|As I bailed out of backgammon in Denmark and chose a remote tropical beach in Costa Rica instead, I really did not anticipate having much contact with my former backgammon buddies except for the occasional visit to see friends and family in the north.
Some of you will know that it did not take long before I had built up my own little club of enthusiasts in my new hometown on Tamarindo Beach on the Pacific coast of Costa Rica, and time proved that friendships and bonds stretch much further than a day’s traveling around half the globe.
After a couple of years of vacationing and enjoying my new ‘Pura Vida’ lifestyle on the beach I realized that the trickling out of my bank account was probably not an encouraging development, so I decided to develop the property I had bought in Tamarindo a few years earlier. But, I was short of cash to go through with the plans that I thought would be most profitable. So… now what?
(Note: Pura Vida is a common Costa Rican term used to answer, “How’s it going?” which one replies to with “pure life” or “life is great”.)
I tried to get a loan in the local banks, but interest rates were at best sky high, and I did not want to jeopardize my entire earthly fortune in case the project did not meet the cash flow requirements to begin with. After all, I was a novice in the development business, and despite my high beliefs in myself and my common sense, the last thing I wanted to do was to put all my eggs in one basket.
I took my detailed business plan with me on a trip back to Denmark in 2002 and gave copies away to family and friends, including friends I had in backgammon circles. I sold shares in the company, minimum $1,000 investment, and managed to raise about 25% of the capital I needed from my backgammon buddies. Another handful of US investors – all friends and mostly fellow players – chipped in and I was ready to go ahead with the first stages. When the time came to commit bigger bags of money I sold my house to finance the rest (the loans had not become any cheaper in the meantime) and 10 months later we opened our “La Placita” commercial centre complete with shops, a restaurant and two apartments just half a block form the surf at Playa Langosta.
Later in the year we paid off our debt (to me!) by selling off the restaurant part, and things were looking good with long-term rental contracts priced above the budget in the business plan! COOL!!
I think I might have started a trend in the Tamarindo area. All of a sudden everybody seemed to be building shopping centres and offices, a development that seemed a bit too optimistic for my taste, and I saw the writing on the wall: Soon there would be a huge overcapacity of commercial space, which could mean a lot more competition, turning the lucrative seller’s market into the opposite. When an offer was made on the entire company in 2005, I decided it would be a good time to cash in the chips. When the smoke lifted my investors and I had quadrupled our initial investment in just two years, yummy!
Meanwhile I had bought another piece of property on a hillside in Playa Hermosa an hour’s drive north of Tamarindo. The site is overlooking the beautiful bay and the Four Seasons Costa Rica Resort, and I started looking for more investors to build a luxury vacation villa as there seemed to be a huge demand and potential for that kind of accommodation in this more expensive neighbourhood.
The word about La Placita project must have spread faster than I had imagined it would, I actually had to turn down a few potential investors as they lined up to buy shares. Despite the much higher “entry fee” of 20,000 USD per share. Backgammon players probably know a lot more about "position equity” than the average Joe and despite the fact that I had only "rolled out” once, confidence was high.
The project was named “The Light House” and it should be completely finished any day now. It has turned out to be a fantastic house, thanks to the architect and the builder, but it has also been delayed severely, with too many additional costs as a result (thanks to the architect and the builder!). Still we expect to get a return of approximately 170% return when we sell it.
Here are some photos of The Light House:
When I had sold all the shares in the Light House I realized that the Costa Rica is offering much more market for tourism, real estate and development and many more opportunities than I could handle myself (after all!) and the way to really take advantage of that would be to work with more investor money, create volume and ideally manage an investment fund for private investors – and then the idea for my Paradise Portfolio was born.
Now, there is a huge difference between selling shares in a well-defined project and selling fluffy promises with no guarantees other than my word and some lines and signatures on Spanish documents most people don’t know what to do with. However, this is what I had to work with when I presented Paradise Portfolio to my investors. By now the group had grown substantially. Apart from a number of well-known backgammon stars and champions, as well as hopefuls and beginners, now I also saw more and more poker players joining the Portfolio plus a steady trickle of friends and friends of friends. To this day I do not have one investor that I do not know either directly or through a friend. Many of you would know the names, but I can not reveal any details, all my investors enjoy full discretion.
From the beginning I decided that it should be easy to enter, so I set the minimum investment to $10,000. Not a huge sum of money, but when you have half a dozen of those now you already have something to work with. The biggest single investor has trusted me with more than $100,000, but I will take any sum that somebody would be interested in putting to work.
Another important reason (I think) that people like to invest with me is that there are no maintenance or administration fees. I only make money when my investors do, and I take a percentage of the final net profit in each project. So far we have bought and sold one property in the Portfolio, and we doubled the investment in just eight months!
…and that is probably the single most important factor: Once people have seen me perform it is much easier to find the trust.
Now times have changed in the real estate markets throughout Europe and the U.S. as most will know. This has also affected the movements down here, and the property flipping with huge profits that we have seen in the last three or four years are much less likely to happen now. However, Paradise Portfolio has come in cheap on the current projects, and our policy for the coming years is to buy up raw land with three to five minimum years projections. We will most likely not enter any construction adventures as they seem to create more headaches than profits. The way to make really solid and profitable investments right now is to find and buy the right properties and sit tight, making sure maintenance costs and expenditures on market presence are low – then I can still get to play backgammon on the beach whenever I want to!
A PDF document on Paradise Portofolio is available online, although it not too recent, it provides a lot of information on some of the projects, the document can by seen here. Henrik Bodholdt can be reached by email.