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How Old Stereotypes Can Lead To Property Investing Profits

15 Aug
Latin America is full of property markets that offer much upside.

How To Profit From Nazis, Kidnappers, Crime, And Drug Lords?!

Since 2001, I’ve picked some of the world’s best places to live… places that stood out because of their fantastic lifestyle, rich culture, and low cost of living. Walking the cobblestones of Spanish colonial cities… enjoying the convenient city living in a world capital… enjoying the world’s best weather… and beachfront living on a tropical island, all seemed pretty hard to beat.

Yet I keep hearing from friends and readers that I’ve been living among fugitive Nazis… running the risk of kidnapping and violence… or that I’m surrounded by abject poverty and crime.

Why the big difference in viewpoints?

My own view is based on my living experience in Latin America. The second viewpoint is based on the popular cultural stereotypes of those same places.

I frequently hear the latter from people who are hoping to fill me in on the “truth” about where I’m living.

And I appreciate their perspective completely; I shared similar ideas for a long time. For most of my life, I “knew” that Latin America was basically unsafe and unstable… aside from a few semi-civilized outposts like Puerto Vallarta and Buenos Aires. My cultural conclusions were drawn from such reliable sources as “West Side Story,” U.S. government spokesmen, Tom Clancy novels, and the nightly news.

Stereotyping Countries And World Regions

As a culture, we are cautious not to stereotype people… but we’re the masters of stereotyping countries and world regions. So unfortunately, Americans miss much of what the world has to offer. And that’s the worst barrier most people encounter when considering living or investing abroad, separating the facts from the stereotypes in the countries under consideration.

I invited a friend to come down to our home in Medellín for a visit. Here’s what he said: “Thanks for the invitation, but I don’t think we’ll be coming to visit in Medellín… we couldn’t afford the ransom if something were to happen.”

As I sit in one of Medellín’s many cheerful sidewalk cafés, sipping cappuccino and enjoying a fresh-baked croissant, it’s hard to believe that so many people cling to the outdated reputation of this elegant city. With lush surroundings and year-round perfect weather, I’ll argue that there’s no better place in the world to live.

Then I received this from a reader at a time when Rio de Janeiro was in the news: “No way I’m going to Brazil. The extreme poverty and high crime just make it too dangerous…”

Brazil is larger than the continental United States, yet news of violence in the favelas on the outskirts of Rio had caused many to paint the entire country with the same brush. My idyllic beachfront home on the sunny tropical island of Itamaracá was four days’ travel from the slums of Rio. Avoiding it would be akin to ruling out Jackson Hole, Wyoming, because of the crime rates in Baltimore.

And just this past week, I received a number of admonitions about Brazil becoming dangerous and unstable because of the impeachment of President Rousseff. Don’t these guys remember that we impeached Bill Clinton not too long ago? As many will recall, the United States remained a stable democracy as we headed in to 1999… (By the way, he wasn’t the only one either, U.S. President Andrew Johnson was also impeached in 1868.)

I got this one back when I lived in Uruguay: “How can you live in Uruguay? Isn’t that the haven for Nazi war criminals?”

I lived in Uruguay for almost six years and did experience a few notable sightings: Michael Caine, Shakira, Ricky Martin, and Tom Jones, to name a few… even Carlos Slim, the world’s richest man. They were there to enjoy some of the world’s best beaches, beautiful cities, and the First-World environment.

The Nazi theme probably comes from Adolf Eichmann, who was caught in neighboring Argentina, or Josef Mengele, who became a citizen of Paraguay (which people often confuse with Uruguay).

In fact, the small German community in Uruguay originated in the 1850s… and they weren’t hiding from anything.

Finally, reliably as clockwork, I’m now frequently warned about the Sinaloa Cartel. I recently bought a home on the beach in Mazatlán’s historic center (in the Mexican state of Sinaloa). Since writing about it, I’ve gotten at least 100 warnings about the Sinaloa drug cartel.

In fact, Mazatlán has undergone a dramatic rebirth over the past 10 years. With a newly restored historic center and 20 miles of beautiful beaches, it now offers one of the best beachfront and colonial lifestyles you can find.

Stereotyping is an efficient way to mentally organize large blocks of information based on a few facts and prior assumptions, allowing us to simplify and organize our world. We could never manage all of the information we receive without this system of categorization.

Unfortunately, once we’ve got everything categorized, there’s a natural human tendency to avoid processing new or unexpected information that contradicts our stereotype. This is why outdated stereotypes can take generations to change… it’s what allows Pablo Escobar and Adolf Eichmann to affect property values years after their death.

How To Avoid These Stereotypes

There are a couple of things we can do to avoid the entrapment of stereotypes.

Ignore the news media. Reports are almost always sensationalized, often politically motivated, and frequently take one incident and spread its implications over an entire country.

Also, remember that countries are generally not categorically safe or unsafe in their entirety. Things like safety—and even character—can vary from one neighborhood to the next.

For example, the behavior of Carmen Montenegro—the woman caught wheeling a trashcan filled with her ex-boyfriend’s body parts down the street—is not typical of all Americans or Californians. The same applies to reports from any other country.

And take the U.S. State Department warnings with a grain of salt. Their website lends itself to stereotyping a country or area based on a few reported incidents… it fails to keep these reports in perspective relative to the entire country. Again, imagine reading all the reported crimes before planning a trip to Los Angeles or Chicago… it would make the trip sound much more ominous than it really is.

Most importantly, go see for yourself… talk to people on the ground, and form your own firsthand impressions.

I’ve got a simple, three-step rule about outdated stereotypes.

Find them… disprove them… and see if you can profit from them.

Here are a few examples.

I bought two properties in Medellín, Colombia… unquestionably one of the best places to live in the entire world. Yet thanks to the ghost of Pablo Escobar and the Medellín Cartel, I was able to buy those apartments at about 70% less than their fair value. Today, that’s changing (and prices are rising) as the stereotype slowly disappears from our cultural memory.

And Cali, Colombia, offers even more dramatic bargains for the same reason. Cali’s a great place to live and invest, yet the 1980s news headlines about the Cali Cartel are still keeping prices down, even in the nicest areas.

Finally, the Sinaloa Cartel had given me the opportunity to buy a beachfront home in a popular Mexican resort at well below what I’d pay in most of the world. This too, is changing. But as of now the bargains are still plentiful.

So don’t let the likes of Pablo Escobar, El Chapo, the Cali Cartel, and Josef Mengele keep you home. Use those old stereotypes to your advantage.

Lee Harrison