JF1540: Grow Your International Portfolio By Passively Investing In Another Country with Eric Berman & Sam Miller

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Sam and Eric are partners and working together to grow their own real estate investing business – by helping other investors also grow theirs. If you’re trying to grow your own portfolio, they have an opportunity for you. You can passively invest in vacation rentals in Columbia with their company. They also chronicle their adventures on their popular YouTube channel: https://www.youtube.com/user/samaza. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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Eric Berman & Sam Miller Real Estate Backgrounds:

  • Both work to scale and grow their company Lifeafar, which is a collective of visionaries, business experts, and adventurers
  • They are using their success to show how a new lifestyle and investment abroad can work
  • Eric serves as the CIO, he has advised a wide array of lenders and developers on over $2B USD of mixed-use real estate and hotel transactions
  • Sam fled the 9-5 in 2009 when he took off on motorcycle across the Americas
  • Currently Sam is chronicling travel, lifestyle, real estate and investing in Colombia for Lifeafar
  • Based in Columbia
  • Say hi to them at https://www.lifeafar.com/
  • Their YouTube Channel: https://www.youtube.com/user/samaza
  • Best Ever Books: War of Art

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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Eric Berman and Sam Miller. How are you two doing?

Eric Berman: Good. How are you, Joe?

Joe Fairless: I’m doing well, and nice to have you two on the show. Eric is the CIO of LifeAFAR, and Sam is the vlogger for LifeAFAR. They will tell a little bit more about that company. Both of you work to scale and grow your company, LifeAFAR, which is a collection of visionaries, business experts and adventurers, and we’ll get into the specifics about what that business is… Let’s go ahead and do that right now. Do you two wanna give the Best Ever listeners a  little bit more about your background and what LifeAFAR is in terms of the actual business?

Eric Berman: Sure, I’ll start off. This is Eric. I began my career as a CPA, and  then spent the next five years doing corporate real estate finance; through that I had exposure to a lot of lending and development advisory on mixed-use buildings and hotel assets throughout the U.S. and Latin America. About three years ago I moved down to Medellin, Colombia, where LifeAFAR is headquartered; I was exposed to real estate opportunity down there.

I’ll let Sam give a little bit of background as well, but in a nutshell, the 30,000-foot level, LifeAFAR is a real estate investing platform that allows investors from the U.S. to find deals otherwise not easily accessible. We do that through the crowdfunded model, which is how we finance a lot of these projects. Sam, I don’t know if you wanna expand on that a little bit…

Sam Miller: Sure. I started in Canada a motorcycle journey through the Americas, found Colombia, saw something special here. I started getting involved in real estate. I eventually partnered up with the partners at LifeAFAR. We came from being a brokerage, a furnished vacation rental agency, and we started listening to what the investors who were coming to Colombia, who were looking at real estate in Colombia, what they really wanted… And they wanted something that would generate passive cashflow for them when they weren’t there, staying in the property themselves. That need has led us to develop the product that we have today, which we can go into.

Joe Fairless: From what I’m hearing so far, it sounds like you all offer an opportunity to invest in vacation rentals in Colombia… And I’m sure I’m not getting it all correct, but from what I’ve heard so far – vacation rentals in Colombia, and the investor can stay there whenever they want, but then when they’re not staying there, they’re renting it out and making some money. What about what I just said is accurate and what part needs clarification?

Eric Berman: I would say all of it is accurate. A lot of our investors actually don’t travel to the properties, but a lot of them are just looking for that passive income, and looking to diversify into different markets. Sam, what do you think?

Sam Miller: It’s fairly accurate. It is vacation rental, but really are taking on the vacation rental market in a different way. We have a lobby, we have our HQ in the middle of our markets… So it’s almost like a decentralized hotel, in some ways, where we’re taking the convenience, the predictability of the hotel world and bringing it to the Airbnb world, which can be a little less unpredictable, but sometimes a bit more chaotic. So we’re kind of blending the best of both of those worlds.

Joe Fairless: Can you give some specific examples of how you blend the hotel world and make it a little bit more conservative with that world, and bringing it to the Airbnb model?

Sam Miller: Sure. The Airbnb experience has some unique local accommodations to stay in; we have that side of it. When it comes to making your booking, when it comes to getting a driver from the airport, preferably bilingual, someone that’s gonna be able to take better care of the guest, professional check-ins, so you’re not coordinating with somebody who has a full-time job and works on the other side of the city, so smoother check-ins… And then an ongoing 24-hour concierge service over WhatsApp; you’re always in connection with the host, who is connected to various tour, travel activities, and they can plug you into the local scene a lot more predictably than a random host. There’s that, and there’s a lot more we could get into, but that’s one of the more visceral ones for the guests who stay in the apartments.

Joe Fairless: Okay. So it’s like more of a VIP Airbnb experience than a traditional Airbnb experience from a guest standpoint.

Eric Berman: Yeah, I would say that’s correct… And if I could just add to that – Sam mentioned we’re responding to the guests’ feedback that we’ve gotten, and our newest project, which is actually in the old [unintelligible [00:07:57].03] of Puerto Rico, is gonna encompass a lot of F&B zones. So it’ll have a rooftop bar and restaurant, on the ground floor will be some sort of high-end food market with (it could be) an independent beer garden, or something like that… And then it will also have a fitness center.

So we’re looking to provide the amenities in these buildings that you would be accustomed to in a hotel, but also the uniqueness of Airbnb spaces, as Sam mentioned.

Joe Fairless: Got it. So I now understand – and thank you for very clearly walking me through – what the experience is for the guest. For your business model with your company, is your customer the guest, so you’re focused on the management side, or is it getting investors to invest in the properties that you all control or you list, and then you do the management side as well?

Eric Berman: Good question. It’s both. I think that’s something that makes us unique and it differentiates us – on the front-end we’re really focused on getting investors, and through that crowdfunded model we acquire properties, we visualize the concept, and then we develop the properties. Then our property management team takes over and we manage the property, we operate it full-cycle.

Joe Fairless: Okay. Cool. Sam, anything to add on that?

Sam Miller: At the end of the day, there’s guests who will come into an apartment; they know what Airbnb is, they know that in general it provides higher returns, and in a market like Colombia, like Puerto Rico, that rings true, as well. So we’re on the ground when we identify a property that has potential for conversion into a building of Airbnb units. We have, very importantly, the data which allows us to predict and forecast and project what numbers in terms of the guest side, and allows us to put together the investment project very confidently.

As we’ve gone through and we’ve done about 14 of these types of projects, we have more investor relationships, so we’re growing on both sides… And I think because we are administering the properties ourselves and we’ve also promised to the investors different returns, we do whatever it takes to compete in those markets. We’re looking at how we are serving guests, how can we take that to the next level on that side as well.

Joe Fairless: How do you identify a property that has potential for a conversion?

Sam Miller: Sure. This market that we’re in — four cities, currently: Bogota, Cartagena, Medellin and Cali. Each one is slightly different. Some of them are more vacation rental, some of them more international tourism. Bogota is a top business destination, so you have different profiles there. So it’s a combination of looking at the real estate trends in the city, but because we’re not necessarily targeting the local market as our primary market, we’re looking at areas that are going to serve the international visitor to the city in the most effective way; that’ll come down to location, that’ll come down to what bars, restaurants, which parts of the town are trending in terms of favorites from the foreigners… And then also the rental rates – it really helps that we have a portfolio of over 200 properties that we manage in our markets, because it gives us a very accurate idea of what we can generate from a particular building.

Joe Fairless: So you’ve looked to see where the international visitors are currently going, and you look to see how much potential rent you could charge them based on the properties you’re already renting in that particular area… What about the in-between of you see a property, and then you know what the end result is, but in order to get there, you’ve got some (I’m imagining) renovations that need to be done. So how do you project the renovation costs and the timeframe that you can do those in?

Eric Berman: Good question, as well. We have an internal architecture and design team, but we really work with local partners in everything that we do, and that’s one of my biggest pieces of real estate advice in general – always work with a local partner, somebody who knows the laws, the language, the regulations, and more importantly, the costs of developing and doing business in that market.

Joe Fairless: Got it. And how do you vet that?

Eric Berman: Experience. Like Sam said, we have a team in each of the cities, and in Puerto Rico, which is our newest market, we have a local development partner there as well, and we’re using all local architects and contractors to lead the work. And just to kind of add on the guest side as well, in terms of identifying a project for our investors, there’s a lot that plays into the potential returns in Puerto Rico, for example; there’s a lot of tax credits and incentives right now, as well as Puerto Rico being designated an opportunity zone… So for investors with capital gains, it’s a huge advantage to take advantage of right now in terms of investing.

Joe Fairless: So you kind of just answered a question I was about to ask, but I’ll still ask it, just to get additional thoughts… The question is, if an investor is looking at a deal — let’s put Puerto Rico aside, because you said there is an opportunity zone, so there are some capital gain benefits there, but there’s also opportunity zones all over the U.S, too… But if an investor is looking at opportunities in, say, Bogota, through your platform, and opportunities in their backyard – and I’m sure you come across this question a lot – there is certainly a perceived risk, and I think justifiably so, investing outside of the country, in an area that they perhaps have not been, versus in their backyard… So what is the counter-point to that argument?

Sam Miller: I’ll say something and then maybe Eric you can jump in. I think that’s huge. Colombia is another country, and in South America — it’s been isolated for a very long time, it’s got a lot of incorrect and outdated associations… I think the best way to really update the reality of the situation is through video, and that’s one of my main focuses on the YouTube channel – “Sam – LifeAFAR” if  you’d like to see first-hand. I try to really give a perspective of what that potential investor would be curious about, about what’s happening, what’s going on, to kind of overcome some of those objections. Once people get here, they understand and they become much more comfortable with it.

Eric Berman: Yeah, I think that’s a good point. I would add that another piece of advice that I like to give real estate investors and the Best Ever listeners is that I would always diversify, in terms of not only asset class that you’re investing in in real estate, but geographically, as well. You never know when, where or how the economic markets are gonna be affected throughout the world. We as a company are founded and based upon our success in Colombia, but we’re now taking that success and looking to replicate it into other international markets that might not be as common for real estate investors to do projects in; we wanna replicate that success and help them do so.

Joe Fairless: And I think I heard Sam say you’ve done 14 projects like this so far, and Colombia is a big ol’ country, so why not just focus on Colombia and do more projects there, versus trying to go to different countries? Because to me that seems like that would increase your risk, versus working with the same proven team members.

Eric Berman: Yeah, it’s definitely a process that we’re taking slowly and gradually, and we’re certainly not going to jump into a new market until we’re confident that we have the right partner to do so, and that we can build upon the success that we’ve already been achieving with our investors. I think there’s  a lot of other great opportunities to be found in real estate in other countries as well, as Colombia, and that’s one of the main reasons — I know some of our feedback from investors is they’re open to seeing opportunities in other countries, other geographies of the world as well.

Joe Fairless: From a business standpoint – I’m just putting myself in your shoes – it seems like it’s a greater amount of effort to find other team members in different countries, versus me just sticking in Colombia if I’ve done 14 projects there; it’s a whole country. Still, there might be greater opportunities in other countries, but is it really that much greater with the risk and the time associated to it, compared to just staying in Columbia?

Eric Berman: I think it also has to do with expanding our platform.

Joe Fairless: Okay.

Eric Berman: The community that Sam was talking about how we’re building, and providing that guest experience – it goes twofold. One is providing opportunities to investors, but also providing new locations for our travelers and guests to stay at and experience.

Joe Fairless: Oh, got it. So do you have a following of guests  who seek out the different destinations that you all have, to experience what you provide, that VIP Airbnb experience?

Eric Berman: I think Sam will probably best answer this…

Sam Miller: Yeah, going to the core of the question (why expand), I think the risk in terms of starting with new partners is mitigated through using the same talent, with the same skills, so when it comes to identifying the deals, when it comes to the finishing touches on the property and what’s that final product gonna look like – those are things that we’re still managing, and it’s a part of the business that we’ve expanded successfully to other cities… And when you have the right team – and we have a significant accounting, administration and legal team – we’re able to make these moves and we’re able to expand our core value, which is [unintelligible [00:18:00].15] integrating this investment process.

Joe Fairless: Sam, when you’re creating the videos about whatever you all are investing in, and you’re thinking about it from a business standpoint, where I imagine the business outcome is to – as you said earlier – proactively address some objections that investors might have, or just simply make them more comfortable and familiar with the surroundings, what are some things that you make sure you do, or film, or experience, in order to accomplish those objectives?

Sam Miller: I really like the vlog style. It’s less scripted, it’s getting out on the street, walking past properties and explaining, “Well, this is what this property is worth, this is how much it’s worth per square meter, this is what the zone was like eight years ago, when I first arrived here, and this is what’s happening now… This is a new restaurant, this is a new bar, this is a new designer shop”, you can clearly see some of those gentrification trends that pass through particular areas as they improve, in each markets. It’s very interesting how each one plays out.

Showing the process, speaking to agents who work in the area as well, showing example properties… Just being as transparent as possible. I get it, it’s like — it’s some new people in a foreign country, that you may or may not have a positive perception of, but at the end of the day, that shared perception, that shared agreement of value of the real estate is what determines the value… So we look for areas that are not always in the most prime locations; we’re looking right on fringes. We’re following basic real estate formulas – looking where the movements are, looking where the expansion is, and getting in on those areas.

We’re very transparent with our process, I think that’s the best way to put it.

Joe Fairless: How do you identify where the international travelers are going, from a quantitative standpoint? Where do you look?

Sam Miller: In the last ten years I think we’ve served about 25,000 guests now, so we have that data. We speak to our property management teams where the new trends are coming. We’re ten partners now, we’re all based here in Colombia; we’ve come from all over the world. Our marketing director came from San Francisco, he was working with GAP up there, and he decided to see what was happening in Medellin, and eventually fell in love and moved a few years later. We all live here, we’re all experiencing it for ourselves, so they’re like our local markets.

Joe Fairless: Such a smart idea, to do the vlog… How long has that been doing?

Sam Miller: About two years now. I saw some movement in terms of what people were doing with video, what people were doing with YouTube, which after all is the second-largest search engine after Google… I’d been writing articles, and I just saw the opportunity in videos, so I thought it was the best way to really show what was going on.

Joe Fairless: Taking a step back, thinking about it from a real estate investor’s standpoint, here’s the question I ask everyone – what’s your best real estate investing advice ever?

Eric Berman: Mine is diversify and find great partners.

Sam Miller: Yeah, great partners, as well as demographics. I think at the end of the day it’s demographics – where they’re moving, what people are  moving there and what they desire.

Joe Fairless: And earlier — I don’t remember which one of you said it, but I wrote this down… You said you’ve done 14 deals in this model, and you’ve looked at data to predict where to go, and Sam, you just talked about how you get that data… One question I have on that is “How has the process of analyzing the data evolved from when you started to where you are today?” And I ask that just to see if certain things have become more or less important as you’ve been looking at the data to predict future success of projects.

Eric Berman: Yeah, I would say that internally, the property management team has certainly grown, and with the increase in sheer volume of data, of course, you have a bigger data pool to analyze, and I know that our team spends a lot of time analyzing trends from the guests, feedback from guests, international traveling trends and traveling trends within Colombia, as well – where the guests are arriving from, how long they’re staying for… Points of that nature.

Joe Fairless: So you’ve got more data, which is a blessing and a curse usually, because then it’s like “Okay, I’ve got all this information, but how do I make sense of it? How do I prioritize?” Is there something that you were prioritizing or not prioritizing at the beginning, that now you either increased the priority of that or decreased it?

Sam Miller: You know, because we are focused on the international travelers in a country which is going through a tourism boom – it’s gone from 2,5 million 8 years ago to 6,5 million international tourists per year, and I think it’s got a long way to go still; the negative perception is still out there, but every single person who comes to Colombia becomes a raving ambassador afterwards… So a long way to go there. But in terms of looking for these trends, it’s looking at, okay, where have they chosen now, and how is that growing?

We’ve been living here for these past ten years and we’ve seen growth, where it starts in particular parts of town, and it grows up, it gets very popular, then people look for an alternative to that popular part of town… It’s really something that we see first-hand. But then you look for the data to back it up, as well.

Joe Fairless: We’re gonna do a lightning round. Are you two ready for the Best Ever Lightning Round?

Eric Berman: Let’s do it!

Sam Miller: Let’s do it!

Joe Fairless: Alright, let’s do it! First, a quick word from our Best Ever partners.

Break: [[00:23:38].28] to [[00:24:32].14]

Joe Fairless: Best ever book you’ve recently read?

Eric Berman: Setting the Table, by Daniel Meyer.

Sam Miller: War of Art.

Joe Fairless: What’s the best ever deal you’ve done?

Sam Miller: Creating a job doing what I love.

Eric Berman: Good answer. I like to think that the deal we’ve just signed up in Puerto Rico is gonna be our most exciting one yet. I think it’s gonna be a flagship property for us. It’s gonna enable us to provide an experience way above what we already do.

Joe Fairless: Best ever way you like to give back?

Sam Miller: What I’m discovering now is opening minds to the reality of the world that we’re living in. It’s coming with a lot of baggage, but I think a lot of people are holding themselves back… I’m discovering one of the most beneficial ways I can give back.

Eric Berman: Yeah, I’ll say the best ever way that I like to give back is through education – education of opportunities, whether that’s in real estate, or giving my time to spend time helping to educate under-privileged children. There are a few organizations that I donate time with in Medellin, and I really enjoy doing that.

Joe Fairless: And how can the Best Ever listeners learn more about what you two have got going on?

Eric Berman: LifeAfar.com is the website, and for investors that are interested in learning of opportunities, investments@lifeafar.com is where you can reach us.

Sam Miller: And if you’d like to see visually what we’re doing, and inside and outside of our projects, “Sam – LifeAFAR” on YouTube.

Joe Fairless: Well, Sam and Eric, thank you so much for being on the show and talking about your business model, how it works, the opportunities and how you differentiate from other business models, in particular having that VIP Airbnb service, as well as you’ve got many boots on the ground, and you’re using that information to determine where to invest next, and to mitigate risk as a result of that… And how you’re building a level of comfort remotely by having the vlog on YouTube, and showing investors the opportunities and familiarizing them with the area.

Thanks again for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

Sam Miller: Thanks, Joe.

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