How much do you think this ocean view cost me?

October 30, 2013

Santiago, Chile

[Editor’s note: Darren Kaiser, author of Sovereign Man’s Chile Property Investment Black Paper, is filling in today while Simon is en route to Asia.]

Look around the world from an investment perspective these days, nothing seems particularly cheap. And finding safe places to park capital is a little like trying to find your way through a mine field.

At first glance things might look fine, but the reality is that there’s serious trouble just under the surface.

Many stock markets are near all-time highs and bond yields are an absolute joke.

Farmland in most parts of the world has become quite expensive and yields from rental properties seem to be in jeopardy thanks to high unemployment rates and shaky consumer spending.

Of the 30 countries that I visited, there’s only been one that was able to fully convince me it was worthy of my family’s hard earned investment dollars. That country was Chile.

When I’m evaluating investments around the world, I use a two pronged approach.

First I look at all the technical details. Local laws. Private property rights. Government finances. Economic drivers. Infrastructure. Emerging trends.

The second part, after I’m done with the due diligence, is listening to my instincts.

Over the past 5 years, ocean view property and farmland in the path of progress in Chile are some of the only asset classes that have passed these tests.

Take the picture above. At under $20,000 USD, this building site was an absolute no brainer.

A property like this doesn’t just make sense emotionally; it makes a lot of sense financially too.

There’s something quite satisfying about having your own piece of land in an up and coming country. And between the rental yields and capital appreciation, it’s not hard to see gains of between 20% and 40% in some of the areas I focus on.

To be honest though, there is one catch to all of this.

No, it’s not that the government here in Chile is crazy, or that these properties are in the middle of nowhere (the property shown has paved road frontage, electricity on site, and is less than a 10 minute drive to the nearest gas station and grocery store).

The catch is that you’re not going to just show up here tomorrow and find deals like this. The inefficiencies and inconsistencies of the local market have a way of weeding out the less persistent and the faint of heart.

Most things move slowly here in Chile. And finding these kinds of deals takes a LOT of time on the ground, usually just enough to make you want to give up on the endeavor entirely.

You’re going to need a solid knowledge of Chilean Spanish, lots of local contacts, and be willing to spend hundreds of hours throughout the year driving around looking at properties (or employ the services of someone who does these things for you).

I’ll admit, going down to your local coin shop and loading up on some gold is a lot easier than trying to pick up one of these drastically undervalued properties.

But if you’re willing to put in the time and the effort, there’s little that compares to gaining exposure to the Chilean real estate market.


Darren Kaiser is an accomplished investor in Chilean real estate and author of the Chile Property Investment Black Paper.

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