Real Estate Investing School Podcast

Episode 161: International Real Estate Investments with Andrew Bilak
Date: May 27, 2024
Host: Joe Jensen
Guest: Andrew Bilak

Episode Overview

In this episode, host Joe Jensen interviews Canadian real estate investor Andrew Bilak, who specializes in acquiring cash-flowing rental properties abroad, with a current focus on Costa Rica. Andrew shares his journey from student rentals in Canada to building a consulting and marketing business that assists expats in navigating the Costa Rican property market. The discussion is candid, focusing on lessons learned, practical advice, and the realities of international real estate investing.

Key Discussion Points & Insights

1. Andrew's Early Real Estate Journey in Canada

• Started with Student Rentals:

  • Andrew began his real estate journey about five years ago, investing in student rental properties in London, Ontario, Canada—where he attended college.
  • Partnered with his then-girlfriend to buy two houses in a "student ghetto," charging by room for robust cash flow.
  • "Charge by room, you got turnover every one to two years. It was a good foray into real estate." (B, 01:37)

• Lessons From Partnerships:

  • Partnering with a romantic partner led to complications; after their breakup, they sold the properties, fortunately timing the market well for a 35% equity gain over two years.
  • Key Takeaway: Always have a partnership agreement in place, even when working with close friends or romantic partners.
    • "If you run into a situation where things end up getting salty...it's good to have that when times are good. Because when they're bad, you can look back on that." (B, 07:14)
    • Joe: "Contracts keep friends friends." (A, 08:37)

2. Real Estate Lending Differences: Canada v. USA

• Loan Terms in Canada:

  • No 30-year fixed rate loans; standard terms are 3 or 5 years.
  • After the term, the mortgage rate adjusts to the prevailing rate—creating challenges in a rising rate environment.
    • "You are going to be taking on a new mortgage at that, at that term date. So whatever rate you had before, it doesn't matter." (B, 09:55)
  • Investment loans typically require 20% down; only first-time home buyers can potentially go as low as 10%.
  • No 1031 exchange equivalent; investors must pay capital gains when selling.

• Comparing to the U.S.:

  • Joe emphasizes the comparative advantage of U.S. real estate financing, especially the 30-year fixed rate at low down payments.
    • "We have a gift, like we're so freaking lucky. Like, take advantage of these loans..." (A, 13:49)

• Affordability Issues:

  • Skyrocketing home prices in cities like Toronto and Vancouver are leading to multi-generational housing and significant barriers to entry.

3. Investing Internationally: Why Costa Rica?

• Origin of Costa Rica Investments:

  • Initial attraction came from personal travel and love of surfing.
  • Andrew attended a webinar about pre-construction opportunities in Costa Rica shortly after a trip, leading to his first purchase.
    • "Pre construction in this new development...going for $140,000 US, and I was like, I'm in." (B, 19:10)

• Due Diligence & Challenges:

  • Sourcing reliable information was the hardest part; it took two months to answer all questions regarding local laws, developers, safety, and financing.
    • "The biggest hurdle...was finding the truth to the answer to the questions that I was asking..." (B, 19:54)
  • Emphasized the importance of verifying builders, developments, and safest areas, especially for first-time buyers abroad.

• Costa Rica's Growing Popularity:

  • Now ranked at the top for retirement and luxury real estate by several travel publications.
  • "The secret's out...seems to be this perfect storm because there's softening in real estate back home...rates are high, people still have money, people want to travel, people want to invest." (B, 21:16)

4. The Practicalities of Buying in Costa Rica

A. Financing

• Limited Financing Options:
  • Most common scenario: investors refinance their home in their native country and use cash.
  • Local Costa Rican lending is very difficult for foreigners and comes with high interest rates (9.5–11%+).
    • "People who are going down there and are buying, they are still buying cash...they are their own banks." (B, 22:54)

B. Ownership Laws

• Ownership Rights:
  • Foreigners have the same property rights as citizens, can buy from day one without residency.
    • "You go into the land registry, you get your finca number, the ownership of your property and it's registered in your name." (B, 25:39)
  • Investing $150,000+ secures eligibility for an investor residency visa.

C. Due Diligence Advice

• Importance of vetting developers, properties, and on-the-ground partners.
• Trusted, local contacts are crucial for avoiding scams and ensuring a property is legitimate.
  • "Have trusted boots on the ground to provide you some background information..." (B, 25:39)

D. Rental Market Insights

• Short-Term Rentals:
  • No national restrictions on short-term rentals; tourism is vital to the Costa Rican economy, making this a favorable strategy.
    • "There’s a massive short term rental market." (B, 28:31)
• Rental Seasons:
  • Dry season (Nov–Apr) is peak rental time.
• Market Research Tools:
  • Andrew recommends using tools like AirDNA for rental projections and Airbnb for comparable listings.
• Tenant Protections:
  • Long-term lease laws tend to favor tenants, so investors should be cautious with extended rentals.

E. Property Management

• Boots on the Ground Essential:
  • Quality property managers are vital given the climate (humidity, mold, pests) and local nuances.
    • "You really, really need a property manager...this might be the most important process, vetting process, you go through..." (B, 35:21)
• Finding Managers:
  • Andrew finds success by visiting, building connections, and seeking referrals from locals and other property owners.

F. Dealing with Language Barriers

• Google Translate is invaluable; enough people speak English to get by, especially for big transactions.
  • "If you have your phone and Google Translate, it's perfect." (B, 38:56)

5. Andrew’s Consulting & Resources for Investors

• Provides free educational resources and a networking group for aspiring Costa Rica investors.
• Also offers hands-on, full-service support—finding deals, connecting to vetted professionals, due diligence, property managers, and more.
  • "My goal is to help people get through that process as seamlessly as possible through that free content...but...if they want that help, I can provide them with those services from top to bottom." (B, 40:12)
• Instagram is the main hub for updates and resources: @andrewbbilak

6. Are Costa Rica Rentals Cash Flowing?

• Andrew reports success with both appreciation and rent:

  • His first $140k pre-construction property was worth $220k on completion—a 30% unrealized equity gain. (B, 43:18)
  • Consistent bookings even in shoulder season, though he stresses the importance of differentiating your rental by delivering added value and experiences.
    • "You need something to offer...people are planning vacations...they want an incredible experience." (B, 45:13)
  • Building connections with locals for activities/tours can enhance guest experience and your rental’s appeal.

• Market isn't over-saturated, but you can't be passive and expect success.

7. Advice for Aspiring International Investors

• Start from Personal Enjoyment:

  • Focus first on places you'd love to stay, then analyze the numbers for rentals.
  • "Look at it first through the lens of where would I like to go...if it intersects with an amazing opportunity to also rent it out while you're not there, that's where the magic happens." (B, 47:31)

• Stay Open to New Paths:

  • "I never anticipated this is kind of where I would be...but it’s really interesting to see how the universe works. Open the door and don’t be afraid to see where things go..." (B, 48:18)

Notable Quotes & Memorable Moments

• “Contracts keep friends friends.” – Joe Jensen (08:37)
• “People who are going down there and are buying, they are still buying cash ... they are their own banks.” – Andrew Bilak (22:54)
• “If you have your phone and Google Translate, it’s perfect.” – Andrew Bilak (38:56)
• “Look at it first through the lens of where would I like to go with my friends or my family? Because at the end of the day, this is a place you get to go and enjoy...” – Andrew Bilak (47:31)
• “Open the door and don't be afraid to see where things go, even if it wasn’t your idea of where you thought it would be.” – Andrew Bilak (48:18)

Timestamps for Key Segments

• Student Rentals Journey: 01:06–04:15
• Importance of Partnership Agreements: 07:01–08:52
• Canada v. U.S. Lending Differences: 09:16–14:41
• Rising Housing Costs and Multi-generational Living: 14:41–16:43
• Pivot to Costa Rica / First Deal: 18:01–19:54
• Costa Rica Ownership, Residency, Financing: 24:04–28:27
• Short-Term v. Long-Term Rentals, Market Seasons: 29:12–33:08
• Property Management Insights: 33:36–37:51
• Handling Language Barriers: 37:53–38:56
• Andrew’s Services and Resources: 40:02–42:21
• Cash Flow & Investment Performance: 43:18–46:22
• Closing Advice & Philosophy: 47:31–49:08

Final Thoughts

This episode provides a transparent, experience-based roadmap for those curious about international real estate, particularly in Costa Rica. Andrew emphasizes personal enjoyment, due diligence, and fostering local relationships, all while highlighting the practical, financial, and legal realities of investing abroad. Both his story and service offerings aim to lower the barrier for others to create their own version of a "paradise investment."

Connect with Andrew Bilak:
Instagram: @andrewbbilak

Host: Joe Jensen
Podcast: Real Estate Investing School Podcast