Warren Buffett is the world’s richest and most successful investor. He looks for businesses with what he describes as “economic moats”. That’s something special or unique that insulates them (and their margins) from the ravages of competition.
Examples of such a moat might be a brand like Coca Cola...or the scale, cost base and buying power of a Walmart...or other protections like a patent or monopoly. These moats make it difficult for competitors...and keep sales and margins strong.
On my beat of scouting for undervalued international real estate, I look for property opportunities with similar protections. Nothing undermines real estate appreciation potential like a flood of supply. That’s why we look for a moat that will prevent a flood of supply of similar units. Plus, a very special attribute that’s difficult to find elsewhere.
Let me explain by way of an example.
Tulum is located at the southern edge of Mexico’s Riviera Maya. The best beaches in Mexico are here. This is an area rich in nature and culture.
The Tao project is close by and within the upscale Gran Bahia Principe resort. The appreciation potential of the Tao project is strong...in part of because of its “moat” type attributes.
First, the white-sand beaches are Mexico’s finest. You just can’t replicate that.
Second, the infrastructure is already in—$100 million has been invested to date to get the resort looking the way it does today. There will be no other resort like this for at least another decade. Front loading an investment of $100 million is a huge barrier to entry. Even if/when someone is willing to invest this much money it will be at least a decade before the project is off the ground when you figure the complexities of planning, permitting and infrastructure.
Third, Tulum just can’t sprawl south along the coast. The protected Sian Ka'an biosphere covers 1.3 million acres. There's an additional 200,000 protected acres south of the biosphere. That limits the amount of land available for residential and resort development.
Finally, once developed the concept and amenities at Tao will add a unique dimension. Ground has broken on The Tao Center. This will be the focal point of the community. The focus is on health and wellness. You will be able to stretch or do yoga on glass platforms looking down to magical caverns. You can stay fit in the gym or by swimming the lap pools that weave their way through this complex. In the evenings, you can learn salsa and the traditions of the ancient Maya with your friends and neighbors.
Creating this type of community isn’t easy. You don’t just plant a “for sale” sign on your land and start selling lots. You need a place of outstanding natural beauty and prime cultural importance. You need the people to design and deliver the experience. You need First-World infrastructure to get you there and keep you connected.
Tao is a project with competitive advantages and a decade head start in an area where a government plan calls for the increase of tourism numbers from 3 million to 11 million by 2025.
Join us in Toronto for the International Real Estate Investment Forum and discover how you can get in with as little as $15,000 down and monthly payments of $800.
About the author: Ronan McMahon is the director of Pathfinder (IL’s preferred real estate advertiser).