Thursday, July 01, 2021
Dear Your Overseas Dream Home Reader,
Last December I wrote an article that irked some of your fellow reader…
I was about the changing face of American cities, the growing degree of crime, and the exodus of the wealthy.
I compared what’s happening now to the bad old days of New York in the ‘70s when murder rates were soaring, and Time Square was the “sleaziest block in America.”
It was sensational, sure, but inaccurate? I don’t think so.
In fact, in the six months since, we’ve seen the trends I discussed continue to play out, even as the fallout from the pandemic subsides.
Last month alone, the crime index in New York City rose 22%…
And a recent report from Bloomberg found that only 9,000 of the 19,000 New Yorkers who moved to Florida to ride out COVID say they definitely plan to return.
Similarly, in San Francisco a recent poll found that more than 40% of participants plan to move out of the city in the next few years due to worsening crime and the decline in quality of life.
By all indicators, combined with the freedom to relocate afforded to millions of people thanks to remote working, the exodus from overpriced U.S. metropolises is set to continue well after the pandemic.
Much of this movement will be to lower cost cities within the U.S., but as I suggested in my original article, folks who look a little farther afield have a lot more to gain…
In destinations across our RETA beat you can find better weather, lower living costs, and an immediate lifestyle upgrade…
You can read my original article below…
And if you’re living in a major U.S. city, do share your thoughts. Are you planning to leave? Am I misrepresenting your hometown?
You can email me at firstname.lastname@example.org.
Wishing you good real estate investing,
Ronan McMahon, Real Estate Trend Alert
Welcome to Fear City (Again!)
By Ronan McMahon
Growing up in Ireland, I learned about New York City from movies like Coming to America (starring the brilliant Eddie Murphy), Wall Street, and Martin Scorsese’s mafia masterpiece Goodfellas…
It was a gritty city where danger and opportunity were intertwined. You could become a millionaire on Wall Street, then get mugged the next block over.
But this wasn’t Hollywood’s overactive imagination. Art was imitating real-life.
In the ‘70s, things were so bad in New York City, police unions handed out a pamphlet to tourists with the title “WELCOME TO FEAR CITY: A Survival Guide for Visitors to the City of New York”.
In 1981, Rolling Stone magazine called the center of Times Square the “sleaziest block in America.”
By 1990, the murder-rate in the Big Apple hit a record high of 2,245.
But when I finally visited for the first time in 1997, a wave of gentrification had washed away New York’s rough edges. Times Square was no longer the sleaziest block in America, it was a theme park for consumers. One giant shopping mall. If you wanted to buy a small apartment there, it would cost you upwards of half-a-million dollars.
From rags to riches, New York City was the American Dream.
But now, New York City is turning into Fear City again…
The number of shootings in New York City this year is already double the total tally of 2019.
The city’s wealthiest citizens aren’t staying around to find out how much worse it might get…
They are fleeing in record numbers.
61% of residents leaving Manhattan earn over $100,000. The cost of this exodus to New York City’s economy will total $330 billion.
In Manhattan’s Lower East Side, home prices have already plummeted a jaw dropping 56.5% in one year. That’s unprecedented.
It’s not just the rich, but the young, too. Anyone who can is leaving.
Governor Cuomo and Mayor de Blasio blame the pandemic. But COVID-19 was simply a catalyst. The final straw for residents who already had enough, tired of the overcrowding, high prices, and high taxes.
Now, I can’t help but remember another movie, John Carpenter’s dystopian sci-fi Escape from New York.
And New York City isn’t alone…
San Francisco… Boston… Chicago… Seattle…
It’s hard to imagine, but look at Detroit and Baltimore (both among America’s richest cities at one point in history) and you can see how bad things could get and how long the bad times could last.
But this isn’t a requiem for America’s once great cities. It’s a reminder that you should always have a “Plan B” because no matter where you live, things can go south much faster than you can ever imagine…
While residents of New York and California are fleeing to Florida and Idaho, I recommend going even further, to countries like Mexico, Costa Rica, or even Portugal.
Not only are these countries further removed from the long and greedy arm of the U.S. government, living there can be more affordable too…and that means you can slash your living costs without sacrificing on living standards.
For example, the median rent for a one-bedroom apartment in Miami, Florida is $1,750 per month.
While that might be dirt cheap to someone moving from San Francisco, you can rent an apartment by the beach in Mexico for even less, where the weather is better, the living costs are lower and the lifestyle is more laidback…
Sure, you won’t get key lime pie, but you get delicious, authentic tacos for pennies on the dollar.
Buy and your costs could fall even further. Record-low interest rates mean it’s never been cheaper to buy real estate overseas, even for foreigners. I’m buying a condo in Portugal right now with no money down and an interest rate of 1.1%.
Buying lets you diversify a portion of your wealth outside of the U.S. too, giving you more protection from economic catastrophe or a government tax grab in America.
Just like the t-shirts, I love NY and I hope it rebounds quickly. Having a Plan B doesn’t mean you are giving up. It’s common-sense, just in case…
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Your Comments and Questions
Marcie says: Good morning Ronan, we’ve been following you for years and now we’re ready to make that overseas purchase.
I am an avid diver and my partner is also a cyclist so we love all of the opportunities in Mexico to be in nature. We plan to make our first purchase based on its potential to generate income and to provide us with a place to vacation. Do you have any guidance on whether to go with Cabo or Playa for our destination?
Ronan says: Hi Marcie. There are two aspects to the choice ahead of you. The first is based on income. In that regard, both destinations can deliver. They’re internationalized, appeal to multiple markets, have long seasons, etc. However, you need to find the right deal at the right price. A rental income is little consolation if you’ve overpaid for the property and your yield is low.
The second aspect is personal vacation appeal. This obviously depends on your own preferences. Both are popular diving destinations. I wouldn’t recommend road cycling, but there are mountain biking options in Cabo and jungle tracks near Playa.
I always recommend profiling yourself before buying. Here’s a recent piece I wrote that should help you get started.