if you really know your way around the market and can jump on opportunities when they appear, oversized returns have a way of finding you, instead of the other way around.
With all the nonsense that’s happening in the world these days and the insidious inflation that’s eating away at the savings of multiple generations, I have to say “thank goodness” for the market anomalies that can be so obvious to those with a trained eye. I bet if you came down and got in on the action, you’d be thankful for them too.
From the looks of the photo, you’d probably expect this place to be a ways away from civilization but that’s not the truth. There’s actually a town of about 50,000 just 10 minute down the roadwith a number of cafes, supermarkets, and banks near the main square. There are also a lot more jobs here than there are in most other similarly sized towns, jobs that pay quite a bit more than the average Chilean salary.
What stuck out to me the most though when I first came across this place was the discrepancy inproperty prices in relation to other local markets. Due to the town’s demographics, residential and commercial properties close to the downtown here sell for a big premium compared with similar properties in larger towns and cities in the region. At the same time, rural building lots 15 or 20 minutes from town can be found for next to nothing, or at least much less than they would go for on the outskirts of other similarly sized or larger towns and cities.
Over the last year, I’ve helped a number of friends, family members, and clients pick up properties in different areas outside of this town and the strategy has been working out even better than I originally expected. About 4 months after personally picking up a small beach lot in the area, I was offered 50% more than I had paid for it. I wasn’t crazy about letting it go but figured there would always be more opportunities down the road.
At about the same time, we got an offer on another property that I had just helped a client purchase. The offer was for 30% more than they had paid and it happened almost immediately after closing. In this case the new owner declined, due to the location and plans for future personal use.
Situations like these sometimes sound ridiculous to outsiders. Why didn’t these secondary buyers just put in a slightly higher bid to the original sellers? In most cases, it all comes back to market knowledge and contacts. The real estate industry is fragmented in many parts of rural Chile and it can take years to start getting leads on the best deals. This means if you really know your way around the market and can jump on opportunities when they appear, oversized returns have a way of finding you, instead of the other way around.
With all the nonsense that’s happening in the world these days and the insidious inflation that’s eating away at the savings of multiple generations, I have to say “thank goodness” for the market anomalies that can be so obvious to those with a trained eye. I bet if you came down and got in on the action, you’d be thankful for them too.
