Click here to receive our email updates

Island Broker Blog

Timing an island purchase

August 8th, 2009

We’ve had several discussions with seasoned real estate investors who feel that “CASH is King” and that if they time their purchase right, they can pick up some real bargains. They rightly feel they have an advantage by using their cash to negotiate a great deal on a stunning piece of real estate. And islands are subject to the same market fluctuations as any other piece of real estate right? Although that’s usually the case, often times it’s a challenge to get the owner to acknowledge this!

Here’s why;
One of the biggest misconceptions we come across is that islands are all owned by rich people.  This just isn’t the case.  In fact a good percentage of our island listings are owned by very simple people.  More than once, we’ve sat in the home of a fisherman that couldn’t read and their accommodations are little more than one room shacks. Their homes exhibit the most basic elements of shelter. Yet these people own islands! How is that?
For generations, fishermen have used islands as fishing camps. There was never a concern about who owned the land because they were just using it. When the fishing conditions required they move, they would just pick up their camp and move to a new island. Some of them, however, stayed in one location for years. Eventually the locals would just associate a particular island with the fisherman staying on it.  So an unnamed island, for example, eventually became known as “Wilfred’s Caye”. Eventually the fisherman realized the value in formalizing his “ownership” of the island.  Not because of a perceived value or exclusivity but simply to retain a legal hold on their fishing camp.  Provided they had followed a specific set of rules, they could apply to the government for ownership of the island.

Fishermen of course play an important role in most societies and as a group they can have considerable clout in government.  When fishing cooperatives were formed, these fishermen picked up substantial amounts of the off-shore land.  Primarily because no one else had any desire or use for it.  Islands were never thought of as glamorous or exclusive. They weren’t even considered an investment; they were just a place to stay and a way to protect their fishing territory.
As years go by, the island is passed down through the generations.  It wasn’t until fairly recently that the lowly fisherman hears stories of some other fisherman who sold his island for a million dollars.  Naturally, they feel their island MUST be worth at least that much or more.  They don’t take into consideration all of the typical ingredients that make up real estate value.  If someone else got a million bucks, then they should get more!
One happy day we arrive in the home of this fisherman and agree to help him sell his island.  We attempt to explain the various factors that make up the value of his property.  But none of our experience or advice matters. These individuals have virtually no understanding of money.  All they know is they want a million dollars! Forget the fact that the property is only really worth about $200,000 (which would make them “rich” by local standards); our advice usually falls on deaf ears.
In certain situations, we won’t even accept the listing.  It’s just not worth our time.  In other instances, we’ll take the listing knowing full well that it will take a while before the owner comes to his senses.

Eventually our savvy investor shows up with cash.  Knowing the condition of the world economy and that many investors need to cash out quickly, they assume the real estate market has also affected this fisherman.  The problem is, in the fisherman’s mind, it hasn’t affected him at all. He doesn’t tie his life’s hardships to the value of his property.  He doesn’t even see the connection.  So, trying to convince him his land is worth less than it was last year because people are buying fewer fish is usually futile.

The example above is used to demonstrate that timing an island purchase isn’t quite as critical as your typical real estate investment.  Are there desperate foreign island investors that need to liquidate?  Of course; but they are fairly rare.  The very thing that makes an island special also makes it less liquid than traditional real estate and most investors know this going in.  Also, keep in mind, for most investors the island was more than a simple real estate investment.  It was more a lifestyle investment and the fulfillment of a life-long dream. So, when times get tough, the island is probably the last property they want to sell.

So although it makes perfect sense to strategize the timing of your “normal” real estate investments; islands don’t necessarily fit this approach.

Categories: Uncategorized

Leave a Comment