Belize: Paradise Or Real Estate Scam?

He began to build a condo, but the labor cost was high
His partner stole his money, that left him high and dry
His land is still a mudhole, where you sink up to your knees
And he’s just another gringo in Belize

—Lyrics to Jerry Jeff Walker’s Gringo in Belize.

The “gringo in Latin America” has a certain image: A ne’er-do-well in a panama hat and a guayabera with a terrible command of the local language and money from questionable sources—a walking caricature of a Jimmy Buffett song.

But Latin America, and particularly Belize, has also long been a popular retirement destination for Americans, Canadians and Europeans looking to enjoy great weather and a fantastic lifestyle for considerably less than what they might pay in West Palm Beach, Florida or Scottsdale, Arizona. Belize also has no taxes on income or property, making it an ideal escape in an era of bankrupt government and creeping taxation.

Retirement Boom

With the Baby Boomers now starting to retire en masse, the Central American retirement industry is booming -- but unfortunately, so is the industry from scamming unwitting gringo retirees out of their nest eggs.

The gringo penchant for getting sucked into Latin American land scams goes back centuries. Even the Scots, world reknown for having a hard nose for business, faced national ruin following the Darien Disaster of the 1690s. The Scots–who really should have known better–tried to build a trading colony on the mosquito-infested Caribbean coast of Panama, and by some estimates as much as half the cash of the Scottish population was invested in the project. Its miserable failure–and resulting effective bankruptcy of the nation–was a leading factor in Scotland’s decision to merge with England to form the UK in 1707.

Googling “Buy Belize scams” brings up 863,000 hits. The more general “Belize scams” brings up 1.5 million hits. And all of this for a country with a population of less than 350,000 souls. Belize’s con artists must be working overtime to generate that kind of notoriety.

But should you avoid Belize altogether if you dream of retiring in paradise? Not at all. You just need to be smart about how you approach it.

The Big-Picture View

Belize is unique in Latin America in that it is English, not Spanish, that is its official language. Property deeds, contracts, and other legal documents are in English, which avoids the cost, hassle and risk associated with operating in a language that is not your own. Until the 1980s, Belize was actually a British colony, and even today Queen Elizabeth II of the UK serves as head of state. An English heritage brings with it one major differentiator from the rest of Latin America that Americans will find reassuring: a common-law legal system with a reputation for fairness. All of Spanish and Portuguese-speaking Latin America use a continental-style civil law system.

This is Belize “on paper.” In practice, only about 4% of the population speaks English as a first language. Spanish is the most common language, spoken by 46% of the population, followed by the Belizean Creole dialect at 33%. Creole is “Caribbean English” and sounds a little like Jamaican English to the uninitiated. It’s also going to be unintelligible to most Americans or Canadians, at least without a little study.

So, while you will have no problems at all communicating at local banks and government buildings, coordinating the construction of your home or even getting a broken pipe fixed can be a frustrating experience for those who don’t have an ear for languages.

A lot of the “scams” reported are less outright frauds in which a swindler absconds with a briefcase full of your money and more cases of wildly unrealistic expectations mixed with inexperienced and unprofessional developers. Of course, that distinction doesn’t make them any less damaging to the would-be gringo retiree.

So, how can you make your retirement dreams come true without risking getting sucked into a scam or, equally badly, a project that is doomed to fail?

A Few Guidelines

1. Do not approach a Belize retirement property as if it were an investment. If your goal is to live in the house, you should view it as an expense, the same way you would consider apartment rent or a mortgage payment at home. Tricking yourself into viewing it as an investment can cause you to overlook obvious deal breakers, such as those Enderle mentioned above.
2. Buy an existing property in a finished or near-finished community. Yes, you will pay more than you would in building on a new lot. But you also know exactly what you are buying, you can inspect the property yourself, and you can be certain that basic utilities and roads are in place and that the properties are owned by fellow expatriate retirees and not property speculators. This also makes budget-busting cost overruns an impossibility.
3. Don’t be in a hurry. If you are thinking of retiring in Belize, plan on renting for six months or more and doing some real “boots on the ground” research before actually buying. Talk to multiple real estate agents and, more importantly, to multiple residents in multiple communities.
4. Plan to learn basic Spanish and basic Creole. Yes, you can get by without knowing either. But if you really want to take advantage of the lower cost of living, you need to know how to haggle with the locals without going through a middle man. Don’t be one of those ugly Americans that believes speaking louder will make the locals understand you better. It will just make you an easy target for every two-bit con artist.
5. Hire a reputable lawyer to do a little title research before buying. You can never completely eliminate the risk that a title dispute will crop up at some point in the future, but you can at least massively reduce that possibility by doing the proper research beforehand.
6. Finally, use common sense and your instincts. If something looks too good to be true, it probably is. And if you feel you’re getting hustled, walk away.

This article first appeared on InvestorPlace.

Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management.