“I think it's also just a great big wake up call for everyone that there's another way to live your life. That there's a way to live your life free from hour long commutes, from the cubicle, from chasing a salary to pay these bills that you don't need any of that. So it's been a really, really, really interesting time.”
~ Ronan McMahon, editor of the Real Estate Trend Alert
TRANSCRIPT
Joel Bowman:
Imagine spending part of your year playing golf on world class links courses during the Irish high summer, then a few months either side on your ocean front property down on Portugal's Atlantic Coast, and the rest of your year traipsing around Latin America, zipping off to beachfront resorts from your home base in Cabo San Lucas. For most people that kind of jet setting lifestyle would be a dream come true. But for international real estate hunter Ronan McMahon, it's merely his everyday reality. You see a long time ago, Ronan decided that he didn't want to live with heating or air conditioning, that he didn't wish to pass his days in a cubicle sitting in rush hour or working for a salary to pay needless bills and fees and the high cost of living that he didn't want in his life anyway. Over the years, Ronan has made a career out of showing people, just like you and me how to do precisely the same, that is to ditch the commute, to say goodbye to the office and to begin living the kind of life you've always dreamed of, but, and perhaps until recently thought impossible.
I've known Ronan personally for nearly two decades now, and as somewhat of a permanent traveler myself, I can more than vouch for his bonafides as a real boots on ground international investor. One who has an uncanny knack for seeing around the corner, when it comes to identifying the next trend in international real estate and international living. It seems only appropriate then that when I caught up with him earlier in the week from his sometimes home down here in Baja, California, Ronan was actually overlooking the Atlantic Coast out front of his villa in Portugal. I made sure to ask him about the zoom town phenomenon, which he called years ago, by the way, about travel during the time of COVID and where he thinks the next path of progress might be, including the best real estate opportunities that that trend will present to early and savvy investors. Please enjoy our truly international conversation up next.
Joel Bowman:
So mate, where exactly are you right now? It's often tough to keep track of your whereabouts, which is a good thing, I guess.
Ronan McMahon:
Hi, Joel. Lovely to see you and chat to you as always.
Joel Bowman:
You too.
Ronan McMahon:
I'm in Portugal's Silver Coast, which is kind of my spring and fall home. So, the way I organize my year is I have a block in Northern hemisphere winter in Cabo where you are now. Then I have spring in Portugal, high summer in Ireland, then fall in Portugal and then back to Cabo, and the cycle repeats. And I use each of those places as a base for travel and exploration more regionally.
Joel Bowman:
And so when you're in Cabo, for example, you're scouting out other opportunities in Costa Rica or Nicaragua what have you, is that kind of more or less how it goes?
Ronan McMahon:
Exactly. So, first of all, we've had a lot of opportunity in Mexico. So Cabo facilitates ease of travel within Mexico, and then Nicaragua, Costa Rica, just anything in the Western hemisphere comes at that block of time when I'm in my Cabo base. And of course, plenty of scouting on my doorstep in Cabo too, because it's a market that's been extremely good to us where we've had a number of really exciting opportunities. And I guess for reasons, like why you are there right now, and just more and more people are being attracted there, and it's got this really fast growing community of remote workers. Tourism is growing. It's expanding from a market that was primarily timeshare and super rich into a much broader market, and really, really exciting times there too.
Joel Bowman:
Yeah, I have to confess, this is, despite having lived in Mexico, Mexico City that is, a couple of years ago this is actually my first time out to Cabo. But as usual, you've done your homework and I'm very impressed because as we were just talking about before the recording here, this West Coast sunset deal is very attractive indeed. And of course, you've got the cold water of the Pacific, which is very good for seafood. And you've just got these dramatic sun downer postcard settings, which is very delightful indeed.
But mate, last time you and I were speaking, I just had a look at this before, it was about a year ago. And you were talking about zoom towns, which now it seems like everybody's talking about them, but you were way ahead of that trend. And I went back and had a bit of a listen to our conversation and you'd identified things like cost of living in big metropolises, increasing violence, overcrowding, particularly obviously during the pandemic when we were very worried about that. How has that trend shaped up over the last year? You seem to have called it a long way out.
Ronan McMahon:
Yeah, I mean, thanks, Joel. I mean, I guess first of all, it's a trend that I've been calling for several years now. So, I mean, there's just this thing that there are these internationalized places that are attractive and reaching out and encouraging internationally mobile people to come and relocate there. And then what we had with COVID and with the pandemic was just this great accelerator. So it just threw gasoline on the fire of this trend that was happening anyway, whereby people were stuck in their cars, stuck in traffic jams, stuck in high HOA fees, high property taxes, high rent, high mortgages, high, high, everything, unpleasantness everywhere.
And people were just saying, enough is enough. This is my life. Why the hell am I spending it here? Why am I spending more in property taxes alone in California than I can get... Then the cost of a true beachfront condo, for example, in Portugal, where I'm now, including your mortgage, including your golf club subscriptions, including your property taxes, including all your insurances, plus pocket money? It's just broken. And what we saw with COVID was I guess the resistance snapped because now people didn't have to come into the office. They didn't have to break from their jobs to make that change where it's been proven that you can go to a different place. And many, many of our jobs as you've been doing for the two close on two decades that I've known you, that you can do your jobs working remotely. And that now applies to so many things.
And I just saw it firsthand. I just saw it happening. And this is the big thing about my beat and my team's beat, we're out there with boots on the ground. So when we see this happening in Tulum, when we see the influx of digital nomads, we're there and we understand straight away what that means in terms of the local rental market there. What it means in terms of demand for various other commercial real estate, whether that's childcare facilities, for schools. But being in Cabo when all this happened, it was just so remarkable because almost overnight the age profile of my community, and when I'm there I live in a community called Copala in the Quivira community, which is just on the other side of the Cape or the arch to you. I live on the Pacific side. And almost overnight the age profile flipped from retirees to young professionals in their late 20s, early 30s, young families.
The gym went from being abandoned, empty, to being packed with all these super fit people. What was two party rooms, all of a sudden became colonized as a coworking space. And you just saw people in there with headsets and two and three monitors, and just everything changed. And what's happening now is the retirees are coming back. There's the old original markets of tourist and vacationers are coming and they're layering on top of that market, that isn't going away. The data out of Cancun has had its busiest year ever in terms of traffic numbers. Cabo is surpassing various records at the moment in terms of spending. Right now it's pretty much the lowest season in Cabo, because you're there in hurricane season. And, this trend is here to stay and it's got a profound driver in terms of realest estate values, a profound driver in terms of our opportunities to make money from international real estate.
And I think it's also just a great big wake up call for everyone that there's another way to live your life. That there's a way to live your life free from hour long commutes, from the cubicle, from chasing a salary to pay these bills that you don't need any of that. So it's been a really, really, really interesting time. It's also been an interesting time from the perspective of the benefits of having multiple citizenships and multiple residencies as I do, because I've been able to move freely across Latin America, move freely if I wanted to into North America, move freely through Europe. Just because I have that kind of, I guess, diversification by having multiple passports and multiple residencies. So I feel like it's a moment where our ideas of international living and international investing and diversification have really come into their own.
Joel Bowman:
Yeah, you're so right about having that kind of contingency plan B when it comes to visas or residencies or citizenships or passports, or what have you. It's just brought into such higher relief, just how important that is at the moment, because as you and I both know, as we travel around during this very peculiar time in history, you can very, very quickly see those rights to travel revoked depending on if you just sort of have the one passport or you're confined to the one country, depending on how COVID rules change. And that's been a real game changer, I feel like. And I've been almost caught out a few times, but fortunately have managed to slip in and out of borders. But that's really come into its own as a pretty key factor for internationalization.
Absolutely, Joel. And just the fickleness of it. So I had meetings scheduled in New York for around October 22nd and basically, listen to this for insanity, so I was precluded from traveling from either Ireland or Portugal, which where knock on wood, everything feels comfortable and manageable and safe and very low incidences of COVID and illness, et cetera. I was not allowed to travel into the U.S., but from Mexico, I would've been. So this is just sheer insanity. Mexico, which has been a mess with COVID, I would've been able to travel without any restrictions into the U.S.
So the only kind of travel hurdle I've had was a planned trip to the U.S. in October. And at that point, when I was planning it, traveling from Europe on a European passport into the U.S., but what wasn't allowed, it seems like that's on the verge of changing now. But very interestingly, the folks I was meeting, I was saying, I feel a bit uncertain about this trip. And my plan was to go from there on to Panama and everyone else who's U.S. base said, "Well, let's do this in Panama." New York, Panama who cares? And that's the way... It was just a really interesting observation about how does New York matter anymore? Maybe it matters for concerts, but as this kind of this hub, all these people we're excited of about the opportunity of going to Panama and doing that same meeting there.
I just see it in the profile of tenants I have in various markets where I have rentals. In fact, in a number of places, both in Baja, California Sur and also in the Riviera Maya, I've transitioned from short term vacation rentals into long term rentals for this type of digital nomad stroke, relocate stroke, work from home market. And long term rental rates have increased by 200, 250%. So all of a sudden it's more economical. It's a better business to be renting long term than short term in some of these vacation markets. Now, again, what's really interesting about this is, I made those decisions before the vacationers were coming back in, in numbers. So now we've got this supply crunch where a lot of the vacation home inventory has moved over to long term rental. So short term rental prices are popping as well. So it's very interesting to have a ring side seat and just to watch how it's all playing out.
Joel Bowman:
Yeah. It's very interesting. You mentioned that kind of shift, and I guess part of that, and I'm speaking just from personal experience here as a father of a young, got a six year old daughter, we notice my wife and I, as we travel around just how many people have become fed up with, you mentioned education before, how many people have become fed up with whatever particular situation they had with school lockdowns and kids having to Zoom to class and being denied all of that social interaction, which is so critical at a young age. Down here in Cabo, for example, we're on the road right now and we see just here at the resort, there are nannies, there are popup homeschool groups where kids are learning Spanish. They're out there interacting. They're playing in the sunshine, they're having a great time of it.
And I think more and more young families, as you mentioned before, they're starting to look at these alternative living arrangements and saying, I could be locked down in my home with my kids not having access to social interaction or education for the next goodness knows how long, and with the rules, just being subject to change at a whim. Or I could set up something a bit more permanent and to the benefit of my child. So that's another thing that I think people may not be so fully aware of.
Ronan McMahon:
Yeah. I mean, I think that people, and I count myself as one of these people, you get brought up in a certain way like we do in Ireland about the central important of these formal educational institutions. And even the idea of taking kids out of school for a couple of weeks here or there might have been frowned upon, but that all gets ripped up when the government decides there's no school for a year, or the bulk of it. And you realize that so there... I mean, the impacts of this in terms of learning and socialization and all that, who knows what they'll be or how long they'll they'll play out. But again, it just speaks to this thing that when you have all your eggs in that basket you're very, very vulnerable. Very vulnerable to things, to decisions other people make, to things that are beyond your control.
And I was just looking at, just before we came on, I was just reading the New York Times and I was just reading their property feature and I was just looking at the just this portrait of a young couple looking for a condo. And the condo was $2 million. And the holding costs before mortgage were $3,000 a month. And it was 1,000 square foot condo, and they had a doorman, but basically it's a 1,000 square feet box. And, then you come somewhere like here and where I'm talking to you from, Joel, my monthly mortgage in a beachfront condo, just overlooking just the most pristine stretch of Atlantic beach you could imagine, with the fabulous golf course to my left... I'll snap a photo when we're off here and a video-
... and maybe you can share that... All in for 850 Euro per month, that's mortgage plus HOA fees, plus all my taxes, plus all my refuse. Everything in. And it's just a no brainer. If you are at all in a position to be flexible, there is just so much more available out there. And then even if you're not in a position to be flexible all the time, I left this apartment for my 10 week sojourner in Ireland. Ireland, plus some traveling around. And in those 10 weeks alone, I made it available, short term rental, and more than a year's cost were covered in those 10 summer weeks.
Joel Bowman:
Wow. That's amazing.
Ronan McMahon:
So there are ways you can physically, financially and otherwise organize yourself that takes you out of that kind of, I guess the metro, boulot, dodo as the French would say, but just that grind.
Joel Bowman:
So I mean on that, let's talk a little bit of kind of nuts and bolts with regards to price mate, because, I have had people on this show who recently moved out of California. Moved to a state like Texas, let's say where housing costs are lower, but property taxes are still considerably high in a place like Texas. I have friends, actually a mate of mine just listed his Hoboken townhouse on the market yesterday and is looking to move somewhere away from what he calls the nightmare of the Northeast metropolises. So this is a big trend.
I notice on a site like Zillow, for example, I just saw this morning that the typical home price in the U.S. over the last year went up something like 13.2%, I think it was. And some of the cities like Austin was up over 30%. So I'm thinking, is this the time to sell high if you're in one of those places in the United States where you've seen your property price increase fairly dramatically over the past year? I mean, I'm guessing you would advise to cash in, sell high and then take those chips elsewhere where you can get a lot more bang for your buck.
Ronan McMahon:
Yeah. I mean, I guess on the sell equation, Joel, I mean, I'm hesitant to take any big view on whether any particular market is, domestically in the U.S. is overpriced. That's not really my beat. What I would say is that if I was in someone's shoes, sitting on a lot of equity or money tied up in U.S. real estate or Canadian real estate or Australian real estate, I would say that now is a good moment to release some of that, whether that's via sale or refinancing and put it elsewhere. Put it in a place that has yet to see this type of really, really strong growth. Put it in places that are at the early stages of big, strong development and growth trajectories. Put it in a place where you can get eight, nine, 12%, even more rental yields. Put it in a place where your capital has real value.
And there's a mix of ways you can do that. One very interesting thing about here in Portugal right now, and also other parts of Europe is interest rates are at the absolute floor. I got a quote yesterday for a mortgage at a 0.49% interest rate. So the statistics are showing five to 6% inflation rates. Who knows what the true number is, but it's definitely not lower than 5%. So, I mean, this is a deep, negative, real interest rate. And for paying a bit more, I can fix, if I was willing to pay 1.4, 1.5%, I could fix for 10 to 15 years. So anyone worried about inflation, blue chip, best in class real estate, fixed at incredibly low interest rates with strong rental income. I think you'll extremely well.
And then on the flip, you can go to other markets that are much more cash starved. Take some capital, go to a city like Medellin that's vibrant, that's on the up, that's attracting lots of digital nomads, but whose currency has been and hit really, really hard during COVID. So there're many ways you can play this, but I certainly would be... Friends of mine who have significant net worth tied up in real estate in London or Dublin, I'm nudging them in the direction of taking a bit of that and moving it elsewhere because yeah, it just feels unnecessary to carry that risk.
And, Joel, I honestly, I mean, the price of many of these markets, but is there going to be a crash? I mean, I don't know. I mean you guys probably have your views over there on where all the money printing is going, is this going to of continue? So I'm hesitant to, to call crashes anywhere, but what I firmly believe is that there are places where you can buy at the ground floor of big, long term development trends and just buy and sit on best in class real estate. And, it'll perform extremely well, both in the short and medium term.
Joel Bowman:
Yeah. You've been writing about... I recognize your phrase from one of your or many columns years ago, when you said that you were looking for things in the path of progress. Explain to me just super quickly how you identify those things, whether it's local airports coming in or influx of construction or whatever, but how you identify those places and maybe a couple of hotspots that are on your radar at present.
Ronan McMahon:
Yeah, sure. Absolutely. I mean, this is just one of my core ideas and core idea at Real Estate Trend Alert is that we want to buy ahead of a major path of progress event. That's roads coming, airports coming, tourism infrastructure coming, just all this type of stuff that facilitates folks wanting to live and work there. And I'd say as a first example, and maybe the ultimate case study that comes to mind is that the Riviera Maya in Mexico. And it's really interesting because just before COVID hit this is the stretch of Caribbean Mexico that runs from Cancun to Tulum. I traveled there with Bill, with Bill Bonner. And Bill hadn't been there since he went on a research trip for the first ever issue of International Living-
Joel Bowman:
Wow.
Ronan McMahon:
... which was, I think was 1979. I think. I could stand corrected.
Joel Bowman:
Yeah. I was going to say, it would have to be in the 70s. That's amazing.
Ronan McMahon:
Yeah. So Bill flew to Merida the time, because I think there was no Cancun airport or the Cancun airport wasn't fully wasn't set up. Drove towards the coast, drove along the coast and in Tulum he found nothing but an empty beach, and I believe naked hippies frolicking the water, was how he phrased it. So if we look at what's happened since then, the first major path of progress event was the Mexican tourism promotion body called Fanna Tour. They put together a package of infrastructure and tax incentives and created the international airport. They created the infrastructure in terms of the physical infrastructure, but also the business environment that would attract these big hotel chains to come.
Cancun developed. Then they built a road from Cancun to Playa del Carmen, which at the time was just a very small fishing village, just literally in the early days of even when I first went there about 17, 18 years ago. It was mostly a jumping off point where you get the ferry over to Cozumel for diving. Infrastructure, a new highway, physically infrastructure for resorts and hotels was created, more development came. Then in the past 10, 15 years, that infrastructure has been extended to Tulum. So we've been able to buy in Tulum ahead of this next wave of development and path of progress. And interestingly at each step along the way the target market has been refined. In the early days of Cancun, it was mass market tour, then Playa del Carman became a bit more sophisticated and boutique. And now with Tulum, we've got the ultimate in that, in terms of all the various kind of yoga retreats and all that jazz.
So typically it's a mixture of big, big trends. So with the emergence of the Riviera Maya, you had the trend of international air travel, you had the physical infrastructure of the airport. You had this stunning pristine Caribbean paradise. So an absolutely beautiful canvas to put it all on. So it's a combination of those things coming together, often with local twists, which can be either things like low land costs, which allow us to buy cheaply at the ground floor. Sometimes land scarcities that mean that values can pop pretty quickly. So this range of things. And likewise with Cabo, Cabo where you're now has seen a similar story. Again, this mix of physical infrastructure, airport, consumer trends, a business environment. All these things. So it's the basket of all these things. And it's really very much through just living and breathing and being on the ground with the experience and the contacts to get a sense of what's really happening. That's how it all comes together in terms of forming a reliable view.
Joel Bowman:
Yeah. It's really amazing the opportunities that you can avail yourself of when you just look beyond your own back fence. And obviously you've been helping people with your real estate trend aler. Just see that little bit further, whether it be into the next country or into the next decade, when that path of progress unfolds mate. Just before we shoot off here, because I realize I've taken quite a bit of your time, one thing that I think people are probably a little wary of, and especially at the moment, is something like healthcare abroad. And, it's a bit of a security blanket when you're in say a so-called developed nation, in the U.S. or Australia or Canada, Ireland... Excuse me.
When you travel abroad, particularly during a pandemic, people worry, I think a little bit about they might get caught off guard. They might have to deal with a health or a hospital situation. Living in Argentina, I know that I can get first rate eight private healthcare for a fraction of what I would have to pay with the outlandish costs comparable in the United States. But just speak for a quick second about what it's like in say Mexico or some of the other places that you spend your time, and let people know just the situation vis-a-vis healthcare abroad.
Ronan McMahon:
Yeah. So knock on wood, I've never had to consume any of their product. My sense from speaking with a lot of people who have and for whom it's a top, top consideration is in general, they can do much, much better overseas in terms of choice and service and in terms of options. So, first of all, let's say an American moves to Cabo. They can get much, much better cover for a fraction of the cost from pretty much any private hospital, anywhere in the world, except in the U.S. So you've this situation with a lot of people I know in Cabo who've got this amazing cover, but they've no cover in the U.S. because their policy just exempts. They've no cover in the U.S. but they can get whatever they want outside of the U.S.
I'd say standards are generally very in a place like Mexico, you've got all these chains of international hospitals. In Europe, you've got the full spectrum of public and private systems. My personal health insurance comes out of Portugal, but I've got one of these international policies that again covers me anywhere in the world for basically any private hospital except the U.S. and Canada. So now I'm petrified about connecting through the U.S. in case I slip and hit my head because every time I talk to my ensurer they'd say, "Now, don't call us. Don't call us from the U.S. Call us from anywhere else." And Axa, it's a global company.
So, I guess in all seriousness, if someone has a chronic condition or they've risks, you'd want to be very careful about being a long way from a major hospital. Is there helicopter evac? Is that an option? In most cases, it is. I think in Rancho Santana, Nicaragua, for example, that we're familiar with, I think generally there's a helicopter evac option. But once you're close to the big civilization, like there in Cabo, you've got multiple of these big chains. If there's a significant problem that needs a major hospital, maybe you get flown to Guadalajara. They'll also repatriate people a lot to the states if your insurance covers. So I feel, Joel, maybe I'm not giving you a great answer because it's not top of... it's not something I've experienced that I'm very fortunate not to have been a consumer. But my sense is you get much better choice, much better service.
You'll get from in the centers and the major hospitals you'll get world class treatment. And you won't have the waits that maybe we have somewhere like Ireland. And you will have much lower costs and maybe much less... Maybe more pragmatic, less testing, less prodding, and poking then maybe you get in the states. But there's, healthcare just should not be a hurdle to anyone because, in all these countries, they're very, very sophisticated markets for healthcare. There's top flight, private hospitals, in some places. The public system is excellent. Otherwise, it's a nightmare, so it just should... Moving overseas should, again, just mean that if you are a healthcare consumer, you get more for less on that front, too.
Joel Bowman:
Yeah. And I'd just add to that too, I think you mentioned, I mean, healthcare abroad, but also just general wellness abroad. And we started out this conversation describing somebody who was perhaps cubicle bound and spending time in an hour or two of rush hour traffic every day. Worried about bills, worried about costs, worried about inflation. All that eats away at not just your mental, but your physical health as well. So it's a long way different than waking up in the morning as bill wrote in his very first international, what was it, International Living magazine. You wake up in the morning, the smell of hollyhocks, your maid brings you fresh orange juice. I mean, just a completely different level of stress.
And you would see it as well as I do when you're touring around these places. People are relaxed, they're enjoying their life. And they're not highly strong. They're not being fed fear. And just consuming that news cycle all the time, which cannot be good for one stress levels. But mate, I want to leave this on a positive note. Where in the world you headed next and when can you and I catch up for an in-person beer? It seems like we're zigzagging around and just missing one another.
Ronan McMahon:
You'll just need to hang tuff in Cabo until the 1st of November. And I'll see you there.
Joel Bowman:
Okay.
Ronan McMahon:
I'm in Lisbon next week, Porto the following week, then back here on the Silver Coast for a week. Then I'm in the Riviera Maya for a week, then Panama, and then to Cabo. And then I'll hunker down in Cabo. And if you're still in Cabo, do stay for this, because I'm going to bring you to some of my favorite spots. Forget that Medano, I'm going to bring you up the Pacific to Todo Santos and to far more appropriate locations than that tourist trap.
Joel Bowman:
All right, mate, I look forward to it. An international real estate hunter, still one of my favorite job titles of all time, Ronan. I look forward to catching up and thanks so much for taking the time. Always very generous with your thoughts and insights.
Ronan McMahon:
Thanks so much, Joel.
Joel Bowman:
Cheers mate.
Thanks for listening to this episode of the Bonner Private Research Podcast. You can find more conversations like this in the members only section of our website at bonnerprivateresearch.com. We look forward to hearing from you either way. Until next week.
Joel Bowman and Ronan McMahon On The Path Of Progress