Strategy: International
Article 2 – March 2010
Maria Davies
Maria Davies is a successful property investor and presenter who regularly appears as a property expert on television and radio. To contact Maria email maria.davies@justdoproperty.com Resources |
Island Destinations for Investment Purposes
There’s a saying that goes “Where there’s water, there’s wealth” which is why I am a great fan of island destinations for investment purposes. You immediately have the supply/demand issue on your side as there’s a limit to the amount of land available for building. Due to the geographical layout of some islands, the available building land could be in even shorter supply.
One place where there’s plenty of water and plenty of islands is the Caribbean. Visitors who’ve been before will have their favourite amongst the islands and many are stunningly beautiful. Of course, when we’re looking at the best place for investment, there are many other things to consider including:
- Ease of reaching the destination: Given that most tourists will travel from the US and Europe, how easy is it for travellers to reach the location and are there direct flights?
- Standard of available accommodations: Tourists with money (the type we, as investors, hope to attract to our investment property) expect a high standard of accommodation on holiday, particularly when booking for a location that’s billed as a luxury destination
- Variety of activities: It stands to reason that the more a destination can offer, the more there will be something for everyone
- Political environment: The last thing you want is to own investment property in an area where the locals might stage a coup at any moment or where political events could conspire to wipe out your investment (I always avoided a purchase in Northern Cyprus for exactly this reason, even though the North is prettier than the south, where I own property)
- Safety issues/Crime: How safe is the location for tourists? Crime and poverty go hand-in-hand. Add into this mix luxury hotels and wealthy tourists and you can guess the outcome
- Environmental considerations: Is the weather an attraction? Are there downsides to this such as a short tourism season or dangers such as hurricanes?
- Finance Issues: How do prices compare with similar destinations? What rental returns can you expect? What are the average occupancy rates? Does your chosen location/resort/property have what it takes to beat the average?
Once we have our checklist, we can start evaluating, but even after deciding to look at the Caribbean, which of the many beautiful islands do we then select?
One island that certainly ticks all the boxes for me is romantic St Lucia, described in brochure terms as “a luxuriant tropical island indented with sandy coves exploding out of the surrounding crystalline waters in a volcanic heap.” I couldn’t have said it better myself.
Not only is the island small (remember supply & demand) at just 27 miles x 14 miles, it is volcanic and mountainous with National Rainforest that is protected by the Government covering more than one-tenth of the landmass. The island is distinctive amongst Caribbean islands as it is home to the Pitons, arguably the Caribbean’s most distinctive landmarks.
Ease of Travel
Several major airlines have direct flights to St Lucia’s international airport on the southern tip of the island, with the number of flights increasing gradually. We all know that airlines don’t plan to fly empty planes so we can piggy-back on the research the major airlines have carried out that tells them it’s worthwhile increasing flights.
In addition, St Lucia welcomes many cruise ship visitors. Indeed, it would be unthinkable to cruise the Caribbean and miss out St Lucia. Whilst this doesn’t necessarily help us to fill our investment rental property, it does confirm the island’s pulling power. As a regular cruiser myself, I’m well aware that we will always aim to return for a “proper” holiday to the destinations we find the most enchanting.
Standard of Accommodations
Standards are high in order to meet the high expectations of tourists, many of whom visit to marry or are on honeymoon but there is variety in both type and price of accommodation. This avoids the snobbery factor that exists on some other islands where gated resorts are the order of the day breeding resentment amongst locals.
Variety of Activities
There really is “something for everyone.” I’m not just talking about the usual water sport activities, although there is that, including fabulous diving. The rainforest offers wonders for nature lovers who can walk, trek on horseback and even take an aerial trip through the branches!
St Lucia’s wildlife is a big attraction, particularly whale, turtle and bird watching and many visit just to catch sight of the world famous St Lucia parrot.
Due to St Lucia’s rich history – the island was fought over by the French and the British for many years – there’s plenty to see in the way of architecture and militia, plantations and fishing villages.
Stable Political Environment
There are no worries from St Lucia on this score. I’ve met several officials from St Lucia, including the Prime Minister. They all appreciate the importance of tourism to the island, coupled with the need to avoid the dangers of over-build which would upset the ecosystem of the compact island.
The island has an efficient legal system based on British common law with an independent judiciary conducting fair public trials. The government implements penalties for corruption through the judicial system which is generally considered to run efficienctly.
St Lucia is ranked as the 25th most free economy in the world in 2010 and scores above the world average in seven economic freedoms including business freedom, freedom from corruption, and monetary freedom. The entrepreneurial environment is efficient and transparent, and efforts to eliminate price controls have encouraged economic growth. The financial sector has generally weathered the global financial crisis.
Safety
St Lucian children enjoy free and compulsory education between the ages of 5 & 15, so literacy is very common. The island also has a university. Generally, the standard of living is good and people tend to be content. Tourists are welcomed and treated respectfully. The World Bank’s tip to buy here has been, in large part, due to St Lucia’s low crime rate.
Environmental Considerations
The island was severely affected by Hurricane Allen in 1980, which caused tourism to drop, but St Lucia has generally had fewer hurricanes than most other Caribbean islands.
Being such a lush island is as a result of rainfall and there is a rainy season from end of May to November. However, it’s certainly not a constant downpour and there’s actually little variation in temperatures throughout the year.
Events are organized to increase visitors during these months, for example, there is a world famous Jazz Festival in May and the carnival in June and July.
Finance – Purchase & Rental Figures
St Lucia has a high probability of price appreciation over the next ten years as prices are currently 40%-60% below those of Barbados although the island has many of the same advantages as Barbados, without the traffic jams (and without Simon Cowell!).
The World Bank has placed St Lucia in the top 30 countries in the world in which to invest. St Lucia is the only Caricom country to make the top 30, beating both Barbados and Antigua.
Add to all this an average 8-9 hours of sunshine every day and it’s easy to see why St Lucia has been a luxury holiday destination for decades which means you’re buying into an already established market. There’s no need for you to buy and pray that your destination will be marketed well in order to create a demand. There’s already a demand and it’s going nowhere.
The individual figures will be specific to whatever investment you select and this is where your further research comes in. The key, now, is to select the right location and to buy at the right time, and this depends upon what you’re looking for in terms of return.
If St Lucia sounds like a destination you’d like to include in your portfolio, as I have done, below are two potential opportunities for you.
Are you looking for long-term income with personal holiday usage or do you want a fixed lump sum return with a closed exit period? Currently, I’m dealing with both. If you’d like to know more about either opportunity, just click the appropriate link below and I’ll get more information to you.
Opportunity 1: Fixed Lump Sum Return
This is where you invest in a fund with a guaranteed bank coupon. Your investment is made purely for the large returns as the plots will be sold to end users who wish to have the luxury villas built by the developer. Features are:
- GUARANTEED 8% per annum return on investment PLUS 50% of net profits from sale and development of the villas:
- Secured against prime beachfront resort land within World Heritage Site;
- Full planning permission for the construction of a 4,575 sq ft four-bedroom luxury villa. Closed end fund with 3 year exit strategy;
- Total projected returns at 175% of equity invested from development and sale of land and coupon;
- Iconic luxury development adjoining proposed 5 star resort;
- Custodian services by Jersey Trust;
- Listing on Channel Islands stock exchange;
- Tax efficient structure through Jersey and BVI;
- Fund audited by Grant Thornton;
- Minimum investment from US$25,000;
- Suitable for SIPP investment.
Opportunity 2 : Ongoing Rental Returns
Here, you choose to invest primarily for rental income, although great capital appreciation is also expected. Features:
- Prices genuinely 40-50%+ below comparable resort properties
- 100% finance available with a reservation fee of only £1,000 which is fully refundable if you (or we) are unable to raise you the necessary finance
- Prestigious, big name golf resort;
- 5 star fully managed, meaning hands off investment for you;
- 10% to 20% annual returns on completion;
- Suitable for SIPP investment.
Email maria@justdoproperty.co.uk for more information about the 2 opportunities.
If you would like to ask Maria a question click here
