Taking the Plunge
How a lucky real estate dabbler became an overseas landlord

By Steve Hendrix
Sunday, March 5, 2006

I think of it as the toilet bowl index.

A year and a half ago, we were possessed of seven toilets: two in our own house; one in a little cabin we own with some friends in Pennsylvania; and four others in rental properties we'd bought in Takoma Park. Of course, we also had four circuit boxes in those houses, 15 or so faucets and dozens of windows. But it was the toilet tally I preferred as a measure of the tiny real estate empire my wife, Ann, and I had begun to assemble as amateur investors.

It struck me after we closed on the first rental property, a small brick bungalow off Sligo Creek Parkway. On our final walk-through, I stopped before the tank-and-bowl centerpiece of one of the little bathrooms.

"Why, that's my toilet," I said, a little disoriented from the emotional tumult of buying a house that I wasn't planning to actually live in. "I may never even use it. But it's mine, and I'm responsible for it."

I gave it a little getting-to-know-you flush.

I knew seven toilets didn't place me among the great Potty Barons of our age. How many toilets does Donald Trump own? The mind boggles. (It's easier to imagine how many of them he has ever plunged himself.) But I was still proud that two undercapitalized Washington wonks -- a journalist and a public health consultant -- with meager savings and less than a clue about investing, had quadrupled our porcelain holdings in about five years of real estate dabbling. The johns were all performing admirably, as were the houses themselves. All were growing steadily more valuable each year in a streaking property market, with their mortgages paid by the rents we collected. I've never attended a seminar or read a book on real estate investing, but I gather that's how it is supposed to work.

"The commode count stands at seven," I would update my father, who is always interested in our real estate investments. He is a long-retired cement salesman who hasn't owned a house in more than 30 years. "Holding at seven."

And then, in 2004, we had a chance to buy another property and push ourselves, gulp, into double-digit johnny ownership. And these came with something that was noticeably lacking in our mid-Atlantic houses: a really killer view of a volcano.

It was a little place on Lake Atitlan, a high mountain basin in western Guatemala that Ann and I ranked among the most spectacular settings we'd seen in our global wanderings. We were on vacation there with our two daughters and another Takoma Park family and, after a week, we were all thoroughly smitten. Finally -- hypnotized by the view, emboldened by the rum -- I spoke the inevitable:

"I wonder what houses go for around here."

Real estate investing was about to get seriously weird.

Buying a house is the third most emotion-fraught of all human transactions (right after falling in love and selecting a cable package). The whole process is one big Tilt-a-Whirl, from finding a place (The hunt!), to bidding on it (The battle!), to taking possession (The drapes! They have to go!). It also has to be the world's oldest investment, with people acquiring, managing and losing property since the First Landlord served the first eviction notice at the Garden of Eden. (What was that illegal apple picking, after all, but history's first zoning violation?)

Still, we were in our thirties before we thought to acquire a house of our own, much less any spares. As grad students and young workers who had never bought anything more expensive than a used Honda, stretching our bankroll to purchase something with so many zeros on the price tag seemed like the physics of another dimension.

That's when we discovered that an entire industry exists to smooth over those little hindrances to buying a house -- like not being able to afford one. One-hundred percent financing; FHA guarantees; 80/20 split notes to avoid mortgage insurance --this is the necromancy that Realtors, brokers and title attorneys conjure in service of your American Dream -- and their percentage. They waved their fountain pens, dumbfounded us with rune-covered documents and finally handed us the keys to a 1939 Cape Cod in Takoma Park that they said we could keep.

Cool. I loved owning my own toilets -- and the house they came in. After a lifetime in apartments, it was immensely satisfying to know I could take a sledgehammer to a wall and no one, except Ann, could object. I relished the chores and didn't hesitate to take apart a busted dryer or dismantle a dripping faucet. "Now if you could just put them back together again," Ann would say. So I learned how to do that, too. Together, we laid our own floor tile, upgraded our own wiring and generally were the do-it-yourself masters of our 1,200-square-foot domain. We were good at home-owning.

It was a few years later that we had our first baby and -- given a baby's constant need for food, diapers and college educations -- that the phrase "financial planning" seemed relevant for the first time. It's not surprising that we thought of buying another house. We'd once had a neighbor with two houses, one he lived in with his family and another left over from his bachelor days that he rented to college students. When he was transferred to Bellingham, Wash., he sold them both and headed west with an impressive grubstake. It was a powerful object lesson.

Surprisingly, our most venture-savvy friend, a partner in a major accounting firm, tried to dissuade us. He didn't think much of single-family rental houses as investment vehicles. "The P.I.T.A. factor is too high," he said. (That's accountant talk for pain-in-the-asset column.) "Landlording is work. You never have to fix a dripping faucet on a stock certificate."

Pshaw. We weren't scared of any dripping faucets. And I understood more about plumbing than I did about NASDAQ. So back we ventured into the For Sale wilds.

This was 1998. Compared with the ferocious real estate market of today, it might as well have been an episode of "Father Knows Best." There were plenty of houses in Takoma Park and Silver Spring in the mid-$100,000 range; buyers mulled their options for weeks and often bid below the asking price; I wore a snappy fedora, and we drove to open houses in a 1958 Packard. It was another age.

Two incredibly lucky breaks sealed our interest in real estate investing: We got into it just before the recent astonishing jump in home values, and our first rental property turned out to be a total cream puff. It was a little brick cottage on a big wooded lot in Takoma Park, recently restored, full of charm, 3 br, 2 ba, wlk to Mtro . . . Oops, sorry. Force of habit.

Beth Truman, our Realtor, had actually been our first landlord in Takoma Park. She gave us invaluable advice about moving to the other side of the lease. Most of it boiled down to valuing the tenants: Fix things quickly; be flexible in the terms of the lease; don't jack up the rent every year.

"It's worth hanging on to good tenants," she said. "You can lose a lot a money by having the house go vacant for even a month or two."

We ran an ad for an open house one Saturday and had more than 20 people show up, all of them ready to sign a lease on the spot. We took a stack of applications, ran credit checks and gave the place to the first person who had applied -- a single female professor at Gallaudet University. I think I was more excited than she was on moving day. I wanted to hang out to see how her stuff fit into our house, but Ann told me I had to let go. They were the tenant's toilets now.

But I was on call.

Unfortunately not much went wrong with that cute little garden cottage, given how much I enjoyed strapping on the old Hechinger tool belt and showing up to save the day. I replaced the ceiling fan in the bedroom one Saturday. Unstuck the disposal a few times; nailed up a gutter. The only emergency was a drip from the ceiling that turned out to be a leaky air-conditioning compressor in the attic. Not to worry, ma'am. Have cordless drill, will travel.

In all, the cute little garden cottage conducted itself just as a well-behaved investment property should -- it largely disappeared from our lives, quietly stockpiling equity as someone else paid the mortgage. What a good little housie.

The next time, we weren't so lucky.

Everything that was easy with the first house was hard with the second. We were in better shape financially because we could refinance House A for cash to use as a down payment on House B. But it was 2003 by then, and home prices were on a rocket. It was easier to find an ivory-billed woodpecker in the Washington suburbs than a house for less than $200,000. That was the most we could pay and still break even with prevailing rents.

It took six months of non-starters and lost bids before Ann happened to be browsing the listings with a Realtor named Bob Young, another in our growing stable of agents. Right before their eyes, a new listing popped up, a modest brick ranch off New Hampshire Avenue for $180,000. They were at the front door within minutes, and we made an offer that day. I never even went inside the place.

Such a bargain. A few weeks later we found out why.

The title search quickly flushed two hidden bankruptcies from the seller's closet, along with an undisclosed second mortgage that was 10 years in arrears. We put the champagne cork back in the bottle, and for about two months the deal lay on the table with unresponsive pupils. Still, every few weeks Bob Young would dutifully make a round of calls, trying to work out a compromise between the sellers and the tough and shadowy holder of the second mortgage. Finally, he persuaded her to cut her losses. She would give up some of the accrued interest if we would pay a few thousand dollars more.

It was a huge relief when we finally closed in the fall, four months later than we'd hoped. (And I still hadn't been inside the house.) But now we had to rush. It was only a week before the end of the month, turnover time for rental houses. We spit on our hands and got busy with yardwork, re-enameling the tub and carpeting. The house dressed up nicely, and after five straight post-midnight painting sessions, Ann put down the roller for the last time, just two days before our advertised open house.

Twelve hours later, they called us about the fire.

All the firetrucks were gone by the time I got there, but I could still smell the smoke from the yard. The boxwood hedge was scorched, and there were long streaks of melted glue on the walk where workers had dragged some burning carpet out the front door. Thick tongues of soot, all leading out from the utility closet, decorated the ceilings throughout the ground floor. That's where the carpet installers had placed their contact cement -- apparently very flammable contact cement -- a bit too close to the base of the gas water heater. It was the throat of a volcano in there. The water heater looked like something by Dali. Even the boiler was cooked, its glass dials shattered and the wires burned away.

Ann's 50-hour paint job was totally ruined. For the first time, real estate brought us to tears.

There was nothing to do but start over, double time. We postponed the open house by a week and drove the reluctant carpet company to replace the hot water heater, the boiler and, of course, the carpet. The company also got a crew of painters in and, happily, the house began to smell more like wet latex than fried polyester.

We never did get the melted glue off the sidewalk. But still they lined up on open-house day, more eager renters than we could accommodate.

The tenants moved in the next weekend, a young couple fresh from grad school. And we started planning a much-needed break in some soothing tropical haven, far from anything to do with real estate.

Guatemala's Lake Atitlan has been drawing gringo tourists and expatriates for decades. As every hotel brochure proclaims, English novelist Aldous Huxley dubbed the place the most beautiful lake in the world after he visited in the 1930s. That's a bit of hyperbole that fades into understatement the moment you crest the surrounding ridge and look down on a body of water that could be the gods' own bathtub. On a sunny day, the most common kind, the waters wink like a blot of turquoise ink, spreading 81 square miles among steep, green mountain slopes. The lake is 5,100 feet above sea level, where lofty altitude combines with tropical latitude to generate breezy year-round temperatures in the mid-70s.

But it's the three surrounding volcanoes that make the whole package "really too much of a good thing," in Huxley's words. They stand in silent vigil above the southern shore, Toliman, Atitlan and San Pedro, so perfectly triangular they could be a background set from "The Flintstones." It's a first impression that not only attracts visitors but keeps them. Many a gringo resident talks reverently of his first look at the lake as the moment that a drop-by turned into a change of life.

A wave of hippie travelers settled around Atitlan in the 1970s, lured from their wandering by the hypnotizing views, the laid-back vibe and, not least, the cheap and potent marijuana. Panajachel, the largest town, became known as a good-time outpost amid a ring of placid, traditional Maya villages. Even during Guatemala's vicious civil war, Lake Atitlan remained largely isolated from the worst of the paramilitary campaigns that killed hundreds of thousands of Guatemalans before peace arrived in 1996. One community on the lake, Santiago Atitlan, still takes great pride in having kicked the army out of town after a massacre of 13 Maya villagers in 1990.

Nowadays, postwar Guatemala has opened up to tourists with a basic three-stop itinerary that includes the Maya ruins of Tikal, the colonial capital of Antigua and a few kick-back days at Lake Atitlan.

The southern shore, accessible by road, is lined with the homes of weekenders from the capital, Guatemala City. Instead, we headed for the quieter northern shore. That one is reachable only by boat and attracts a mellower class of visitor, namely artists, New Age seekers and one-time backpackers (like us), traveling with kids now but who still like their tropical getaways with a side of local culture.

Our group consisted of Ann and me and our two daughters, Isabel, then 7, and Tyrie, 5, along with our neighborhood friends Katie and Jim Sebastian and their son, Cole, 4, and daughter, Dillon, 7. Online, we'd found two adjacent lakefront houses to rent near the village of Santa Cruz. The fellow who managed them, an expatriate Frenchman named Armand Boissy, met our tourist van at the dock in Panajachel. We pitched a week's worth of groceries into a 21-foot boat and motored 15 minutes to Santa Cruz . . . and destiny.

We adored it. Every fresh banana, lime from the garden, handmade tortilla and spellbinding sunset of that week was a beaming pleasure. We loved the public boats that plied the shore, which we would hail from the dock for dining or sightseeing runs into Panajachel. We squeezed in between Maya women in traditional embroidered blouses and the bags of avocadoes or papaya they hauled to market. We loved the generous, patient manner of the village folks who helped untangle our endless knots of Spanish and pantomime as we asked about local history and traditions. (After all, Spanish wasn't their first language either; they spoke Kaqchikel at home.) We loved the cool swims, the subtly rich food and the cheap, spa-class massages at the holistic studios of San Marcos, the village down the shore that has become a sort of New Age jamboree. Mostly we loved the beauty of the view, where volcanoes bask in the shifting mountain light.

It is one of those settings that provokes not only admiration but also longing. Looking doesn't seem enough. You want, somehow, to possess it.

"I wonder what houses go for around here?"

Armand Boissy was happy to show us. Suave and boyishly handsome in his late thirties (he swims in Atitlan every day and jogs on the steep mountain paths), he'd lived on the lake for 15 years. He had been through two marriages there, had two daughters, had built a well-regarded hotel with his second wife. And he'd generally seized the small-but-growing market of gringo tourists who aren't satisfied with tasting the papaya but who have to own a papaya tree. (Norwegians are his biggest clients; he was just breaking ground on a sizable house for an Oslo chiropractor when we arrived.)

"But of course," he said when we'd asked, tentatively, if anything was for sale. "I can take you to see tomorrow."

House hunting by boat should be forbidden by the Realtor code of ethics. It's too much fun. Every house looks good when you coast up to its dock on a sunny morning. All the places we saw were pleasant -- in that setting, they'd have to be built without windows not to be. But the whole outing stayed safely at lark level for the first three stops.

Then we pulled up to a place called Pamakanya, a house on a little cove just outside the village of Jaibalito.

This time, no one said anything at all as we walked about the ground. Silently, as we turned corners onto one joyous view or architectural delight after another, all four grown-ups were coming to the same terrifying conclusion -- this might be too good to ignore.

It could only be called, well, a villa. It took me weeks to surrender to that word, which to me implies a lavish place on the Mediterranean where bronzed and topless sunbathers are draped like cats around an azure pool, and a bathrobe-wearing megalomaniac engages in arch banter with Mr. Bond. This place was too small for SMERSH headquarters, but what else do you call a walled waterfront compound that consists of a main house full of arched doorways, massive beams and indoor-and-outdoor fireplaces, a guesthouse, multiple cocktail decks, acres of riotous tropical gardens and a couple hundred yards of rock paths and stairs winding from the dock up to the mountain paths. It was a villa, all right. And it was for sale.

"I think we need to get out of here right now," said Jim, closely monitoring the glassy stare creeping into our eyes as we stood on a rock terrace looking over clouds of bougainvillea blooms. He was the skeptic among us, happy enough to indulge in some idle house hunting, but determined to quash the madness before any actual money changed hands.

But that was before he walked into the main bathroom, with tile mosaics on every wall and a toilet (this would be number eight for us, if you're keeping track) that faced a huge Captain Nemo window and a spectacular panoramic vista of the volcanoes. On all of Lake Atitlan, the seat with possibly the best view was a white American Standard with a 3.5-gallon flush capacity. This was a scene that any fellow could happily linger over during times of, uh, reflection.

"Clearly this house was designed by a man," said Katie.

Armand stepped forward with a soft smile, pulling out his cell phone. "Let me just call the owner . . ."

It had taken us about two hours to find a house that stunned us into helpless submission. It would take us two weeks, back home and working by e-mail and phone, to reach a deal with the owner, a friend of Armand's named John Pennington -- a Guatemalan architect with an English name but no English. Pennington, a well-known barfly and bon vivant around Panajachel, had been slowly building Pamakanya for more than 10 years. No one had ever lived there, but the architect had thrown some legendary parties on the property. He was willing to sell for $180,000.

We agreed with the Sebastians to go halvsies on the whole project. It was just doable if we begged, borrowed and refinanced with abandon. Not that any of us, down for a combined 16 years of college tuition just over the horizon, had cash to spare on slothful second homes. This house, like our other investment properties, would have to earn its keep. We were getting into the vacation rental business.

Those real estate seminars must include whole sessions on keeping emotions out of these things. The successful investor, no doubt, is an ice-eyed realist with no room on his spreadsheet for calculations of the heart. You run the numbers, weigh the risks, test the market. If it's going to make money, it's buy. If not, it's bye.

Us? We just really, really liked that house.

We had no idea how many renters we could expect. I could tell Guatemala was a comer on the international tourism scene, but who knew how many people would share our taste for out-of-the-way accommodations in a country still suffering widespread poverty and pockets of high crime?

Everyone reported sleeping badly in those early days, partly from excitement, partly from the string of acid-reflux moments that emerged as we prepared to wire a chunk of our assets down to people we barely knew.

It is, as it turns out, illegal for foreigners to own waterfront property in Guatemala. Armand said not to worry. "It is an old law," he said. It came out "Eeet eeeze zan old law" in his beguiling Grenoble accent. The regulation traditionally has had more to do with coastal defense than with lakeside properties.

We also would not get a deed to the land, or any of the other ironclad niceties that are such a comfort to American property owners and their nervous-Nellie bankers. The land would remain officially "owned" by the local village; we would get something called a "transferable right of possession." Land title reform is just beginning in Guatemala. Armand said not to worry. "Here it is normal," he said. "It is a small village. Everybody will know it is your property."

In any event, we would have to pay two-thirds of the cash purchase price before the house would be finished. John Pennington needed some capital to complete things like, oh, the water system and the half-built guesthouse. Armand said not to worry. "If he say he will finish, he will finish."

Finally, in a collective spasm of uncertainty at the very moment of hitting the button that would instantly and irrevocably flush our bank accounts into his, we asked Armand outright what was to keep him from bolting with the cash. "Nothing," he said. "You will just have to trust me. Here, that is how it is done."

We gulped, we swallowed, we closed our eyes and pictured that view from the bathroom, and we hit Send.

In the United States, a modern real estate transaction contains within it every transaction that ever went before -- and went wrong. Every lead-paint lawsuit, disputed deed and property-line catfight is reflected in the hours of certificates, waivers and addenda you are forced to sign at the closing table. There are dozens of them, culminating in the ultimate litigious absurdity, the form that pledges you to come back and sign any forms they may have forgotten to give you. The overwhelming emotion of new homeowners in America is writer's cramp.

Not so in Guatemala. The contract that indentured us to a tiny piece of Latin America came as a single Word attachment and was about four pages long, double-spaced. We couldn't read it, of course, but we ran it through a free Internet translation engine and assured ourselves that our names were spelled correctly. Otherwise, it remained gibberish. ("Both comparacientes declare, one after the other that in the terms briefed in this writing the obligations accept for himself that of the same one are derived.")

Armand got the cash and e-mailed a snapshot of John Pennington signing the deal in an abogado's office in Panajachel. Nothing about their smiling demeanor seemed to say, "So long, suckers!"

And almost immediately, Armand began sending updates, complete with digital photos, of Pennington's progress. The new water tank: done. The hand-carved guesthouse windows: done. The toilet in the guesthouse (number nine!): done.

A month before Pennington's deadline -- Jim and I reaped the first boondoggle. It was decided that someone needed to go down, show the flag and lay in a few necessities. We wanted the place to be renter-ready as soon as the sawdust settled. Armand met us at the airport in a hired van. On our way out of the capital, we stopped and bought a gas range, a microwave and two refrigerators. Then we drove them to the lake and, walking backward over a plank ramp, helped load them in a motorboat for the trip out to our house.

I'll never forget that first night at Pamakanya -- pain being so memorable. Pennington's caretaker didn't show up with the key, so we slept on the front patio on folded clothes from our baggage. I lay awake -- watching a little black scorpion climb slowly over the tiled floor and listening to the night noises of a country that still shows up on the occasional State Department advisory list -- and wondered what beach houses in Rehoboth were going for.

But it's a deep funk indeed that can survive a Atitlan sunrise. The morning brought a sheepish watchman, a key and our first showers in the Loo With a View. The house was even more beautiful than I remembered. Pennington was nearly done, and everything was obviously going to be ready for us to take possession on schedule.

Armand -- the Jeeves of Atitlan -- came by with his ever-ringing cell phone. We ordered beds to be built, closet shelves, a huge 10-foot dining table for the patio. We went to the excellent artisan markets in Panajachel for bedspreads, quilts and tablecloths, all in the exquisite Maya textiles that bring big bucks in Adams Morgan and Soho.

But our most important chore was hiring a staff. All the lakeside houses have a caretaker, called a guardian in the local argot, and these are coveted positions. (Not many jobs in rural Guatemala pay higher-than-market wages and come with benefits; among the applicants for Armand's last guardian post was the mayor of Santa Cruz.) Our leading candidate was one of Pennington's workers, a young man from the village named Andres Hernandez. We knew him to be a skilled carpenter, an enthusiastic gardener and very tolerant of our pre-K Spanish.

He was recently married, a new father and living with his family in his father's house. At the moment he accepted the job, the entire project changed for me. Whether this was a visionary investment strategy, a supreme self-indulgence or a wacky lark, it was now also a business, with a payroll and a young family's livelihood depending on it.

Andres started right away, but, inevitably, it took another year before the little economic cogs of Pamakanya began slowly to turn. Nowadays, I'm happy to report, we field several queries from renters a week. We have to turn away almost as many as we can accommodate, as just about every day of the high season (December through March) is booked. But for our first 12 months, all the money flowed the other way. We made half a dozen trips in various combinations, the gals one weekend, the guys another. We all spent spring break there together, and hosted more than 20 friends and family members during a long summer stint. Each time, like most other families in the Taca Airlines check-in line, we came wrangling a mountain of luggage: dishes, sheets, Ikea-crap, puzzles, board games, trash novels, all the accouterments of a vacation, um, villa.

The house quickly came to seem like our newest friend, a fun-loving uncle that we visit a couple of times a year. We talk often, and fondly, about its quirks and personality. The kids draw pictures of it. This scheme may never show up in a real estate seminar, but I'd like to propose a tenet for the sub-genre of vacation rentals: Invest in a place that you love yourself.

Our most important project in the run-up to financial solvency was, believe it or not, to add a third house. A studio bungalow, Armand said, would push us up to 13 beds, making the place more marketable for large groups. So last spring, on a flat stretch near the dock, where John Pennington had built a huge fiesta barbecue pit, a local crew put up a stone-and-stucco casita in the local style: red tile roof, a wide covered porch with massive beams ready for hammocks and baskets of blooming vines. We added an outdoor shower, a little kitchenette and a half-bath with a ceramic lavatory.

And, of course, a beige Kohler low-flow toilet.

And that makes 10.

Steve Hendrix is a writer for The Post's Travel section. He will be fielding questions and comments about this article Monday at 1 p.m. at washingtonpost.com/liveonline.

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