Taking the Real Estate Plunge

Steve Hendrix is the kind of guy who keeps track of his burgeoning amateur real estate empire by counting the number of toilets he owns. He's also the kind of guy who -- with his wife and another couple -- is willing to buy a vacation rental house in Guatemala on a wing and a prayer.

Hendrix, whose story about his experiences as a landlord appeared in Sunday's Washington Post Magazine , was online Monday, March 6, at 1 p.m. ET to field questions and comments.

Steve Hendrix is a writer for The Post's Travel section.

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Steve Hendrix: Hi folks. Thanks for taking to time to stop by and talk about real estate as an investment (which is smart, in my view) or buying a vacation home in the developing tropics (which is probably really, really dumb, but very fun and satisfying).

Here we go...

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Odenton, Md: I had initially planned to take my daughters to Guatemala the summer they were 8 and 10 to learn some Spanish and see something beyond the way we live. Life intervened and I instead spent those months packing and preparing for a house move. Now I am sure every Washingtonian with a few coins to spare (or at least some real estate to refi) is going to be jetting down there! But in case they all slept in, I want to put my name on the waiting list! The pictures are gorgeous. Congratulations!!

Steve Hendrix: Well Guatemala has been on the rise for a number of years now (which is how we first ended up there on vacation at all). As someone who keeps an eye on tourism trends for my job, it's been amazing to see how Central America has blossomed in recent years as a destination. Once the civil wars ended in 90s, people slowly began to realize what an beautiful and fascinating region was sitting down there.

Every country is progressing differently, but booming tourism has the potential to really increase living standards in all of them. Having said that, there are enormous challenges still, particularly increasing crime and gang violence (and now the vigilante backlash to same). It's a tricky cycle: I think tourist going to and investing in Guatemala is helping, but there's no promise it will help fast enough to keep the security fears from scaring off the tourists.

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Washington, DC: Do you feel secure about 'ownership' since technically you don't own the property? What level of risk do you think there is?

Steve Hendrix: That's a hard one. We're assured by folks, Guatemalan and expats, who have far more experience than we do that our claim is solid and that we're obeying all the local standards and practices. But you're right, our "right of possession" isn't the same as a clear title. In the end, we all decided we couuld live with the uncertainty. My father thinks I'm nuts.

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Dale City, Va.: My husband and I have always talked about buying rental houses, but whenever I'm gung-ho, he gets too nervous about spending the money. Or rather, borrowing the money. Are you and your wife equally enthusiastic about these projects?

Steve Hendrix: The gung-ho/hold-back dynamic is probably the key to our negotiating these risky projects. I'm a financial disaster area; before I married, I only knew my checking account was empty when I got the first overdraft notices. Hardly a day goes by that I don't think of some crazy way for us to lose all our money, putting Ann in the unenviable position of being the Doctor No in our house. But when she says yes--starting with the first rental house we ever bought--I know we're on to something good.

Still, it makes it hard on her to always have her foot on the break. Thank goodness she does. THAT'S the secret to successful investing (and living): Marry the perfect person.

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Garfield, NJ: This article is really making me re-think my stance on real estate investing. We bought a two family house that turned into a disaster and we sold as quickly as possible. Since then, we have been very afraid to go near real estate. But reading your story has given me hope in foriegn markets. We love to travel and have often dreamed of owning international real-estate. But then the very fears you mentioned in your guatemalen story are exactly what have kept us from actually doing it. Do you have any tips on how to research potential markets, find trustworthy advisors/real estate brokers, etc? What makes a good vacation rental location? Are hot spots the best places to buy? (Hawaii vs Indonesia for example)

Steve Hendrix: I can see how having a clunker on your hands could sour the whole experience. We've had one serious problem (the small fire I described in the article) and that really was a bummer. It took tons of work and money and marrital stress to make right. But right it became, and now that's a great little house.

Of course, Ann and I had the total blind luck to get into this in of the hottest real estate markets of all time. It would be different in, say, the Houston of the late 1980s.

My only advice when you try this over seas to do your research by foot. Go to the places you like, find a place you love, and go from there. Indonesia (or Hawaii) would be too far for us, since we want to use the place with our kiddies a couple of times a year. For others, it wouuld be perfect.

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Jeffersonton, Va: How do you treat this property for IRS purposes? Is it different than your other rental properties? How?

My wife, son and I stayed in a small place on Lake Atitlan 6 years ago. Wonderful, including experiencing a 15 second earthquake at 3 am which did not hurt anything, but gave us quite a thrill. We will be going to Costa Rica this summer and have thought of purchasing property there or other central american countries. Any comment of investments like yours in Mexico, Honduras, Nicaragua, Panama, etc? Bob in Virginia.

Steve Hendrix: Now THAT I don't know. Maybe if Ann is listening she can write or call in with tax info. I know we had to report both the purchase and the revenue. Ann?

I don't know much beyond generalities about other countries: Costa Rica is probably more straightforward legally, Honduras is booming along the coast and Roatan (sp?); Mexico has a long history of Gringo home buyers (wonderful book on home buying in San Miguel called "On Mexican Time").

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Rockville, Md.: Have just returned from gorgeous Lake Atitlan and stayed in the retreat center Armand and his second wife built. It is truly a paradise. We met many wonderful people there - indigenous Mayans and expats. While there, we visited Santiago Atitlan and, upon our return, saw the article in the Post about the vigilantes roaming the area.

I am fascinated by the country and applaud your courage in investing in a place so full of paradoxes. Given the history of the region, the isolation and locals' mistrust of authority, how safe do you feel (personally and investment-wise) - and how do you reassure your renters that the area is safe?

Steve Hendrix: Glad to hear from someone who knows the unique mix of folks and cultures at Atitlan.

My colleague Nurith Aizenman's great piece of reporting from the lake was disturbing (it ran too late for me to address in the Magazine piece). Maybe we can link to it, but in general she documents the rise of vigilantes to counter the growing problem of gang violence in Guatemala, particular in Santigo Atitlan, a town on the opposite side of the lake from us.

I think the danger is not that this will affect tourists (the groups are targeting local gang members), but that it represents serious backsliding by a country that has been so prone to systemic violence. These groups are going beyond probable gang criminals and settling personal scores. That's bad...not for tourists (who probably benefit from the crime-fighting effect) but for the whole country. I dearly hope that tourism and investment will take hold fast enough to let Guatemala continue its recovery from the war.

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Annandale, Va: How well I remember that house! In January 1959, a college friend and her family took me there to visit George Holton, a photographer famous for his photos of Guatemalan Indians in native costume. He lived there with his pet monkey and two parrots. He took a wonderful black and white photo of his monkey silhouetted in that window with the two parrots beside him and a volcano beyond the lake in the distance.

Steve Hendrix: Hmmm. That wouldn't have been the exact same house...it was only built within last 10 or 12 years. But one of the nice things about Atitlan is that all the places along the shore share a variation of that same killer view.

No monkeys around now, though, that I've ever seen or heard.

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Fredericksburg, Va: My husband and I are planning our first trip to Guatemala in June and are spending a week at Lago Atitlan. I fall in love with every place I ever visit, and I always dream of buying a home there. Your article is proof that the same will be true of our upcoming visit. I have read a number of safety issues concerning Guatemala, and specifically the trails around the lake. What sorts of experiences have you had with safety? Do you worry about break-ins and/or muggings? Have you had any dealings with local authorities?I thoroughly enjoyed your article and wish you the best.Caren Scaife

Steve Hendrix: Be careful, Fredericksburg! Falling in love with every place we visit is what doomed us. It's just that this time, it was too good to pass up.

Security concerns around the lake seems to ebb and flow. You'll hear of a spate tourists being held up on the footpaths around San Marcos or Tzununa (often adolescent boys), but then months will go be with nothing happening. We hike that way all the time and have had no trouble at all (but we usually do in groups of least four).

The government has reportedly done a good job of patrolling the trails up to the volcanoes, which used to be famous for hold-up. Now you see guards along the way.

Personally, I feel no more at risk there than I do here (hey, the closest I've been to Central American gang crime is the fatal Toys R Us parking lot two miles from my house). I wouldn't take my kids there, otherwise.

But if you're someone who worries a lot about crime and security, you shouldn't go. They are real and serious problems there, especially for the local people.

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washingtonpost.com: Self-Styled Justice in Guatemala , (Feb. 24, 2005)

Steve Hendrix: Here's the story on Vigilante justice.

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Adams Morgan, Washington, D.C.: I found it pretty funny that the thread of your story was toilets. As someone who spends every summer dealing with the often inadequate Guatemalan plumbing I think you kind of led folks astray with all your talk of johns with great views and your brand new low-flow toilet. Perhaps you should have pointed out to them too that you're encouraged to put your used toilet paper in trash cans and not in the toilet...

Steve Hendrix: True, true. Yes, people, it's common in Latin America to deposit your paper in little wastebaskets provided for that purpose. (What is this, Weingarten's chat?).

But that's not such a big deal (nor is it always necessary. It's more an artifact of custom. A modern houses, the plumbing is basically the same as ours, although folk invariably provide the little wastebasket.

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Virginia: Does the IRA really check Americans with properties overseas? My neighbor go to Costa Rica for the summer and came back fine year after year.

Steve Hendrix: I have no idea, but stand-by, here's someone who does....

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Takoma Park, Md: Ann Hendrix-Jenkins here...

We treat it as we do our other rental properties for tax purposes. Report income and expenses and pay tax if it makes a profit and take it as a loss if it doesn't. The initial phase of investing in a property to get it up and running typically makes for a loss the first few years. Our goal is to break even from a cash flow point of view and just hang on to the properties as they appreciate. Thanks Steve for saying I am a perfect person. Now I will let you buy another house.

Steve Hendrix: HER goal is to break even. MY goal is make the perfect mojito.

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Chevy Chase Md: Steve, My wife, who is from Peru (and I from Rockville, MD) recently visited Costa Rica and considered purchasing a vacation home on the coast down there. However, my wife's primary concern is the lack of medical services available in case of an emergency. We are expecting our first child in May and we are not sure a vacation property in Cental Am. is a good idea for that reason. Could you give us your thoughts about this subject? Thank you. Mark L., a "Tico" want-to-be.

Steve Hendrix: That's a pretty personal call, much like 'how much of a crime risk is too great.' We're probably two hours from the nearest clinic (have to call for a boat, etc), and four or five from a full-scale hospital (faster by helicopter, if it came to that). That doesn't worry us, but I'm sure it's probably too isolated for many people, especially folks who have chronic medical needs.

We go with young kids (my wife took our three-month-old son there last month), but of course, we only go for a few weeks at time. We might feel differently if we lived there full time.

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Boston, Mass: Hi Steve, very interesting article!I have spent some time in Guatemala, Antigua mostly, and have fallen in love with the country. Recently, I have been thinking a lot about buying a home in Antigua to use personally and to rent out. What advice would you offer for someone at the beginning of this process? Specifically regarding estimating costs to maintain, renovate, rent and manage something like this. Also can you comment on how it has worked for you to share these responsibilities with another family. Is there any issues with monies/payments coming to you in the US from this rental property?Thanks so much....also do you have a link to your property? It sounds incredible. Jody

Steve Hendrix: Get a good local agent. We were totally dependant on the expertise and good will of Armand Boissey, an expatriate Frenchmen who has lived on the lake for years and knows everything and everyone. Find your Armand!

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Hagerstown, Md.: No question. Just a comment. I just read your story online, and I must say I'm appalled. I'm an unwed mother of two who can barely make ends meet with one house, yet the Post sees fit to dangle a story in front of me about someone who owns FOUR. please!!!!

Steve Hendrix: Hey, as someone who was raised by a single mother in a rented apartment, I'm sorry you read it that way. Part of our story of real estate investing is to point out that it can be a way to build assets over time, even if you don't have a whole lot of money to start. We didn't. I was a freelance writer with big student loans and she was low-level policy wonk at an NGO. But we had good credit (thanks to my wife's careful management of our finances), and we searched until we found programs that would lend us 100 percent of the cost of our first house. (Not everyone thinks those are such great programs, but it sure worked for us)

After that, thanks to the growing real estate market, we were able to borrow from one house to make a downpayment on the next, giving us better terms.

My mom would have delighted.

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Guatemala: I saw an essay recently suggesting Guatemala would benefit by changing its name to reflect more of its Mayan history and less of its recent history. Agree?

Steve Hendrix: Hmmm. I love the name Guatemala (Is there a funner country name to say? Guatemala. Guatemala. Guatemala.)

But it's not my country. If they want to change it to celebrate the truely awe-inspiring Maya history, I'll stand by and applaud.

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Bethesda, Md: Was there anything akin to a title search involved in your pre-purchase activities? Were you at all concerned that, at some point, the land on which the house is built could have been seized from relatively vulnerable landowners who were the victims of the somewhat problematic ownership protections described in your article?

Steve Hendrix: Our land had been owned for more than a decade by the guy we bought it from, and before that there was a clear record of the owners (it was three separate parcels). We did have a local lawyer who was easily able to gather and vet those documents, so we felt the title was free and clear. But as Armand told us, the most important certainty was that the village itself knows we bought the land. There is a land title reform effort going in in Guatemala now, which gives us even more confidence.

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Chevy Chase, Md: We've talked about investing in rental properties for years, but your ability to do the repairwork yourself seems key to success. Would you ever consider it without the time or skills - ie having to retain a property manager? I've heard you lose 10-15 percent of the rental income...

Stop talking about the lake house! We need everyone to forget about it so WE can go!

Steve Hendrix: It sure helps a lot when you don't have to spend $100 everytime the disposal gets stuck (which is basically a 30 second fix). But it's not key. I've been doing less of the handiman work as I've gotten busier with my real job and kids. Ann has been doing more, and we hire more quickly. It can work either way.

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Helena, Mont: I'm curious as to why you didn't use a local (Guatamelan)attorney to protect your interests. It appears that things worked out ok, but, man, you were hanging out there!

Steve Hendrix: No kidding. Basically, we chose to believe everything everybody told us. Remember that, as you evaulate the quality of my investing advice.

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St Petersburg, Fla: Wild card: Norwegians are the main tourists there, you said, and, if I can buy similar property - which my Filipino wife can actually own - in the Philippines, (not so far from Europe) is their any obvious fault in the analogy? My in laws could attend to watching the house/maintenance. Comments?? (P.S. Like lots of places, many areas of the Philippines are quite safe and pleasant.)

Steve Hendrix: My answer to questions like that is always the same: Buy!

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Manhattan, NY: Do you have any thoughts on whether it would be better to buy a single family villa or a small hotel? We are currently interested in buying property in Morocco and have had opportunities turn up in both.

Steve Hendrix: It's probably just a matter of management. Running even a small hotel is a much more involved than running a single family house (more staff, more guests). You'd have to have the right local folks, unless you're going to be there yourself. Sounds fun, though. You'd have your own bar!

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JC, NJ: As you buy each house, do you worry about market trends? Is fear of depreciation ever a concern? Because a lot of markets these days are very hot, would you recommend waiting it out before buying?

Steve Hendrix: What do you mean, "depreciation"? House values can go DOWN???

Gulp.

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Washington, DC: What a fun article! I grew up in Mexico, and have travelled to Brazil, Costa Rica and other Latin American countries. I ask myself on a daily basis why it is that we do not own any property in Latin America. What were the challenges of going 'halvies' with friends? I don't think my husband and I could afford a vacation home on our own, but I think it might be feasible with some friends and/or family. Being here and not there...could you please lay out some steps in making a vacation home in Latin America a reality. THANKS!

Steve Hendrix: We couldn't have afforded it--financially or psychically--without our partners, Jim and Katie Sebastian. Splitting the cost of everything is great, of course, but mostly its the joy of sharing the joy (and the hassle) of a wacky project like this.

What were the chances that TWO families would think this was a swell idea? Second to having the perfect spouse, having the perfect friends is key.

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Sheni, Waldorf: I am a Guatemalan native and thank you so much for bringing positive attention to a country that greatly needs it and certainly deserves it. Unfortunately many people will never discover the majestic beauties the country has to offer out of fear of crime and uncertainty. I applaud you on your quest and wish you the best in the future. My husband and I too hope to one day own a piece of that small yet uncomplicated piece of heaven. I will suggest to anyone traveling that you check out other beautiful places like Samuc Champei, San Lucas Toliman, Los Siete Altares, Playa Dorada not to mention the obvious ones like Antigua, Tikal and Panajachel.

Steve Hendrix: I'm going to copy your list of tips! Thanks so much.

People are smart to be cauitous about security, and I certainly pay attention myself. But once I'm on the road to the Lake, I always feel totally...normal. Just like I do here. It's a wonderful country. I hope it can get past its past, and I hope my spending money there can help.

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Washington, DC: Why so many Norweigans in Santa Cruz and around Lake Attitlan? We were just there, and (long story) ended up hanging out with some. Also, where does your sewage go? I hear that the Pana sewage goes right into the Lake and that the increased tourism could jeopordize the lake's health.

Steve Hendrix: Don't know, but it's probably the same reason I keep meeting folks from Mongomery County there. Word spreads. (I think we may petition for a Ride-On Bus stop in Panajachel.)

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Guatemala City, Guatemala: I just wanted to thank you for emphasizing that the new upsurge in violence is not very likely to affect tourists very much. I have two questions for you.

Judging even simply from this discussion it's obvious that security and stability remain the biggest barriers to foreign investment in Guatemala. To what extent do you think those factors are over or under emphasized and what do you think it's going to require to overcome these obstacles in the eyes of the outside world?

I was also wondering what role you think outside investors like yourself have in helping to develop the country? I know it's personally heartening for me to know that someone such as yourself has such a large stake in the country.

Steve Hendrix: Well, I sympathize with people who want to make sure they're not putting themselves and their families in danger. As you know, there are no guarantees that you won't be a victim of crime there (or here, as I keep saying). But the odds great that you will have a fine time with no problem. It's just never worried me that much, and I traveled alone there a lot.

I HOPE outside investment will be a huge boon to Guatemala. Tourism is already the first or second largest industry and you only have to look at Lake Atitlan or Antigua to see how tourist dollars can spread through the towns.

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Bethesda, Md: Sometimes it seems the most beautiful areas are the most disaster-prone -- Isn't that the same lake where a mudslide buried a whole village of over a thousand people at around the same time that New Orleans was flooded last year? Do you have some sort of local or international insurance in case something like that happens to your house?

Steve Hendrix: We were THIS close to buying a place in the French Quarter a few years ago. I still wish we had.

Yes, more than 600 people were buried in Santiago Atitlan. I went down, along with other reporters, to cover it for the Post. Any area near a watercourse was devastated. Our side of the lake fared much better, and locals said they were impressed with tthe government response.

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Guatemala City, Guatemala: Just to answer the comments about the Norwegians. Norway had a kind of wild card stake in the peace accords and has been involved a good deal ever since.

Steve Hendrix: Really! Thanks so much for that.

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Washington, DC: What would you suggest folks consider before going into real estate with their friends? It seems to have worked out for you rather well, but if there were some bumps in the road how did you handle them? Do you have a sort of chart letting each other know when the other is staying there, etc?

Steve Hendrix: Clear understandings and, for any substantial amount of money, written contracts. We've done it twice now, and those guidelines have made it work both time.

Ultimately, it's probably the nature of your friendship that count most.

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Annandale, Va Isn't Atitlan an active volcano? I seem to remember discussions on Frommer's boards about which hotel has the best views of the lava fields. Granted, it seems to be the constantly mumbling sort of volcano rather than the explosive temper type, but it would still make for a noisy neighbor.

Steve Hendrix: There's always a little puff of cloud hanging over it. Someone on this chat felt an earthquake there, but I never have. We have active thermal vents in the water by our dock. Pile up some rocks and you've got a natural hot tub!

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Washington, D.C.: Amazing story Steve. I have always dreamed of owning waterfront property and you have provided an interesting alternative to the absurd prices in the US. I have a few questions:

- If you have to take a boat to get to your house, how does the water/electricity work?

-Do you have a link or advertisement to rent the house?

-Does flooding concern you? I've heard that Hurricane Stan did some damage about a year ago.

-I imagine the money transaction and ownership papers gave you some heartache. Any additional thoughts or references?

Thanks!

Travis

Steve Hendrix: Well, we certainly sweated bullets after wiring all that money down. But ever person who ever contracted with us (builders, the original owners, the van drivers) has delivered honestly. So now we don't worry about it any more.

For power, it's on the grid. We lose it a lot, but never for long. And yes, Hurricane Stan knocked out our dock, since repaired.

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Germantown, Md: Four years ago I purchased a building lot high on a mountainside on St. John, VI (I wasn't there at the actual closing). I couldn't afford to buy that lot today. I've had houseplans created (handshake contract-nothing in writing other than my Emails)and I'm looking to start building a small house late this year for rental purposes and later retirement purposes. Any suggestions?

Steve Hendrix: Congratulations! Get a reliable open person to act as your agent, unless you can spend a lot of time down there. Find your Armand!

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very impressed Steve!: I read the entire story before knowing you wrote it. I really should read bylines ahead of time!

At any rate - it's really beautiful. Congratulations. I'm nearing the point in my life where I may be able to afford a vacation/rental investment in another country - any generic advice to give?

I'd most likely end up in Normandy or perhaps southern France somewhere, or somewhere in Italy. What a dream!

When do you expect to break even? How often do you visit and how long does it take to get there?

Steve Hendrix: Thanks so much, mystery poster. Good luck house hunting. Break even? That must be another investment term that's new to me.

On that note, thanks everyone for all the questions and comments. I'm sorry I couldn't get to more of them, but I've got writers cramp. (and I'll see some of you over at the Travel section chat...now!)

Bye for now.

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