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My Favorite Real Estate Investment Right Now

By Tom Dyson, publisher, The Palm Beach Letter
Monday, August 28, 2006

Horrible housing numbers came out last week. Home sales fell by 4% in July and the inventory of unsold homes rose to its highest level ever.

In light of these terrible housing numbers, it’s time for me to disclose my favorite real estate investment in America...

This is the last place I know of in America where you can still buy houses for $50,000. I’m not talking about trailer parks or projects... these are three-bedroom houses in nice developments, close to the center of town.

Interested? You should be...

The local schools are excellent, you’ve got cable, high-speed Internet, strong transport links and in most cases, the airports are less than an hour away. Southwest Airlines may even serve your city.

The climate is nice too. These developments are in the southwest, so the air is dry, the sunshine is plentiful and the winters are mild. There’s golf, fishing, and the beaches are within easy reach.

One more thing...

Not only are these houses very affordable, decent, and convenient, but I think they’ll make a great long-term investment. I wouldn’t be surprised if these houses double or triple in value over the next fifteen years.

My wife and I are considering making an investment here. We love this part of the world. It may not be everyone’s cup of tea though...

I’m talking about Mexico. But didn’t I promise you easy access to American airports and American schools? There’s only one place where this is possible: Mexican border towns.

I think Mexican border towns offer the best of both worlds. They are very cheap... you can expect your cost of living to immediately fall by 90%. At the same time, you have American malls, banks, and doctors all less than fifteen minutes away. Of course, American doctors wouldn’t be much use to you. You’d get all your dental and medical needs taken care of in Mexico for a tenth of the cost.

I know most readers aren’t about to pack their bags and move to Mexicali. I happen to love Mexico anyway, so that makes a big difference to my thinking.

I also like the border towns as contrarian investments. They are truly hated. As Steve says, the best money is made when things go from bad to less bad. I think that’s the situation along the border...

Two massive rival cocaine cartels have pitched a battle along the border in recent months, and it seems to have centered on Nuevo Laredo, a small border town below Texas. It makes Nuevo Laredo possibly the most dangerous place in North America right now. The U.S. consulate has this warning about the Mexican border towns on their website:

“Drug-related violence has increased dramatically in recent months, and shows no sign of abating. In Ciudad Juarez, Nuevo Laredo and Tijuana, shootings have taken place at busy intersections and at popular restaurants during daylight hours. In recent months, the worst violence has been centered in the city of Nuevo Laredo in the Mexican state of Tamaulipas, where numerous citizens were kidnapped and/or murdered.”

This is why Nuevo Laredo is my favorite border town investment. Nuevo Laredo Chamber of Commerce officials estimate that over 100 businesses have closed in Nuevo Laredo in recent months:

"The evidence is everywhere — in boarded up office spaces and 'For Rent' signs on the doors of once-popular night clubs such as Señor Frogs," says Express-News. “The development is truly tragic for the city south of the border. As Laredo [Texas] booms, its sister city is withering.”

Can the situation in Nuevo Laredo get any worse? I doubt it. It’s why the houses are such a good value at the moment. Most rational investors wouldn’t even invest in a margarita there... let alone purchase property.

But I see a tremendous value there. Nuevo Laredo is in a convenient location, just across the river from a booming Texas city (Laredo), there are always going to be business opportunities, with all the dentists, plastic surgeons, doctors and cheap labor. If it weren’t for the violence, tourists would flock there. Most importantly, a large Mexican population is attracted here by all the opportunity.

Again, I know it’s not an appropriate investment for 99% of Americans. I write about these border towns more as a demonstration of sound contrarian investing. I think house prices could multiply along the border if the violence subsides.

The value is there, now we just have to wait for the trend to change...

Good investing,


P.S. When the bullets stop flying, here's a map to help you plan your next trip to Old Mexico:

Market Notes


Monsanto (MON)… GM foods
Anheuser-Busch (BUD)… beer
ExxonMobil (XOM)… big oil
Royal Bank of Canada (RY)… Canada’s largest bank
Exelon (EXC)… nuclear power
Consumer Staples SPDR (XLP)… “basic stuff” ETF
Equity Residential (EQR)… residential REIT
Valhi (VHI)… holding company
Seabridge Gold (SA)… gold hoarder
Powershares Large Cap Value (PWV)… large cap ETF
Energy Transfer Partners (ETP)… natural gas distribution
Lockheed Martin (LMT)… defense
Nickel, Butter, Coffee


Pier 1 Imports (PIR)… home furnishing
Williams-Sonoma (WSM)… home furnishing
Lowe’s (LOW)… home improvement
Palm Harbor Homes (PHHM)… manufactured housing
H&R Block (HRB)… tax services
Capital One (COF)… what’s in your wallet?
Louisiana-Pacific (LPX)… wood products
Netflix (NFLX)… online movie rentals
LSI Logic (LSI)… semiconductors
Soybeans, Sugar, Wheat, Ethanol, Unleaded Gasoline, Cocoa

-Brian Hunt

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