It's All About The Management
In Paraguay last month, I met with the heads of the biggest cattle ranch operations in that country, groups that manage not only their own ranches but ranches for others, as well. In conversation with one of these groups, I mentioned some of the other agricultural projects I’m invested in, including the mango plantation in Panama.
“Mangos?” one of the guys replied. “We have mango trees all over Paraguay. During mango season, mangos are everywhere. They fall to the ground. If you want some mangos, you just pick them up and take them home. How would you make money from mangos?” he wanted to know.
“It’s the difference,” I explained, “between having a couple of milk cows in the backyard and operating a ranch with 1,000 head of cattle. Mango trees around your house dropping mangos to the ground in season is very different from a 1,000-hectare, managed mango plantation.”
It’s also the difference between growing for the local market and growing to sell for export.
My new friend understood both points, which I’d say are the two critical elements necessary for the success of any real estate investment, from a vacation rental in Paris to a fruit tree plantation in Panama.
I’m talking about management and market.
Other variables affect the success of a property investment, but, even if all other factors are to your maximum benefit, you won’t overcome bad management or the lack of a viable market. This is true for a rental, where the rental or property manager is key and nothing else matters if you can’t find tenants, and for an agricultural buy, where, again, bottom line, the group managing the farm, plantation, or ranch and a ready market for your harvest are everything.
The trees the ranch operator was thinking of, the ones whose mangos fall to the ground each season, aren’t being managed. The trees grow; their fruit falls. No one is taking care of the trees to maximize production, and no one is harvesting the fruit to take it to market. The same is true for the dozen mammoth mango trees at my Los Islotes project in Panama. It’s mango season, and the ground was littered with thousands of mangos when I visited this past weekend. I don’t have anyone managing those trees, so the fruit goes unharvested. My Project Manager Gary and his crew take bagsful home. That’s the extent of the marketing plan.
Good to excellent rental investment opportunities are not difficult to find. I could name a dozen markets that make sense if you’re looking to buy a rental property. More interesting to me right now are agricultural opportunities. Finding turn-key agricultural investments that come with both strong, proven management and reasonable expectations for selling the harvest isn’t easy. For every 10 opportunities I consider, maybe 1 makes sense. Most are too small, in the wrong geographic location (one interesting agricultural project I reviewed this year is in Oman, for example, not a place to invest right now, given the unrest in Yemen), or require too much capital to be interesting to an individual investor. Turn-key agricultural projects targeted to the small investor are few and far between.
That said, I’m looking closely at opportunities that could fit this description in five markets…
My Five Favorite Agro-Markets
Belize is a country made for farming, with rich soil, abundant water and sunshine, affordable land costs, and proximity to the United States. The challenge in Belize is infrastructure. I’m working with a scout to vet a couple of farming opportunities and will share the details if one (or both) pass muster.
In Colombia, colleagues have launched a softwood timber project. Big advantages in this case are the cost of the land and of labor. Farmland near Medellín, for example, is not a bargain; however, my colleagues have identified land elsewhere in the country that truly is.
A colleague in Nicaragua will soon release a hardwood plantation opportunity. The payout timeline for timber is longer than for fruit trees or annual crops. On the other hand, trees can be easier to manage… and left to continue to grow if the market isn’t with you when they’re ready to harvest.
Given the growing demand for hardwoods for furniture and flooring and for softwoods for biomass, paper pulp, and other products, sustainable forest projects will continue to be an interesting market and a personal focus.
Cattle in Paraguay is also on my radar. During my recent scouting trip, I met with three groups that manage cattle ranches. I’m in the process now of working through the numbers and the options.
Finally, Panama remains a core market for me. I’m invested in both fruit and timber plantations in this country and am aggressively considering additional options for diversification. I expect to have news of a specific new fruit plantation opportunity within the next month.
“Lief, we plan to retire to Ireland in the not-too-distant future. At some point, you recommended someone in Ireland for managing personal taxes, and we are looking for that contact information but cannot find it.
“Our goal is to find someone in Ireland who is well-versed in international tax law, in particular someone who can help with tax planning and our annual tax filing and the considerations regarding U.S. pensions, 401(k)s, Social Security, income from foreign investments (e.g. Panama, Brazil, Costa Rica), etc.
“We will be in Ireland in May and were hoping to make an appointment to consult with someone. Could you make a recommendation?”
Yes, I’d recommend the attorney in Dublin we used for many things when living and doing business in Ireland. The attorney is Therese Rochford; she’s with Whitney Moore.
You should also take a look at the double-taxation treaty between Ireland and the United States to get a handle on how Social Security and other pension income may be taxed.