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Chapter 6

CHAPTER 6 – Special Investment Report for 2013 An interview with John Turley – Owner/Broker of RE/MAX Southwind and investor in Belize real estate. John, tell us how you came to live in Belize? Let me start with my personal story going back nine years ago. My wife and I and three children were living in Colorado and I was completely absorbed in the rat race. I owned two businesses and was very successful financially but I wasn’t the husband or father that I had wanted to be. So I set out to change all of that. My wife and I sat down and came up with a plan to make a real life change. A change that involved moving abroad. We did not choose Ambergris Caye, Belize because we thought it was the best investment and real estate market in the world, which we believe it is today. But the reason we choose Ambergris Caye is because it was the perfect place for us to raise our children, have a fresh start and begin anew and enjoy a new level of quality of life. We choose Ambergris Caye after doing a lot of due diligence and research. We wanted somewhere close to the United States with a good climate and we thought that living in the Caribbean wouldn’t be “all that bad”, we wanted it to be politically stable, with a good economy (and diverse economy not dependent on just one industry) and it had to be English speaking. I wish I could say that I was fluent in multiple languages. I’m not. But interestingly 91% of Americans aren’t either. That played a major part in our decision making. We decided that it was very important to us to relocate to a country where English was not only spoken but was the official language of the country. So after looking at everything we identified the country of Belize and more specifically Ambergris Caye as where we wanted to be.

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Belize Relocation and Investment Guide There are many places in the country that seem appealing. Why did you choose Ambergris Caye? Why Ambergris Caye? Well, it’s a small island but not too small. Its 25 miles long by 4 miles wide at it widest and the second longest barrier reef in the world is just 400-800 yards off its eastern shores. This makes it one of the top water sports capitals of the world. It’s among the top 10 snorkeling, diving and fishing destinations anywhere in the world. The island has a population of about 20,000 people. By comparison the islands of Grand Cayman and Roatan have approximately 50,000 people. Those are islands that have gone through their growth fazes. So, Ambergris Caye has a very low population density which is in line with the rest of the country of Belize. Belize has the 4th lowest population density in the Western Hemisphere. There are only 330,000 people in the entire country. Yet it is rich in natural resources. Belize is an exporter of petroleum. Many people don’t know that it exports 5 times more petroleum than it uses. It also exports citrus, bananas, hardwoods as well as tilapia and shrimp. Tourism accounts for 29% of its industry. But on Ambergris Caye tourism is by far and away one of the critical drivers causing economic growth. And its effect on the real estate market is tremendous. For example, more tourism creates more exposure which leads to more real estate being sold and higher prices as a result. There is certainly a lot of vacant land being bought up right now and there is a lot of capital appreciation ahead of us due to the island being just at the bottom of a quickly rising curve. But the cash flow properties are also affected. Now, these cash flow properties which many of our investors in the United States and Canada are looking at are very different from cash flow properties in those areas. We are not concentrated primarily on long term rental property as many real estate investors are in North America. In fact that market is very scarce here. The reason long term rentals on island are so scarce is because most properties are much more valuable when repurposed for tourist accommodations. So short term rentals which are identified as nightly or weekly rentals are the mainstay of the market on Ambergris Caye and where some of the greatest real estate opportunities exist.

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Chapter 6 You’re a numbers guy. Share with us what is driving the market on Ambergris Caye. No problem. Here are some important statistics to help prove where the market is heading. In 2006 there were 670 rooms available on Ambergris Caye. By “rooms” I mean hotel rooms, condos, bed and breakfasts, anything that can be rented by the night or week to tourists visiting the island. Fast forward to 2013 and we hit a very critical number of 2,000 rooms. Now before we talk about the incredible significance of that numbers let’s briefly discuss statistics. One person may take a look at those numbers and say “Wow! That’s a lot of growth in a short period of time. The inventory almost tripled in 7 years. How do I know the market is not overbuilt?” Wouldn’t you agree that that is a very logical question to ask? Of course it is! If I told you that in Las Vegas in the next 7 years that they were going to triple the hotel room inventory don’t you think that would affect the nightly rates? Certainly so. But let me give you a difference perspective. 670 rooms is such a small number that charter companies, travel agencies, consolidators and the tourism industry in general can’t afford to pay much attention to it. On the other hand 2,000 rooms just happens to be the minimum requirement for a destination to be considered a major tourist destination. Not by myself but by the travel industry. Until an area has at least 2,000 rooms there is no basis or desire for the industry to focus on it. 2,000 rooms is what allows the island of Ambergris Caye to hang a shingle and tell the world “We are now open for business”. Now let’s get down to some of the incredible numbers that we have received from the Belize Tourism Board. These numbers are an accurate reflection of what has happened on the island over the past few years and what the growth is projected to be and how that affects the real estate market and investment opportunities here. San Pedro Town Before we do that let’s get an overview of the Ambergris Caye, island. Its 25 miles long by 4 miles wide at it’s Belize widest and as we mentioned the biggest draw is the reef which sits just 400-800 yards off our eastern shores. The main population center is San Pedro Town. For now the only town on the island. To get to Ambergris Caye you would first fly into our countries only international airport (airport code BZE) and then take a quick 17 minute shuttle flight from the airport to the airstrip in San Pedro. Currently we have direct flights to Belize from Houston, Dallas, Miami, Charlotte, Atlanta and Newark. Flight times range from 1 hr. 45 minutes to just under 4 hours from any of these major cities. This next photo shows Front Street. You can see that golf carts are our main source of transportation. We get by

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Belize Relocation and Investment Guide on golf carts, ATV’s, on foot, on bicycle or boat. It’s a very laid back environment and as you can see the phrase “No Shirt, No Shoes, No Problem” is the motto we live by. Hol Chan Marine Reserve is the first under water national park in Central America. Its 21 square miles of national park under water. It’s like swimming in an aquarium. Wayne Gretzgy said “I skate to where the puck is going to be, not to where it’s already been”. Part of my job it to help my clients and investors to see where the puck is going to be. Robert Kiyosaki came to the island in April of 2012 and I had the chance to meet him and show him around. Now I really appreciate and admire this man and his perspective on Ambergris Caye is interesting. He grew up in Hawaii and obviously is very well traveled having visiting many many countries around the world and here is what he had to say about his trip here. “I did not know a place such as this still existed”. And when asked to sum up his experience here he said two words “Simply spectacular”. You are quoted as saying that there will be a “Great Belize Real Boom of 2013 to 2029”. What is that based on? I’ll get into why I specifically chose those dates in a moment but first I wanted to give you what I consider to be the three foundation pillars that are contributing to this boom. The first is “TOURISM”. But tourism is not the only pillar but it is important. Right now tourism is responsible for 29% of the total GDP of the country of Belize and it’s by far the largest industry on the island of Ambergris Caye but its only one of the pillars marking the market here so Baby strong and why it’s poised for significant Boomers growth. But since it’s so important let’s 76 Million - USA take a look at it and see how strong tourism translates into a strong real estate market and creates opportunities for investment.

Exodus of Capital from USA

Tourism

Tourism is the tip of the spear. The way people are introduced to a market is by coming to that market and visiting that

“The Great Belize Real Estate Boom” of 2013-2029: (3) Foundation Pillars

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Chapter 6 market. Typically people come to market as tourist before they come to buy, before they come to retire or before they come to invest. So if we look at tourism numbers and tourism statistics then we can see the trailer of what comes after in terms of real estate sales, prices and return on investment. So if we pay close attention to tourism numbers it allows us a glimpse into the future to see what’s poised to happen with real estate values. That’s why I like to highlight the developments in tourism. Here are some important facts and that have contributed to our increase in tourism. From 2005 to 2013 “Islands Magazine” has consistently rated Ambergris Caye as one of the top 10 or top 20 islands of the world to live on. In 2009 “Islands Magazine” rated Ambergris Caye one of the top islands in the world to retire to. Interesting timing because two years later it was the first year that the Baby Boomers began their 18 year cycle of retirement. In 2011 the Minister of Tourism in Belize Manuel Heredia said that for the first time in the history of Belize there were three months of the year where they achieved record numbers of tourists. In 2012 those numbers increased 10.74%. Resulting in an all-time record for Belize. Arrivals through the international airport however increased by over 16%. That is a very significant number. Here is why. There are three ways that people come to Belize. The come by land, sea or air. Those that come by sea come by cruise ship. They have very little impact on the real estate market. Cruise ship tourists are typically on island not more then 6-8 hours. They might buy some souvenirs, have one meal or take a trip to see the jungles of Belize and scout out the Mayan Ruins or do something fun like cave tubing or zip lining. But their impact on the real estate market is extremely limited. Those who come by land are crossing one of the boarders at Mexico or Guatemala and likewise typically have a negligible effect on the countries real estate market. Now, real estate investors, tourist and retirees (those who have the greatest impact on the market itself) are those who come in through the international airport. So while all overnight guests have an impact when it comes to the tourism industry here in Belize it’s really the arrivals through the international airport that we need to take a look at closely because those are the ones that are having a direct impact on our real estate market and is what is creating the opportunities here.

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Belize Relocation and Investment Guide In 2012 there was a 16.3% increase in overnight arrivals to the country of Belize. Incredible! 2012 was an incredible year for Belize! In 2013 Trip Advisor the “Travelers Choice Awards” were announced. It declared Ambergris Caye the #1 island in the world. What a great bit of press! Right on the heels of a 16.3% increase. How will this impact our tourism numbers in the future remains to be seen. But for now let’s look at what is happening to the market this year during the first two quarters of 2013. For the first half of 2013 the growth was 8.9%. Now bear in mind that that is 8.9% ON TOP OF the record increase of 16.3% last year. If you look at it over a 2 year period from the first half of 2013 compared to the first half of 2011 its an increase of 18.18%. We’re talking massive numbers. Now, it begs the question “What is happening with regards to inventory and occupancy rates?” Well, in the past 2 years less than 50 new “rooms” have become available to overnight guests on Ambergris Caye. Why is that significant? Well, remember we only have 2,000 rooms on Ambergris Caye. If you have a 16% increase in overnight guests how many additional rooms would you have to add to the inventory just to maintain current occupancy rates? Not to grow occupancy or increase rates but just to maintain the status quo? 16% of 2,000 is 320. Fifty rooms is a LOT less than 320! But that is not the end of the story here. Here is another important development….. May 25th – This will be a landmark date. On this date Tropic Air initiated non-stop flights from Belize City to Cancun, Mexico. Why would that matter? I’ll tell you why…if you are coming from Europe it means that you don’t have to get a U.S. visa. You can fly direct to Cancun and on to Belize without having to pass through the U.S. Flying through the US meant that you had to get a visa and very often you couldn’t make the trip from Europe to Belize in one day. Now, Europeans make up just over 15% of the overnight guests arriving in Belize but over the past 8 years I’ve only sold property to ONE. Why would that be? Well, when I’ve interviewed them they’ve told me that’s it’s because of the difficulty of getting to Belize having to go through the US. Air France flies directly from Paris to Cancun and British Airways flies direct from London to Cancun, Lufthansa flies direct from Frankfort to Cancun. We have not yet gone through our high season with Europeans being able to get here to Belize without having to go through the U.S. It will be interesting to see how these new Tropic Air flights affect our market over the next few years as more and more Europeans take advantage of this new and quicker way to get to Belize.

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Chapter 6 From September 2011 to July 2013 there were 19 consecutive months of year over year growth in tourism with 15 months of record highs. Now if we were to go back and look at the past 23 months of statistics 22 of the past 23 showed record numbers of year over year growth. The only month that didn’t show a record was in April which was only 144 people short of breaking that months all time record compared to 2012. Tremendous growth! Now again, we are not seeing the supply keep up with the growth. There are some supply chain issues that you need to be aware of. There are some market constrictions especially when it comes to how long it take to build on Ambergris Caye and how long it takes to bring a new property to market. Right now we are seeing demand outweigh our ability to keep up with construction. Over the past three years you’ll see that we had a 19.33% increase in overnight arrivals to Belize. But it seems as though the island of Ambergris Caye has had a far greater increase then what that number shows. For example many of the island restaurants are full even when it should be our “low season”. And all of the top resorts are reporting record numbers in their occupancy rates. Much greater than what a 19.33% increase in tourism would suggest. So, here is the really exciting number for Ambergris Caye. Ambergris Caye has a 57.53% increase in tourism over the past 3 years!!! It’s 19.3% for the COUNTRY of Belize but 57.53% for Ambergris Caye itself. The question is, is it an anomaly? It is going to plateau? Taper or drop? It certainly is a good question. But would you not agree that that is a tremendous increase in tourism for an island the size of Ambergris Caye? Of course it is! I can see that tourism is important to the island. But is that the only market driver? Not at all. This is just one of our foundation pillars. There are still two are that are also significantly driving the market. But tourism IS important. No doubt about that. It pays to take a close look at these statistics and how they correlate to the real estate market and use them to make good investment decisions. Now on Wall Street if you use insider trading information to make decisions on what to buy and what to sell you get a “Prison Term”. But insider trading in real estate leads to “Tremendous

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Belize Relocation and Investment Guide Wealth”. In this case insider trading is having market knowledge, or information on deals and opportunities. So it’s critical that investors dive into these numbers to see just what is happening so that they can make an informed decision. In addition to all of this we have had some very important announcements from the airline industry this year. Delta Airlines has announced that it will start to fly direct from Los Angeles to Belize on Saturdays later this year. Delta Airlines has also announced that in addition to its once daily flight from Atlanta to Belize it will add a second flight on Saturdays. American Airlines has announced that it is going to increase the number of its flights from Dallas to Belize that currently running three times a week to 7 times a week (offering daily service). With those three announcements alone that is a net gain of 960 seats per week coming into the country. Now the airlines aren’t adding these flights because they HOPE people will come. They are doing it in direct response to people who are demanding the seats be available in the planes. The September 2013 issue of Islands Magazine rated Ambergris Caye as one of the top island to live on if you are looking to retire early. Which brings us nicely to the second foundation pillar in what in what is driving our market. The Baby Boomers. There are two different figures, 76,000,000 and 79,000,000. 76,000,000 is the number of Americans born between the years 1946 and 1964. The largest demographic wave of people in world history. But 79,000,000 is the actual number of Baby Boomers because there are 3,000,000 immigrants that have come to the United States since 1964. So with 79,000,000 people all retiring over the next 18 years (actually the next 15 years because they began retiring in 2011) it begs the question “What type of impact would they have on a real estate market such as Ambergris Caye?” Is there a discernible way to look into the future to see what kind of impact there could be relative to the existing market today?

“I did not know a place such as this still existed” - Robert Kiyosaki 123


Chapter 6 I know the Baby Boomers are a hot topic right now but can they really affect real estate values on Ambergris Caye? Absolutely! Here is how. The Baby Boomers are not a theory or a hypothesis. At the beginning of 2011 there were 7,000 Americans a day retiring. By 2013 that number had increased over 42%. So that’s 10,000 per day starting this year and yet over the entire course of 18 years 11,765 is the average number of retirees per year. Now the majority of Baby Boomers are in their peak earning years. They are in their mid-40’s to mid-50’s. That being the case how does that affect real estate markets. In general some may be affected in a positive way while others in a negative way. Some markets are going to have a disproportionate benefit. That is what we are going to key in on. One thing that all Baby Boomers have in common is that they all want a desirable retirement destination. Not all will move of course. Many will choose to retire and live and stay right where they are today. But many will choose to relocate. The question is “Where are the most likely to relocate to?” And how will where they decide to move to impact that market? Now WE real estate brokers or real estate investors don’t get to decide WHERE they will choose but we can look at the options available and make accurate predictions. Now, one thing is important to mention here. Not every retiree is going to wait until they retire before choosing a retirement destination. Many are going to choose years before they actually retire and secure their retirement destination and this makes sense. They don’t want to wait for an area to become picked over and real estate prices to rise and mature before buying. They are scouting out the good areas now and buying well before they reach retirement age. There are 59% of Baby Boomers that plan to relocate according to a study conducted by AARP. That is 59% of 79,000,000. Not a small or insignificant number. In the U.S. two States in particular are going to benefit the most. Arizona and Florida. In the study 21% plan to relocate to Florida and 18% plan to relocate to Arizona. Some markets in these two States are going to change dramatically. But what about the other 28,000,000 that plan to relocate somewhere other than Arizona or Florida? Where are they going to go?

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Belize Relocation and Investment Guide If we had a way of knowing we do well investing there before they got there. At present there is a total of 350,000 Americans (according to the Wall Street Journal July 25th 2013) who collect their social security outside of the United States. It’s hard to find a breakdown of where those 350,000 live but they do live outside of the States currently. How many additional Americans will move outside of the U.S. and collect their social security checks while living as an expat in the next 5 years or 10 years? Studies have shown (as conducted by Zogby International and the Center for Medical Tourism and Research in Austin, Texas) that 3,300,000 Americans have definitive plans to retire abroad in the next 10 years. What that means is that total sum of Americans who currently live and collect their social security checks outside of the U.S. is going to be placed every year for the next 10 years. On top of that there is another 17,000,000 who claim to be interested or very interested in moving abroad. These numbers has increased from 2005 through 2012. So pre-recession, recession and post-recession the numbers have increased in the amount of Americans who plan to retire abroad and the #1 destination for most of them is the Caribbean and Central America. So…where are they going to go? Well, I would argue that their decision making process would be similar to the one I made 9 years ago. 91% of Americans are not bi-lingual. They will have a pre-disposition to move to an English speaking country. That is not to say they all will but it will play a part in their decision making. Now personally I love visiting surrounding countries such as Mexico, Guatemala, Honduras, etc. I can order Mexican food with the best of them. But I like to read my real estate contracts in English. And if I have a problem medically I absolutely want to make sure I can explain to the doctor in my native tongue exactly what my symptoms are and more importantly I want to make sure I understand them when it comes to my treatment. Now, in addition to that proximity comes into play. How close does someone want to be to family, children, grandchildren, other business interests, properties, other investments? Again Belize is in very close proximity to the States being a couple of hour flight away. Then you take a look at the governmental structure of Belize and see how it’s based British Common Law as compared to Napoleonic Law and look at having property rights here compared to not having property rights in other countries. Then you look at the security and stability of the banks in Belize and how much they differ in security from banks in many countries including the U.S. and you can see that Belize has a lot of advantages that other countries simply don’t have.

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Chapter 6 I will argue that Belize will have a disproportionately share of retirees than any other destination in Central America and the Caribbean. The late great Roy Rogers said “Find out where people are going and invest there before they arrive”. And that is the key. To find out where these Baby Boomers are going and to buy and invest there BEFORE they arrive en mass. The Wall Street Journal reported a few years ago that there were 50,000 Americans who were receiving their social security checks in Mexico. 5,000 are in Costa Rica, 560 are in Belize. These numbers are as of 2011. Those are the latest numbers we can find. I would argue that these numbers will change. For one there has been a change in how desirable Mexico is as a retirement destination in the minds of many Americans. So, this all being looked at an analyzed we can see that Belize and in particular Ambergris Caye is well poised to see major growth as a desirable retirement destination. Even those baby boomers who are NOT looking to relocate will have a huge impact on the island. According to the World Tourism Organization the Baby Boomers will double the size of the tourism industry in the next 10 years. Double the size of the tourism industry! How do you think that will affect an island like Ambergris Caye? The market on Ambergris Caye is unique because it is poised to grow and development right at the same time as the Baby Boomers are looking for desirable retirement and vacation destinations. There has never been a time in history that a market such as we have here on Ambergris Caye has come into fruition at the same time as we come into the largest demographic shift in history. So since we’ve never seen it happen before we just don’t know what it’s going to do but we see what it IS doing already and the market growth is phenomenal. OK. So tourism and the Baby Boomers are driving the market. What happens if tourism drops? That is a great question and its worth looking into that. Some may ask as many cautious investors do “What happens if tourism drops? What will happen to Ambergris Caye”? Well, that brings us to the third

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Belize Relocation and Investment Guide support pillar. Those people looking for an alternative to investing in North America. This market is growing immensely as many investors are looking to get at least some of their portfolio outside of the U.S. and into a market that seems more stable and offers higher ROI. There are a tremendous number of people who are not comfortable holding paper assets. Many have a fear of what might happen to the U.S. currency. It’s probably a real legitimate fear and many people are taking action. We are seeing an exodus not just of people but also in wealth and dollars moving outside of the United States. Moving into stronger markets, stronger economies.

There are a tremendous number of people who are not comfortable holding paper assets. Many have a fear of what might happen to the U.S. currency.

History shows that when tourism drops down due to global economic conditions investors increase their amount of capital that they invest outside of the U.S. In 2008 and 2009 the banks saw significant increase in their deposits and the number of people purchasing property in Belize increased. This is important when considering all the facts. You need to ask the question “Things may be going great now but what if they don’t continue?” That is why the three pillars that are diving the market today are each very important and why I consider Ambergris Caye to be one of the best investments in the world. Today the facts are that our increase in tourism is off the charts. The Baby Boomers are definitively choosing to retiree abroad and are moving in droves to desirable destinations. Belize and more specifically Ambergris Caye is going to be one of those desirable destinations. But even if we saw a downturn in those two support pillars Belize still has one of the safest banking systems and Belize is one of the T-7 Tax Havens so it is well positioned to ride out any down turn in the future. Any concluding comments? Ambergris Caye is a magical place. I love living here with my family. It offers an amazing quality of life and incredible business opportunities. I feel and many people agree with me that it’s simply the best place in the world to live. The best place in the world to raise a family. The best place in the world and we wouldn’t choose to live anywhere else.

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John D. Turley

BRIG FREE Chapter - John Turley  

An interview with John Turley – Owner/Broker of RE/MAX Southwind and Belize Real Estate Investor

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