Way back in May, (where does the time go?) I made the comment in a post to my Blog My San Felipe that San Felipe had passed the real estate coffee test. Well I got busy with La Joya del Mar and never go around to finishing the piece, so here goes.....The story goes that a nationally syndicated radio talk show had enlisted a Real Estate Guru as a guest for their weekly real estate call in programs. This is how it went.
R. E. Guru: Caller number 1 this R.E.Guru whats on your mind? ...
Caller: Thank you for taking my call. I am interested in investing in a real estate investment outside of the community I live in. My problem is that I don't how to pick an area that will offer a good return on my investment. How do I find out if an area is growing and is worth investing in?
R.E. Guru: Good question caller, I personally start by giving the area the "Coffee Test".
Caller: The Coffee Test? What's the Coffee Test?
R. E. Guru: OK Caller it's really pretty easy. If you want to find out what's going on in a community that you are not familiar with go into that community and find yourself the local coffee shop, and get yourself a cup of coffee.
Caller: I,..I ..don't see what your getting at.
R.R. Guru: OK caller this isn't rocket science, I am not telling you to read tea leaves in a cup of coffee, nothing of the sort. It's really very simple, here's how I do it. Talk to the locals ask them about the neighborhoods, are they safe? what's good about the community? what would they like to see change. Any big trends in employment in the area? How would they rate the cost of living in this community verse an other?, and finally ask if they have increased the price of a cup of coffee in the establishment where you are.
Caller: OK, so I talk to the locals but what do they know about real estate? and what does the cost of coffee have to with all this.
R.E. Guru: A lot. Here is the secret to interpreting what you've discovered. If the price of a cup of coffee hasn't gone up in the memorable past tell the locals to have a nice day, get back in your car and find an other community, and redo the coffee test this community is stagnant and isn't growing. This isn't the kind of place you want to make a real estate investment. On the other hand if the price of a cup of coffee has gone up recently and your talks with the locals confirm that the price on lots of local items have been regularly escalating then my suggestion to you is to buy as much real estate in this community as you can afford. This place is growing and the real estate values are going to reflect this growth. This is the kind of market you are looking for when it comes to making a real estate investment.
Caller: OK that makes sense. Is there anything else I should know?
R.E. Guru: Yes and this is very important. If your your doing your coffee test at a Starbuck's it is too late you've missed this market. It's been done, move on.
After hearing this story I started thinking that I should give San Felipe the coffee test. I checked it out and found out that the price of a cup of coffee in San Felipe had certainly gone recently. One local coffee brewer told me that they should have raised the prices twice but the restaurant kept her so busy that the time and effort to print new menus kept her from getting it done. Personally I have noticed almost everything I buy locally has gone up. Most price increases have been small but were undoubtedly reflecting the increase in the property values & rents of the local business people, among other factors.
Recent reports from Mexico real estate experts I have posted here on this blog suggest that San Felipe's high flying property values of 10% to 15% per year over the last few years will most likely simmer near the 5% rate of return for the next couple of years due to the uncertainties in the US. For a large number of folks facing large decreases per year in their US properties values, a 5% per year increase in value per year can be be very attractive. All in all I don't see how San Felipe could receive anything less than high passing marks when it comes to the coffee test... Come by and take the coffee test for yourself. San Felipe has several wonderful little places to enjoy a cup of Joe, enjoy the views & the people. Find the locals and ask them about their San Felipe. Don't be shy, the locals love to tell you about the San Felipe life style. Sure I'll have a little more...pass the cream por favor
