Dateline: Managua, Nicaragua
I just got what could be one of the most insulting emails of my life.
Like you, I spent years trapped in the notion that I should keep everything I owned under one “roof”, so to speak. That meant that all of my savings, my assets, my businesses, and everything I owned was entirely based in Los Estados Unidos.
And to be honest, I still do hold US dollars and have some connections to the United States. I’m constantly diversifying my affairs.
The email I received today reminded me, however, of just how important it is to diversify out of the broken western financial system.
It was an email from a US bank in which I used to maintain deposits, telling me to “turn [my] money into more money”. When I saw the subject line pop up in the corner of my screen, I couldn’t help but chuckle. So I started reading the entire email, which turned out to be a flowery sales pitch for—what else— depositing more money with the bank.
The funny part was that the bank was so excited to tell me that I can earn — wait for it — 0.85% by keeping my money with them.
Less than one percent.
Of course, near-zero interest rates for savers are nothing new. Nevertheless, it’s a sign of the times to see just how many people have accepted this insulting return on their hard-earned money.
In the same way that Americans have gotten used to $3.50-a-gallon gasoline — double the price as when His Majesty took office — they’ve gotten used to the idea that savings rates are no way to get rich.
Many people have naturally looked elsewhere to make a little meatier return on their money. Many have turned to real estate. However, as you know, I’m not a fan of the ticking time bomb that is US real estate; I much prefer foreign real estate.
And, in my opinion, one of the hidden gems in the Americas is Nicaragua.
Tips on how to buy and invest in Nicaragua real estate
Real estate is probably the best opportunity I’ve seen in Nicaragua if you want any kind of scale. I do believe that there are some small business ideas you could run very inexpensively, but you would need to be on the ground managing them.
That said, you need to know which areas in Nicaragua are good for real estate investment, and which are not. As with any other location, there are areas that are yesterday’s news and overpriced.
Nicaragua is much like many other emerging markets in that the local real estate agents will tell you with a completely straight face that the market never goes down. And I think they really believe it. Just as every bartender was rushing to become a realtor in California and Arizona in the mid-2000s, people are getting into the real estate business here in Nicaragua.
And they don’t all know what they are doing.
Nevertheless, Nicaragua has just about every kind of real estate you could want. I toured the Santo Domingo area here in the capital city of Managua today and saw some homes that could easily be $1 or $2 million homes in the United States.
I also saw entry-level luxury homes in nice, quiet communities selling for the mid $100,000s.
Beyond Managua, there are plenty of other interesting cities including Leon and the tourist hot spot of Granada. I’m told you can find plenty of westerners hanging out in these areas.
Nicaragua is called “the land of lakes and volcanoes”, and there are two large lakes (Lake Managua here in the capital, and the larger Lake Nicaragua which extends nearly to Costa Rica) as well as numerous lagoons throughout the country. Real estate around the lakes is largely sold and projects are relatively well developed, meaning deals will be harder to come by.
However, Nicaragua also has coastline along both the Pacific Ocean and the Caribbean Sea. The eastern coastline is sparsely populated, as is the entire eastern half of the country, but the Pacific coastline in Nicaragua is dotted with real estate developments for rich locals and expats.
Later this week, I’ll be in San Juan del Sur looking at ocean property as well as small business ideas for those who want to actually live here in Nicaragua. I’ll let you know what I find.
San Juan del Sur gained traction years ago when expats and retirees started to get priced out of other countries in Central America. Considering San Juan del Sur’s proximity to Costa Rica, it’s easy to see why people flocked there. The beach looks absolutely gorgeous, and crime in Nicaragua is now actually lower than that in most of Costa Rica.
Lastly, Nicaragua has some of the best agricultural land in the world. The volcanoes part of the “land of lakes and volcanoes” has left behind plenty of fertile soil for growing everything from coffee to plantains. In fact, Nicaragua is now getting back into growing cotton, of which it was one of the world’s top producers before the Sandinistas came in.
While prices of land near Managua aren’t exactly cheap, there is cheap farmland in other parts of the country. Again, make sure you do your due diligence since areas like Matagalpa in the fertile northern part of the country may be at higher risk for crime coming down from Honduras.
How to invest in Nicaraguan realty as a foreigner
The good news is that foreigners can own almost any kind of property in Nicaragua. While the state technically owns the first 200 meters of all coastline, they do lease out oceanfront property under renewable 99-year leases, and development is allowed via concessions on all but the fifty meters closest to the ocean.
Unlike most of Asia – including the Philippines – which heavily restricts foreigners’ right to own land, anyone can buy land in Nicaragua, including the rich agricultural property. One expat who has lived here for years is working on resilient mini-farms that expats could buy and come live off the land.
Foreigners can also own homes and other property anywhere in the country.
As far as Nicaragua real estate goes, I would consider it as more of a place to live — or at least invest until you decide to live here. Taxes on rental income are a bit aggressive in my opinion, and deductions are limited.
And while rental yields here aren’t bad, you could get similar yields in other Central American countries. Likewise, don’t get sucked in by some real estate agent who tells you it’s easy to buy a lot for $75,000, build a few homes, and sell them before they’re even built. Those days are largely gone.
In other words, for someone wishing to live in Central America, Nicaragua is an option worth a serious look. Managua’s airport offers fewer flights to outside the region than, say, Panama City, but it does offer daily service to Houston, Miami, and other US hubs for those looking to visit family in The Land of the Free.
With prices in Costa Rica and Panama as much as ten times higher than those in Nicaragua, I suspect more people will be looking at Nicaragua real estate as a retirement or second home option.