Dela
Keith explores how investors can build legacy wealth by owning productive teak timber and the land beneath it in Panama.
Mike Cobb, an international real estate developer with over 30 years of experience, explains why Panama's legal framework, economic stability, and U.S. dollar economy make it a compelling destination for first-time offshore investors.
They discuss the long-term return profile of teak, its resilience as a hard asset, and common mistakes to avoid when investing internationally, along with how a sawmill and vertical integration can enhance returns.
This discussion highlights how the strategy can diversify both geography and asset type while also opening doors to potential residency options abroad.
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Complete episode transcript:
Keith Weinhold 0:01
Welcome to GRE. I'm your host Keith Weinhold, talking about a legacy investment. You can profit from this real asset long term, and so can your heirs. It's real estate, but not housing. It's a diverse and more primitive use type. Today on Get Rich Education, you know. Mid South Homebuyers, that top Memphis turnkey provider. I learned that a secret weapon behind their explosive growth is more than just you buying their properties. It's an executive coach. For nine years now, their CEO Terry Kerr and his COO Pat Mix have worked privately with a coach who I've now learned from too, and he doesn't market himself online anywhere. After 12 years behind the scenes, that coach is now making himself available exclusively for GRE listeners. His name is Daniel Thomas Hind. If you're a hard-charging business owner or investor who wants to get in the best shape of your life, physically, mentally, and professionally, you can fill out an application for a free consult. This is private one-on-one coaching for those willing to go to uncommon lengths to achieve uncommon results. Thanks to Daniel, we've all become better leaders, better operators, and better men. It started by showing up for ourselves. Now it's your turn. Go to DanielThomashind.com. H-I-N-D. That's DanielThomashind.com, and sign up before spots fill.
Keith Weinhold 1:35
What if you got your mortgage loans the same place I get mine? You sure can at Ridge Lending Group NMLS 42056. They provided GRE listeners with more loans than anyone because Ridge specializes in investment property. They'll help you build a long-term plan for growing your real estate empire with leverage. Start your prequal and even chat directly with President Caeli Ridge while it's on your mind. Start at ridgelendinggroup.com. That's ridgelendinggroup.com.
Speaker 1 2:08
You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education.
Keith Weinhold 2:24
Welcome to GRE from Cherokee, North Carolina, to Cherokee, Panama, and across 188 nations worldwide. I'm your host Keith Weinhold. Welcome back to another Wealth Building Week. You are inside Get Rich Education, where financially free beats debt free. Today we're talking about a specific investment that is not residential real estate. In fact, it's a more primordial real estate type that predates housing. So therefore, it is lucid and intelligible. It's easy to understand. Sort of the opposite of more arcane investment like AI data centers or crypto mining. At a basic level, this makes it easy to understand, and there aren't any tenants to manage. It also does not pay you as often as monthly, though as you'll learn, there is income and appreciation is expected too. Now, if you invest outside your home country, you're probably going to want to be diligent and select a politically stable nation that also has an operator based in that region with a fantastic track record. It helps if they're close to the U.S. This small nation is close to the U.S. in both geographic proximity and economically. Their currency is even the U.S. dollar. They even share an electrical system with the U.S. with the same outlets and voltages. As you might be guessing, where I'm talking about, this nation also has a consumer culture somewhat similar to the U.S. with American restaurants and retailers and brands in our real estate world. What we find more important is how, like the U.S. this nation is a constitutional presidential republic, and both nations have these separate executive, legislative, and judicial branches, the three branches and elected presidents, in these competitive multi-party elections, and both America and this place have market-oriented economies that emphasize private property and private enterprise, banking and financial services, international commerce, logistics, ports, and aviation.
Keith Weinhold 4:49
Today, we're talking about the opportunity for you to own productive timber and the land beneath it, teak hardwood trees in Panama, a quarter-acre parcel. At a time with your name on the deed, that direct ownership is known as fee simple ownership. I have directly invested in Panama for about 11 years myself. Now, though teak might be able to survive in a climate like Hawaii, mere survival is not enough in the U.S. It is difficult to impossible to find anywhere that grows productive plantation teak. Here in the late 2020s decade, we've had bouts of El Nino or La Nina a lot of places in the world, and that has severely weakened some crop types. Other providers of different agricultural investments are failing, but not this teak. They're resilient, and we'll get into the physical properties of the teak. I'm going to ask today's distinguished guest about that. He and his business partners planted some select timber 27 years ago, and they've been offering teak hardware parcels to investors for that long, 27 years, and for about the last 10 years to GRE investors. Hundreds of you are participating now, but I'm going to wait to ask more about the physical teak product itself until later, because what's more important are the investment environment and the strength of the operator. So learn more about this and what the projected investment returns are, and just how much exactly does a quarter-acre parcel of teak cost? If you so choose, owning teak parcels also gives you the option of residency status in Panama, and you only need to spend two days there every two years in part of maintaining that status, they offer investor in-person tours of the teak plantations too because they're proud of what they do there. I expect a fascinating discussion with Mike, the teak company co-founder and CEO. This week's guest has become a friend since I met him about 10 years ago. He co-founded and is CEO of an international real estate development company. He's got active projects throughout Central America. He's been doing it for more than 30 years, so he's not a tinkerer and not trying out project concepts.
Keith Weinhold 7:26
And at this point, he's helped thousands of North Americans diversify their portfolios through international real estate ownership and residency planning, and even lifestyle investing. And if you've ever attended an investment conference on something like global diversification. You might have seen him speak there because he's such a frequent, recognized speaker and voice, and he's authored multiple books on real estate, financial freedom, expat living, and just unlocking a better lifestyle. Hey, welcome back onto the show, Mike Cobb.
Mike Cobb 7:59
Oh Keith, nice to be with you. And you're right. 10 years, we've enjoyed one another's company at many conferences. It's always great to be back with you virtually. I look forward to seeing you again personally one of these days as well. And yeah, thank you for the very kind words on the intro.
Keith Weinhold 8:14
Yeah, if I'm teetering on whether or not to attend a conference, I ask myself, is Mike going to be there? That's right.
Mike Cobb 8:20
We'll hang out,
Keith Weinhold 8:22
100% And you know, Mike, he's also an avid reader of GRE's "Don't Quit Your Daydream" newsletter. So then, clearly, he's even smarter than you've ever thought. You heard him on the show before, so you knew he was smart, but now he's even smarter than you ever knew since he's a reader. Tell us what you like about the newsletter.
Mike Cobb 8:40
You know, Keith. I gotta say, every issue that comes in, I read it. By the way, today's issue said read before Thursday, so you give me a couple days tomorrow at least to read it. Anyway, no, you know what? You are so powerfully succinct. The charts that you put in are wonderful. You were a geographer major, and and so spatial things are important. I also recognize. I love the charts. I love the graphs, and I hate to even say I love sort of the I hate to call it the trivial information, but you know enough data points that seem trivial when you put a theory around them actually become meaningful. And what you are able to do is you're able to connect dots that most people don't connect. That's the hallmark of genius, and I think you are a genius, by the way. And I think your newsletter shows that. And so, thanks for putting it out. Your readers are very, very fortunate to have you there, giving them the kinds of information that are super relevant in the marketplace at one level and on a specific level. But even more important, creating the theoretical constructs that allow them to understand the why of something's happening because you know if you understand the why of something you know it makes a lot more sense first of all but it also allows us to maybe forecast the next what coming down the pike and if we can be on the front edge of something or you know being able to look over the hill or around the bend that's. Powerful in the marketplace, and and you bring that power to your readers. Well done, man.
Keith Weinhold 10:04
Thanks. Yeah, it's not just what; it's why this matters. And that was an incredibly kind thing to say. I write every word of the letter myself, and you, the listener, you can get the letter free now@greletter.com I send it about weekly, and Mike, I know that U.S. investors, including some Get Rich Education followers, they've been increasingly looking offshore for one thing many perceive the political risk has palpably higher than it was a few years ago. So, just broadly, tell us more about what North American investors seem to be looking for.
Mike Cobb 10:42
Sure, I summed it up earlier today. I was talking with a conference organizer, and he was really giving me the hard sell on why I should come to his conference. And it's probably not a good fit. But I heard myself say it for the first time. What we really help folks do in certain spheres, but maybe in this sphere, is help people get a good night's sleep, you know, peace of mind, right? And when you've got the political turmoil, you wrote an article or a newsletter a couple weeks ago, and it was about inflation, the kinds of things that were happening, and it was so spot on. And I think your readers, and not just your readers, but people who are tuned into what's really happening from a political standpoint, a financial standpoint. There is no way you can print this much money. There's no way you can have these kinds of things going on all the time that create a huge run-up of debt, right? And it's not even the debt; it's the implications of the debt. What's going to happen next? How's this thing going to unwind, right? And so when you have all of this stuff going on. You have people who are really, really worried about their future. It's a financial future. I say there are two train wrecks. There's a train wreck of debt, which is what I just talked about, and there's a train wreck of freedom. And that train wreck of freedom is really, in some ways, a result of the train wreck of debt. But when you've got a train wreck or two train wrecks happening, we really have three choices. We can ride it out, right? Take the ride and go for the crash, right? We can do something about it, but we really have to do something about it before. I'm going to mix a metaphor here, but if you know a hurricane's coming in three or four days, you don't wait till the wind's blowing 150 miles an hour to put up the plywood, right? You get out there while the sun's still shining. You put up the plywood, and then when the hurricane hits, like you got plywood over the windows, and you can ride out the storm. And this is where I think so many people are today. They're recognizing this hurricane is coming. The problem is, is that I don't think people always know where to go get plywood, right? What do I do? How do I protect myself and my assets, right?
Mike Cobb 12:38
And what this conversation right here is about is here's one kind of plywood you can put up on your window and the diversification overseas the diversification internationally into a hard asset that is not really inflation proof because I'm not sure there is such a thing but largely inflation proof or a big a great hedge against inflation real stuff hard assets real estate timber commodity right this is. what so many people are now looking at, and then the other piece of it is you can layer in a residency, which starts to give you that political plan B. You've got an economic plan B, kind of the hedge against inflation, but you've got this residency component that gives you sort of a hedge against the political uncertainty, and 1000s of folks have moved in this direction. Several 100, I think it's about 600 folks now, have picked up the residency as part of their timber investment as well. So a lot of different things going on, but I think they do circle all the way back to this train wreck of debt and a train wreck of freedom, the political divisiveness kind of what's happening.
Keith Weinhold 13:40
Now, what if someone hasn't invested in a hard asset overseas before, Mike? I'm thinking some people might come ask you. You know, why would I do this? For example, I live in the United States, where we have a rule of law and stable, mature markets and high property ownership rights. So, why should I look to diversify internationally with hard assets,
Mike Cobb 14:01
yeah, I think there's a general answer, and then maybe a couple specific answers. Generally, you know, I would never bet against the U.S. the U.S. economy. We're the largest economy in the world. I would never bet against it, right? But I think that for prudence, we would all want to have at least another basket for a few of our eggs: 5% 10% 20% Pick. Pick a number that's comfortable, but have some of your investable net worth outside your home country. Like that's just prudent, right? Why would you have everything all in one basket? And so we see that as a general answer. Specifically, a country like Panama, where we do have artique plantations, they have public title escritora publica. It's fee simple title, but in the civil law, so it's called escritora publica. The rule of law is strong in Panama. And then the other thing about Panama that I absolutely love is you have the canal, and the canal provides both economic stability and political stability. On the economic side, it generates just. Under $5 billion a year of cash flow, year in year out, right? So just it's like an ATM machine for a country with a population of about 4 million people. Do the math on that; like that's a huge amount of money on a per capita basis, right?
Keith Weinhold 15:13
Narrow water passages have really been newsworthy for a long time now, too.
Mike Cobb 15:16
Well, they have, and just like the Strait of Hormuz, right? You know, people sometimes go. I hear it said, "Oh, the canal is a vital strategic U.S. interest. That is absolutely 100% correct. But if you're a country that produces any goods that ship, or you're a country that receives any goods by ship, that canal is a strategic interest to you, and by definition, that's every country in the world. Every country in the world wants that canal open and transiting, right? Because everybody either produces or receives or both, right? And so you've got the political stability element as well as the economic stability element. You've got the rule of law. Panama is a great, great place for that person who you mentioned who's never done an overseas investment, never gone offshore, right? What's an easy place to start? What's one of the safest places to start is Panama, and it's in this hemisphere too, so it's close. I mean, you can get there for three hours from Miami, three and a half hours from Houston. Flights all over to U.S. Canada. It's easy. So I think a lot of folks see Panama as a very, very easy way to make that first step overseas.
Keith Weinhold 16:25
I happen to know that you just flew in from Panama. You're in the United States today, but you're constantly going to Central America. You span time zones more often than almost anyone I know. You mentioned fee simple ownership in there. For those that don't know, I think of that as direct ownership, where you don't have some weird administrative government layer in there that can dilute your hard asset.
Mike Cobb 16:47
Right, you can own it in your own name, you can own it in a corporation, so it's easy to own it. But yeah, no layering, right? By the way, the Constitution treats owners who are Panamanian the same exact ways it treats all foreign owners, and actually, we do business all over Central America. The one thing that we look for is a a legal regime that protects foreigners and foreign investors the same as it does domestic. Panama does that.
Keith Weinhold 17:12
Yeah, so investing in hard asset in Panama is a bit like investing internationally with training wheels on, due to its close relationship with the United States bolstered by the Panama Canal, but yet if someone hasn't invested internationally first, there are still a few mistakes to avoid. Maybe things that one isn't aware of. Can you tell us more about that?
Mike Cobb 17:33
The biggest danger people have when they make their first foreign investment is what I call margarita madness, right? And a lot of times it happens. You're on vacation in Cancun. You're having the time of your life. You're you just went parasailing, whatever. You're walking down the beach, and some developer says, "Hey, come on up here and take a look at my condo project. You know, and we'll buy you dinner at Senior Frogs tonight. We'll give you a coupon or whatever, right?
Keith Weinhold 17:55
Right.
Mike Cobb 17:55
And a lot of people do that, and then later that night, that's Senior Frogs. They're celebrating the condo they just bought, right? I mean, it's not how we transact real estate in the U.S. and Canada. There's a due diligence process. There's a due diligence period. It takes weeks or months to transact on a property, not hours, right? And so the single biggest mistake is that, and the way that we really can resolve it. I mean, my book is all about this. In fact, you have a copy, and I think you've helped some of your your readers and listeners get copies as well. It's called "How to Buy Your Home Overseas and Get It Right the First Time, and it really boils down to three simple principles: buy what you see. Is it there? Right. Own community. Right. Make sure it's in a place where you have people around. Right? Because there are a lot of ghost towns out there, and then know the developer. Do your due diligence on the developer himself, right? So you've got these three principles, and if you follow those three principles, you could do a lot better. But I actually think there's even a better way, and it has to do with character. It has to do with us, and you know when we move to the developing world, anywhere outside of you know North America, Northern Europe, maybe Australia, New Zealand, right? We're moving from the land of seller beware, right? Think lemon laws, think Ralph Nader, think advocacy groups, you know, lots of laws and regulations that control the seller, to the world of buyer beware, where none of those laws exist, and so now you're on your own. And because we've been living and transacting our whole lives in a seller beware environment, in a bubble of protection, we're protected by the government, right? We think we are. We'll just say that anyway. But we're protected. We're in a bubble, and we move to the land of buyer beware.
Mike Cobb 19:38
The problem is we don't really know how to transact. We don't know the right questions to ask, and our single biggest advantage, our single biggest attribute or asset that we have, is actually humility, because we don't know what we don't know, and we have to forget what we think we know. Assumptions, right? We can't bring assumptions with us that hold true. Some do some. Don't right. If we approach a transaction overseas with humility, there are no dumb questions. I'm going to ask every question I can think of. I'm going to do as much research as I can within a limited period of time. I'm not going to not analysis to paralysis forever. I'm going to say, look, I'm going to spend the next 30 days. I'm going to do a ton of due diligence, and at the end of 30 days, if I like what I say, I'm going to transact, right? So you're you're not getting the deer in the headlights never to do something, right? But you know, several weeks, maybe a month or two, depending on what it is you're doing, is enough time to do really, really good due diligence. Ask all the questions you can think of, but approach it with humility. And when we do those things, we transact so much, so much better than if we just rush into it with Margarita Madness.
Keith Weinhold 20:44
Right? People get caught up in those emotions with Margarita Madness and end up with a timeshare that they can't get rid of, or something like that. You said something so interesting there, Mike. When you move from the developed world to the developing world, you move from a seller beware world, like with some of the things you have to be aware of, and like you need to give disclosures and such into a buyer beware world. I hadn't thought of it that way before.
Mike Cobb 21:08
Yeah, and really, a lot of my book and a lot of the presentations that I've given, you've seen me give over the years, really deal with what I call a change in thought process. Because mostly in presentations, right? My goal in a presentation is to help somebody change how they think, to take away the bubble and understand that they're on their own, right? It's not really their own. They have you, they have me, they have other resources, right? But they don't have this bubble of government or regulations or laws out there protecting them anymore. Now it's the individual, and as an individual, I don't want to be rugged individual. I want to find other people that can help me, right? But I have to do that as opposed to it's just there for me, right? So if I can help people change how they think, they will transact so much better. They'll make better investments. They'll make investments that work for them in ways that they want them to work for them, right? They'll achieve the goal or the dream in a much, much, much higher percentage of the cases,
Keith Weinhold 22:04
we're talking about investing antique tree hardwood plantations, principally in Panama, like you mentioned, and we're talking about one mindset about crossing borders with our investing, and another is oftentimes, at least for GRE listeners, we're crossing asset use type because we're so used to residential rental housing. So when you cross into agriculture or forestry, I guess as it is with teak, what are some of the bridges to cross there as we change use type?
Mike Cobb 22:35
The reason I love timber generally and teak specifically in Panama in this case is that most people, most people, and I hope that many of your readers aren't most people. Most investors look at 20-five years and they simply say themselves, "No way, no way. And I love that because right now teak timber is being cut down 10 to 12 times faster than anyone is replanting it. And the reason people don't replant it is because most average investors come along and say, "Oh, it's 25 years. I can't wait 25 years. Well, you know what? Good, because the folks who do decide to move ahead and plant the teak, what that means is the price of teak is very highly likely to continue to increase in value far beyond inflation. Teak wholesale teak prices have gone up five and a half percent a year on average for the last 50-three years. I think that number is going to increase largely because there's this huge psychological barrier. People think, "Oh, 20-five years, but back in 1990-eight I bought 100-acre cattle pasture in Panama, and we had a professional forestry company plant it and maintain it for the last now 27 years, and two two and a half years ago, we started building a sawmill. Our sawmill is up and running. In fact, was just down there and brought back one of our first retail products. We're producing lumber. Our first container of lumber is headed out to a distributor in Colorado next week.
Keith Weinhold 23:56
Mike's holding up a nice cutting board for those in the audience.
Mike Cobb 24:00
Nice cutting board. We're setting up an e-commerce site. We're going business to consumer with cutting board, bath mat, shelving, tables, chairs. We have our whole production facility ramping up with new retail products. So the bottom line is, is yeah, man, it does take 25 years. You know.
Keith Weinhold 24:15
The lantation to harvest cycle. That's the 25 year span you're talking about here. The patience it takes for an investor.
Mike Cobb 24:21
Thank you. Yes, absolutely. And then, as we cut down this mature plantation that we we are now harvesting right now, it gets replanted, and the next 25 year harvest. I'm 61 Maybe I'll make 86 I don't know. Maybe not. Right. But my kids probably will, and they'll get the big harvest in 25 years, and then it'll replant, and maybe they'll get a next one, or maybe it'll be the grandkids, right? And so what we found savvy investors, people who are really not your average bear, right? And they think to themselves, how can I create generational wealth stewardship? I have enough money coming in. I mean, Keith, that the I mean, you can own teak for 10 grand. You can. Own a quarter acre of teak. You own the land. You own the trees. 10 grand, like it's 9000 something or other, but 10 grand, right? I mean, the bottom line is it's such an affordable, easy investment, right? And it turns into well over $100,000 in today's numbers. Who knows what inflation? But in today's numbers, buying power, you know, 10,000 turns into 100,000 right? Over 20-five years, and so most people who do this recognize the fact that they might get the first harvest, but it's their kids, their grandkids, their great grandkids who are going to get this harvest every 20-five years thereafter. And so the 20-five year thing becomes a wonderful thing, not a bad thing. Right, it keeps many people out, which keeps the price of teak high and growing, which we like. But it also creates this cash flow period. People go, "Oh, it doesn't cash flow. I'm like, "Absolutely, it does. It cash flows phenomenally four times a century. Like you have an internal rate of return of almost 11% 10 point something, right? You have an internal rate of return of 11% and it cash flows four times a century. This is a phenomenal cash flow investment. You might get to see the first one or the second one, but you're probably not seeing three or four. But somebody else in your lineage, your family, your heirs will see it, and they will all be so happy you made that decision to own teak.
Keith Weinhold 26:22
We're talking about the ability for you to own teak parcels and the land beneath it, title in your own name, one quarter of an acre at a time. We're going to talk more about that with Mike when we come back. You're listening to Get Rich Education. I'm your host Keith Weinhold. Flock Homes helps you retire from real estate and landlording, whether it's one problem property or your whole portfolio, through a 721 exchange, deferring your capital gains tax and depreciation recapture. It's a strategy long used by the ultra wealthy. Now mom and pop landlords can 721 their residential real estate. Request your initial valuation. See if your properties qualify at flockhomes.com/gre. That's flockehomes.com/gre.
Keith Weinhold 27:09
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Ken McElroy 28:12
This is Rich Dad advisor Ken McElroy. Listen to Get Rich Education with Keith Weinhold and don't quit your daydream.
Keith Weinhold 28:29
Welcome back to Get Rich Education. We're talking about international investing with teak tree plantations. This isn't something experimental. We're not talking about a tinkerer here. You have to be more careful when you go overseas, and we're talking about with the owner of an international company that's been doing this for 30 years, providing international investments. But the teak tree plantation, I think, began in 1998 or 1999 Is that right?
Mike Cobb 28:56
Yeah, 98 was the purchase of the property, and in the rainy season of 99 we planted the first 100 acres. Yep.
Keith Weinhold 29:03
Yeah. Well, talk to us more about that because you talked to us about how historically teak appreciates at about 5% per year. Tell us about how we get to that 11% internal rate of return.
Mike Cobb 29:15
Yeah. Sure. I mean, so two things. One, you've got the five and a half percent a year kind of calculated out over a very long period of time, 50-three years. So that's a pretty good statistical baseline. And then the fact that your trees actually physically grow, right? I mean, back in 2008 my joke is from 2008 to 2012 While the rest of us in real estate were hating life, my trees just simply kept growing, right? They just kept growing. And so what you start off with is about 100 maybe 110, I think, trees on a quarter acre, and in the end, after all the thinnings, you end up with somewhere between 22 and 25 trees per quarter acre, and each of those trees produces about 1.2 to 1.6 cubic meters of timber. For lumber, by the way, one of the things that we are working on, and you know, look at the end of the day, you had a walk, jog, run, right? And we're in the walk stage right now, but we're harvesting out all of the other elements of the teak tree. Your lumber piece, that just you know, sell it as boards, you know, one by fours, one by sixes, one by eights, whatever it is. Ship that stuff off. That's your 1.2 to 1.6 cubic meters, but you've got other pieces of the tree. You've got stuff that's too thin, the root stock that can be turned into other things, including cellucrete with cellulose, the ground up, the sawdust itself. We're saving all the sawdust. We're going to use that for cellulite. This is the math on this. Our investors get 80% of the net proceeds after processing costs, which is 15% my company gets 20% and so we, my company, has the highest incentive to drive the highest possible return to the investor possible because I get 20% of whatever I make for the investor, and so all the numbers we use are always the net investor number, right? And we have a business plan. All the numbers are laid out. It's all there, and it's pretty easy to see how the IRR gets up. About I think it's 10.6, 10.7% I can't remember. Just under 11% but it's all in the business plan, Keith. And again, this is part of that due diligence process, right? Get a copy of the business plan. Get on the phone with one of our property consultants maybe take a trip to Panama. I just got back. We just took a group of people. Yeah, we got tours. Yeah, we have tours, and so like as part of the due diligence process, come visit, come see the trees, come see the sawmill. Right? If it's something that makes sense from a an investment standpoint, yeah, the material, the facts, and the due diligence is all there for people to be able to pick up and do over a you know several week period, you know 30 days, 60 days, 90 days, whatever it is.
Keith Weinhold 31:47
Well, let's back up because seemingly you have had really good prescience. Because when we look at world agriculture today, we see some problems. Whether some people want to call it erratic weather, other want to call it climate change, and how that's really ravaged some crops and created disruptions in certain produce. Or with coffee, you know, we've also got a cattle production problem, for example. But you've chosen something that's been really resilient. Tell us more about that resilience and just why teak of all crops and forestry.
Mike Cobb 32:22
Let me start by saying, who was it? Yogi Berra says, you know, predicting is hard to do, especially when it's about the future or something. Exactly. Yeah. Right. But I mean, look, we're talking about the future. I mean, who the heck knows, right? I mean, that's what makes it investing rather than you know something else. But teak has been grown in plantations for almost 400 years. It was started by the British in India, what was then Burman throughout Southeast Asia. And one of the things the Brits did so so well is they documented everything. They had statisticians keeping track of altitude, rainfall, soil types, different stock. I mean, just anything and everything that you could imagine, and so by the early 1900s, some of the best books about teak and teak plantation farming was written. I actually read those books in order to interview the forestry management companies in Panama that we would hire them to manage our plantation, because I don't know anything about it, right? But I wanted to be prepared to do the interviews, so I was. What amazed and fascinated me was this incredible track record of production for almost 400 years of teak as a commodity in the marketplace, and then for the last 50 years, 53 years, you know, seeing what's happened to the price of teak in that time period. Look, nobody can predict the future. Weather patterns change. Teak as a species, is very very resilient. You know, the highest quality teak is grown in very specific conditions, and the Darien province of Panama has exactly the conditions to produce the highest quality teak. If those conditions change, maybe the quality of the teak goes down. Maybe the quality of the teak goes up a little bit. Who knows, right? I mean, at the end of the day, we don't control weather. We don't control weather patterns. We don't control the future. But that thing goes back to the idea of diversification. Like, how can we mitigate against the future? I think we do that by just simply broad diversification. And if we have all of our assets and stocks, bonds, and rental real estate, we're pretty concentrated, especially if it's all in the United States, right? Our home country, for example, and so some diversification into other sectors probably makes sense. I know it makes sense for me because I think that's my way of hedging against the uncertainties of the future.
Keith Weinhold 34:37
Let's talk about the tree quality and then the sawmill, because some people don't understand that teak really has pretty special properties that maple or black cherry or oak doesn't have.
Mike Cobb 34:47
It does. It has a very very high oil content and it has a hardness that makes it extremely resistant to rot fungus, which is why it's used in the marine environment. If you look at Chris Craft. Boats or yachts. You always hear about teak, teak, teak. Teak is used in maritime environments because it holds up to the salt water-not just salt water-holds up to water, but even more so, salt water and the environment, which makes it unique. And so, even if you don't treat teak, right, you just leave it out. It turns gray, but it doesn't rot. And then you can come back. You can you know sand it and varnish it and turn it into that beautiful, rich color. It's a beautiful, beautiful wood. It's funny because it has furniture uses, outdoor furniture, patio furniture, things like that, decking. But now they're starting to use it in hardwood floors. They're using it in gates and fences and soffit materials. Again, outdoor uses, but it can be used indoors as well for very very fine furniture, which at the end of the day teak has a panache that a lot of these other woods don't have. Mahogany is certainly one mahogany. The thing about mahogany is it's softer, right? It's a softer wood. It carries some qualities in terms of the grains and the colors that make it a a very favorable product for cabinetry and other things. We actually looked at mahogany as a species to possibly grow, and it's about a 30-five to 40-year harvest cycle. And so, when we looked at that, we said, you know, we can get our heads around 20-five, and and maybe someday we will do some mahogany plantations as well. But for now, we we started with teak. Actually, when we did the analysis, I don't know if this is still true, but 27, 28 years ago, when I did the initial research and analysis, it had the best time value of money ROI.
Keith Weinhold 36:29
Ah, that's the first time I learned that. And some of these durability properties that you've been talking about really go back to my earlier question about how some more sensitive crops have been ravaged lately.
Mike Cobb 36:39
Yeah, it holds up very very well to the environment. By the way, it'll do well in pretty much everything but desert, right? If it rains too much, the teak will grow faster. Actually, it produces a less quality. The quality of the teak is less. If so, if panama's rain system changed and it started raining every day of the year, where we have it growing, teak trees would grow wonderfully. The quality of the teak would be lower, right? Still, be teak. It'd still be valuable, but not as valuable in the marketplace. So.
Keith Weinhold 37:08
Now you've been here to talk about teak before, but something that you added a few years ago was a sawmill to really bring some vertical integration there. And now you're not at the mercy, perhaps, of the price that you would need to sell to a lumberyard. Can you tell us more about how it's going with that?
Mike Cobb 37:22
Yeah, absolutely. Well, the bottom line is, is because we earn 20% of what we earn for the investor on their wood, our goal is to sell it for as high a possible price. And lumber does pretty well. I mean, you can sell logs. Let's just start there. You can cut the trees and sell the logs for X. You can turn the logs into lumber and sell it for you know whatever 578 x. You can turn it into things like cutting board, chairs, tables, a finished product, and there you're talking about you know not just five to 7x You're talking about another 10x on top of that. So that's like 30x right? I mean it's an incredible difference. So from log to finished product, it's about a 30 times differential in what you ultimately achieve out of the marketplace for return. Right now it takes longer to do it. There's more work involved, but at the end of the day, because you make more of the investor, we make more. Some of the teak is going to go out as finished product, and so we get a blended return of lumber. We don't do logs, but we're going to have a blended return of lumber and finished product that will push that yield up maybe higher than we've anticipated, which would be just fine with everybody.
Keith Weinhold 38:30
ll right, all right. Diversifying your exit, then. Well, before we learn about how we can get a hold of more information, is there any last thing that we should know about investing across international lines into teak, maybe something that I didn't think about asking you, Mike.
Mike Cobb 38:45
The only thing there is two of the teak farm parcels can be bundled together for a half acre with about a I don't know it's a seven $8,000 legal piece government fees to achieve a residency. So you can actually become a resident of Panama with the teak investment, and again coming in on about 600 folks have done the residency as well as the investment and ownership of the teak farms. So I would say that's a piece. Again, if people aren't sleeping well at night, they're worried about inflation, they're worried about social disruption, polarization, where things are headed, right? And they like the idea of the teak investment, then you know it may make sense to just do the extra government legal piece and get the residency card. I mean, I just did that. By the way, I think you know I'm a I'm a Nicaraguan resident because I lived in Nicaragua for 14 years.
Keith Weinhold 39:34
Mike is holding up his Nicaraguan ID.
Mike Cobb 39:37
but last summer I also got my Panama residency card, so now I have, y'all. I'm a U.S. resident, U.S. citizen, and I'm also a Nicaraguan. I think I held up my West Virginia driver's license. Hold on, let me go. Here's my Nicaraguan residency. Sorry, I was like, yeah. Wait a minute. Anyway, so right. So I'm a U.S. citizen, and I'm a resident of both Nicaragua and Panama. And so, this is something that a lot of folks choose to do because of the uncertainty, the political and social uncertainty in their lives. The teak itself will help with the economic uncertainty, but the residency then helps with the other two elements.
Keith Weinhold 40:15
Next time you fly in and you're doing customs in Panama City or Managua, show them your West Virginia driver's license and see how they like it. See what happens.
Mike Cobb 40:22
It wouldn't work. Hahaha.
Keith Weinhold 40:25
Well, the prices are low. You do not need to be an accredited investor in order to do this. So there's really no qualification bar to clear. There's really no limit in the number of parcels that you can buy. Some people like to purchase 10 parcels, but you can buy as little as one, and tell us more about that price.
Mike Cobb 40:42
Yeah, in fact, we've introduced Keith since the last time we talked a financing program. Oh,
Keith Weinhold 40:48
I didn't know that yet.
Mike Cobb 40:49
We did. That's a fairly new. It's a this year thing, right? So the teak parcels, I think 9890 or something, whatever. Call it 10 grand. The parcels just under $10,000.
Keith Weinhold 40:59
Okay.
Mike Cobb 40:59
Yeah, and they have a down payment and a credit card thing. I think it stretches maybe over a year or two, so it's a fairly short period. Let's people who don't have the entire 10,000 upfront who want the teak investment to be able to acquire it. And if they're doing the residency piece, the residency piece can only begin after the teak farm piece is acquired, right? But it can also lead to the residency piece over time. So yeah, and then there are some discounts on three of them and 10 of them. So we have a lot of people that actually end up getting them for. And and here's a really cool thing because it's titled in your own name, it can also be titled in a child's name or a grandchild's name. And so we have a lot of people that actually acquire them and they don't take ownership. They put it in their kid's name or their grand name. Yeah, so it's a wonderful way to move that asset already right out of the gates into the next generation or the next generation.
Keith Weinhold 41:52
So we're talking about diversifying at least twice, both internationally and then in a different asset type as well. This has been fascinating to learn about, Mike. It's just fascinating alone, I think, to learn about the geography and the teak itself. And like we touched on earlier, they do organize tours. Any reputable provider should do that. They're proud of what they offer there. Tours in the Darien province of Panama, in this case, to see your teak tree parcels. It's a really approachable price. If you want to learn more and get a report and perhaps purchase some parcels, Mike's one of our GRE marketplace providers. You can visit gremarketplace.com/teak or talk to your GRE investment coach. Mike has been fascinating as always. It's been great having you back on the show.
Mike Cobb 42:40
Nice to be here. Thank you, Keith.
Keith Weinhold 42:48
Teak is one of the more durable crops that there is. The demand for teak hardwood is substantial, and it's really growing. They have also had the same tree manager for all 27 years since the teak was planted, some real continuity there. The name of the manager is Heyo Forestall. There's a little to manage with the teak hardwood trees, like performing thinnings, and those thinnings do give investors like you intermittent income. So you're not waiting for absolutely everything for 25 years, but the income from the thinning is really small. Most of the return takes place in that 25 years, and it's interesting to me to see the profile of the GRE investor in teak because it attracts young investors, and maybe that's because the cost of entry is so low. It also attracts older investors because they more often have an eye toward passing along something productive to their heirs that is going to outlive them. A lot of them don't want to give their heirs money because money can be spent on fleeting trivialities. Also, the older a person is, they just have an easier time visualizing the fact of 25 years and knowing that it really will pass by. And yes, in-person tours are offered there in the Darien province of Panama, and there were 13 to 14 attendees on a recent tour. They do need to limit the group size, and the tours are for you, whether you're an existing investor or not. If you're just checking it out, that's for you too. If you believe that you want to attend a tour and you don't want to buy, I understand that you can get your money back from the tour.
Keith Weinhold 44:35
The next tour is in September. Each quarter-acre newborn teak parcel costs $9,680 $9,680 and over 20-five years, it's projected to produce about 110k in today's dollars. And yes, now with financing, we've talked about this investment on GRE before, but it's the first time where they now have financing in place, so you don't even need. 9680 to get started. Also, retirement funds might be eligible for use here. And really, when you think about the long-term horizon of this investment, retirement funds make sense. If this is potentially interesting to you, get a hold of the report that goes into the details and shows you some projections and more. You can do so by either contacting your GRE investment coach or visit gremarketplace.com/teek. Money may not grow on trees, but sometimes trees grow into money. Until next time, keep growing your means and maybe a few trees. You could visit gremarketplace.com/teak. Until next week, I'm your host Keith Weinhold. Don't quit your daydream.
Speaker 1 45:53
Nothing on this show should be considered specific, personal, or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions of guests are their own. Information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Get Rich Education LLC exclusively.
Keith Weinhold 46:21
The preceding program was brought to you by your home for wealth building. getricheduceducation.com
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