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he island of Cozumel is one of the prime cruise destinations in the Caribbean and Mexico, welcoming a significant share of Caribbean cruise tourists to enjoy its traditional Mexican town center and beautiful natural surroundings. Many of these cruise passengers later become interested in buying Cozumel Real Estate, first searching Cozumel MLS listings on the internet, then contacting an agent, exploring their real estate options, and finally return to the island to finalize their Mexico Real Estate purchase. For this reason many of the same aspects that attract cruises to the island later attract foreigners to buy MLS properties on Cozumel.
In 2010, cruise visits to the island have been off to a strong start. During the week of January 4 to 10, Cozumel welcomed 21 cruises, only a couple less than the 23 which arrived the week before, between December 28 and January 3 2010. The following is a breakdown of cruise visits by day.
On Janaury 4, Carnival Liberty arrived in Cozumel, and on the January 5, the cruises Fantasy and Carnival Inspiration arrived, as well as Voyager of the Seas. The sixth of January Cozumel welcomed the Crown Princess, Carnival Legend, and Carnival Imagination. On the seventh Grandeur of the Seas, Independence of the Seas, Ecstasy and Carnival Triumph arrived. On the eighth the cruise ships Carnival Valor, Norwegian Spirit, Costa Fortuna, Carnival Conquest, Liberty of the Seas docked on the island, and on Saturday, January 9, Navigator of the Seas, Carnival Inspiration, Fantasy, Columbus and Carnival Destiny were welcomed to the island.
As this list shows us, Cozumel attracts the most prestigious cruises in the area, in addition to attracting large numbers of both ships and visitors. This leads to the question – why do cruise visitors become interested in buying real estate here and making this island their new home? It’s virtually the same reasons that attract the cruises in the first place. Visitors arriving are welcomed by the more traditionally Mexican town center, with its town square decorated by trees, gardens, benches and walkways. Surrounding the town square are many little shops, selling local hand crafts, as well as excellent restaurants and museums. For those that choose to buy real estate on the island, this quaint atmosphere is embellished with many options of activities, such as snorkeling, diving, boating or fishing. Many of the MLS properties on the island are also in close proximity to Cozumel’s beautiful natural settings.
That’s a question we are all asking today. Why? Because of the many stock market investors who speculated in real estate, the problems surrounding sub-prime loans with the resulting foreclosures and bank failures, and falling home prices.
If the late Dr. David Schumacher, my mentor for the past 10 years and author of the now-famous book, The Buy and Hold Strategies of Real Estate, were still around, I know what he would say because he said it during the last downturn in 1990-1995. He would tell us not to worry. This is only temporary and part of the normal cycle of real estate.
It creates bargains that can benefit you. This cycle has been happening since Montgomery Ward began offering homes for $1,500 through its catalogs. As sure as the sun rises and the seasons come and go, real estate will make those who own it rich over a period of time. He would add that now is the best time to get great deals in real estate.
The Real Estate Cycle
Real estate is still the best investment possible. It always has and always will do well in the long run.
This is the fourth real estate cycle I have been through and none of the downturns were fun. However, if you have patience and look at the long term, your real estate will go up in value more than any other investment. Do not treat real estate as you might treat the stock market, worrying about the ups and down.
Since 1929, real estate has gone up an average of five percent a year; if you stay away from the obvious non-appreciating areas like Detroit, it is more like seven percent a year. At that rate, properties will double in value over 10 years with compounding. Add a federal tax benefit of 28 percent plus state tax deductions, the depreciation write-off for rental property, and the eventual pay-down of the loan and you have a strategy rich people have always used to accumulate wealth.
Over the past 30 years I have watched many flippers who buy, fix up, and sell. I do not know many who have much net worth or are wealthy because of flipping. It is simply a very risky way to make money.
Those who have prospered are the ones who are in it for the long haul and patiently watch their properties increase in value over time. This past downturn was created by speculators who all flipped at the same time, putting too many properties on the market for sale and rental. I guarantee that over the long haul, you will always regret selling any property you have every owned.
Buy and Hold
Since time passes by anyway, the buy-and-hold strategy is a great way to become rich. Dr. Schumacher experienced at least five real estate cycles and did extremely well, acquiring an eventual net worth of over $50 million.
You just can’t go wrong in purchasing an inexpensive condo, townhouse, or single-family home in a good location where there are jobs. Make sure you have a fixed-rate loan, make sure it cash flows, hold on to it for 10 to 20 years, and you have a property that has doubled or even quadrupled in value. When you need to retire, simply do a cash-out refinance to live on or to supplement your retirement pension.
For example, the first property I purchased for $75,000, a townhome in Lake Arrowhead, CA, is now worth $650,000. My first oceanfront condo, which I purchased in Long Beach, CA, in 1982 for $112,000 and used as my residence, is now worth $500,000. One-bedroom condos I purchased in Maui, HI, in the late 1990s for $80,000 are now worth $400,000. Homes I bought around the same time in Phoenix, AZ, for $75,000 are now worth twice that. I could go on and on and on.
What are your Options?
What are your options to building wealth today? The options are to buy real estate and build wealth or to not purchase property at all, to struggle a lot and have nothing to show for it.
- You could do nothing. The 25 percent who do not own a home end up with no assets when they retire. They have a car loan and owe an average of $9,000 on their credit cards. Those who do not purchase rental property may be forced to work past age 65 to supplement their meager retirement income.
- You can try to depend upon your retirement. The above chart shows that you should not depend on your retirement income alone to support you, because it won’t. Those on Social Security or most retirement programs end up living below the poverty line and are forced to work until they drop, so that is not a solution. Other investment options are not doing so well, either.
- Invest in the stock market. We are definitely in a slowdown (I refuse to believe we will have a recession), so the stock market is not going to do well for several more years.
- Invest in gold and silver. They have already made their run; it is doubtful they will do much better. Gold and silver are used as a hedge against inflation and a weak dollar. It looks like oil prices are headed down and the dollar is strengthening.
- Invest in real estate. Those who invest in real estate almost always do well. The following graph shows how the top one percent in income have acquired their wealth. As you can see, the vast majority have invested in real estate.
Don’t Think Short-Term
Real estate is not designed to be considered short-term. Right now, real estate is going down in value in many cities, but it is going up in many others. It is a terrible time to sell and pull out any equity. Only about five percent of the properties are for sale. Most homeowners and investors are simply holding on to their real estate and are waiting for the next upward appreciation cycle.