“Why Argentina?”

Is the first question one should be asking is when one begins to consider the acquisition of a vineyard in a foreign country.

To me it’s ironic how seldom I am asked this question when it should be foremost and fundamental.

My wife and I have always been adventurous Americans and when retirement peaked around the corner our talk about travel seemed to accelerate.

Being ardent wine lovers for decades and increasingly intrigued by the whole wine making process, from grapevines to the tasting, we envisioned owning a vineyard.

There were many candid conversations regarding what we wanted to do and bottom line what  we could afford to do. We assessed the financial possibilities knowing we were not heavy in cash, equity or retirement income. Economic reality dictated we consider a modest vineyard at best.

When retirement knocked on our door we began to strategize how to acquire a vineyard and among our many unanswered questions was, “A vineyard yes, but where”?

My growing-up in Southern California and my wife’s family living in Northern California, gave us both exposure to the Napa/Sonoma wine region, ergo it seemed an obvious choice for a vineyard.

Vineyard Sticker shock squashed any aspirations. Modest Napa/Sonoma vineyards were priced at $250,000 per acre. A modest, yet-to-be proven by award winning wine, 5-acre Napa/Sonoma vineyard fetched over $1,000,000. Financing a vineyard was not only unavailable; with such a high price any mortgage payments would be out of the question.

Our attention turned to Mexico where we had lived for a short time. We traveled south on Ruta Vino that begins after crossing Garita Tecate in the US into Tecate Mexico.

On Ruta Vino, before reaching Ensenada, we found 110-acres of raw land with water sufficient for 50% of the property. How to provide water to the other 50%, well that was up to our ingenuity. Price, one million one hundred thousand US dollars and we would have to build the vineyards.

Next we thought about Spain, Italy and Portugal, but our interest quickly waned when faced with prices of US$250,000 – $350,000 per acre.

We knew French vineyards were galaxies beyond our financial capabilities, typically fetching US$600,000 per acre.

Destiny seemed intent on telling us our vineyard dreams were just that, dreams.

So, we began to concentrate on travel, Mexico, Honduras, Panama and of course Paris and London, added to the mix even though we knew these additional Cities were cost prohibitive.

Because I was an Expert on two key real estate subjects, I was often invited to be a Guest Speaker at International Real Estate Conferences to talk about:

1. 1031 Exchange Strategies
2. Using an IRA to buy real estate, including foreign real estate

One such invite was a Conference to be held in Buenos Aires.

Buenos Aires was on near the top of our bucket list is truly the “Paris” of South America, but it isn’t Paris where people speak Spanish.

Because of Buenos Aires’ fascination and charm my wife and I opted to stay longer.

We found a cute, fully furnished 2 bedroom 1 bath totally renovated apartment off the famous Defensa Blvd. for US$700 per month.

Our odyssey lasted three months during which time we saw the spectacular Iguazu Falls that borders Argentina, Brazil and Paraguay. Don’t skip Iguazu Falls because you have seen Niagara Falls. Both are spectacular.

While in Buenos Aires we made a side excursion to Mendoza City known for its charm. Mendoza  Province is recognized as one of Argentina’s best wine regions with 1,000 vineyards and Wineries.

Mendoza is both a Province and a City. Mendoza City is accessible by plane from two directions, west  flying east via Santiago Chile, a 30-minute flight over the rugged, magnificent Andes and flying east from Buenos Aires.

San Rafael is a 3 hour automobile drive south of Mendoza City with dozens of tantalizing stops at select Bodegas. There is no flight from Mendoza City to San Rafael but there is a direct flight from Buenos Aires to San Rafael (2½  hours once daily).

During our stay in Mendoza City my wife and I visited dozens of Wineries ranging from the tens of millions of dollars invested (often foreign) like the Dutch owned Saletine Bodega, or the five Clos De Siete vineyards comprising over a thousand acres of sprawling vineyards to a less 25-acre Bodega vineyards owned by a European couple and acquired for perhaps US$125,000.

They wines we tasted varied from the terrible, i.e. one was so bad we poured the bottle’s contents down the sink while blaming ourselves for being so naïve to believe a US$4.00 bottle of wine would be good, to the sublime, a stellar deep ruby red with an intense aroma of roasted pepper, eucalyptus and spice wine whose entrance on the palate is sweet and smooth, due to the presence of round and ripe tannins. The wine is aged in new French oak barrels for 18 months, giving the wine an elegant and long finish.

I could never describe a wine as eloquently as above, I have neither the palate nor the nomenclature.

But I do know great wine when I taste it, for example 10-years ago in Argentina I discovered a Puletna  Estates Cabernet Franc at a wine tasting bar in Mendoza. A modest glass fetched US12.00 and US$40 for a 750ml bottle. Today a 750ml bottle sells in the US for rUS$175.00.

Good Argentine wine is not cheap Great Argentine wine is expensive.

After enjoying Mendoza City for several days my wife and I headed south to San Rafael, a quaint city with a population of 120,000 and voted #4 as a Best Retirement Location by CNN.

After visiting dozens of Bodegas with vineyards and my asking a zillion questions, my wife and I realized Argentine vineyards were affordable. We were excited to begin our hunt for a vineyard and previewing vineyards was informative but sometimes confusing, even humorous.

In San Rafael there are few, maybe half a dozen, Real Estate Agents and none are licensed because licenses are not required, they don’t even exist.

While in San Rafael word spread rapidly two Americans were scouting for a vineyard. Soon we were bombarded with prospective vineyard properties coming from restaurant owners, grocery clerks, Lawyers, Accountants, even a Priest. And of course from locals and ex-pats.

A MLS (Multiple Listings Service) does not exist in much of Argentina. Any available vineyards is likely to be offered by a friend, or friend of a friend of the Owner. This arrangement created frustrating and occasionally amusing scouting experiences. One vineyard was shown to us on three occasions by three different alleged representatives of the Owner. Each representative stated a different set of facts, type of grapevines, e.g. Malbec, Bonarda, Cabernet Sauvignon etc., the size of the vineyard, e.g. 10-hectares (25-acres), 30-hectares (74-acres) and most importantly, price, e.g. one recited a price of US$100,000, another US$150,000 and one bold faced stated $210,000.

Eventually we found a British but local San Rafael Real Estate Agent who had married an spirited younger Argentina woman. They were an odd couple but he was competent at what he did.

He showed us dozens of vineyards without success: too big and expensive, (100+ acres), affordable but too small (1 or 2 acres), the wrong variety of grapes, no legal water source, too far out of the city (45-minutes one way making a trip to the market for milk a 1½ hour ordeal, or last but not least, the vineyard sat next to a commercial junk yard or noxious industrial complex.

Fully disappointed we returned to the USA but with high expectations we would soon return and renew our vineyard search.

Shortly after returning to the US we received an email from our friendly Brit Real Estate Agent who included an attachment, a picture of a parcel of raw land he thought might interest us if we would consider building our own vineyards. He acknowledged the parcel was larger than what we had considered and, well a little over our budget. We looked at the pictures with keen interest.

The elongated parcel was nearly one mile deep and represented 108-acres of raw land sandwiched between two well established fruit orchards. His pictures were horrible and when we requested better pictures the Agent dragged his feet in providing more.

A few weeks later, and to our British Real Estate Agent’s chagrin, we unannounced walked into his compact San Rafael Real Estate Office. We were in town for a week and wanted to see the 108-acre property. Embarrassedly the Brit had to dive into his wastebasket to find the crumpled printed property information.

My wife and I had conducted some research regarding building a vineyard so we decided to take a run at the 108-acre parcel.

The asking price wasn’t cheap but also not paralyzingly expensive. We weren’t sure we could afford to drill a water well but our right to was noted on the Deed. And the neighboring 100-acre Plum orchard had a 10” commercial well the neighboring 100-acre Peach orchard also had a commercial well. Preliminary research revealed both orchards had hit water at 70 meters or 227 feet. This depth translated to affordability. We knew of other areas north of San Rafael required drilling 700 feet or more. Ultimately we did spend US$85,000 for a new water well and hit crystal clear water at 200 feet that produced 350,000 liters per hour.

Nervous but hopeful my wife and I left the Real Estate Agent back at his office and went back to our Hotel room to debate whether or not to make an Offer.

One thing was clear, we did not have sufficient cash to pay the full asking price and build vineyards. My wife and I constructed our offer.

“What!?” The Brit Agent exclaimed. “I don’t understand”.

“It’s simple” I explained. “We will pay full price with 50% down and a 50% Mortgage payable at 5% interest fully amortized over 5-years.

“¿Qué?” The Owners exclaimed as the Brit Agent tried to explain. They eventually agreed.

“¿Qué?” The Escribano (Escrow Officer) exclaimed as the Brit Agent and I tried to explain.

The closing of the transaction was surreal, a real eye opener. Not every country handles real estate transactions like in the USA.

My wife and I anxiously arrived at Bank National in San Rafael for the closing. We greeted the Sellers, four adult children representing their widowed mother, our apprehensive Real Estate Agent and his associate from Italy, and the Bank Officer who guided us to a small private room in the interior of the Bank. Once inside he closed the only door.

Everyone chatted for a few minutes in Spanish, except me, (un poco español), until a knock on the door interrupted the conversation.

The Bank Officer opened the door. A meek Bank Associate with wire rimmed glasses quietly slipped inside carefully closing the door behind him. He was rolling a weather beaten small metal table on wheel. It had a mountain of cash on top.

Efficiently tens of thousands of dollars were distributed like banded loaves of bread, most going to the Sellers with a respectable stack going to the anxious Real Estate Agents. After handing out the stacks of Argentine pesos the Bank Associate silently withdrew pulling his little cart behind him.

Two things stuck in my mind that day.

First, the Sellers were apparently not going to deposit their money in the bank.

Two, we had successfully brokered a deal with Seller Financing, i.e. a 50% LTV 1^st Mortgage. Using Mortgage was something unheard of in San Rafael as evidenced in the months that followed by often asked how we convinced the Buyers to carry a 1^st Mortgage and how did we mechanically (verbiage) structure the Mortgage in a land where financing properties was relatively unknown except in wealthy circles.

                                                                                                       After the closing my wife and I drove a brief seven miles (11 kilometers) from the center of San Rafael’s bustling activity to our property, along the way passing what had become familiar orchards and vineyards.

There we stood in awe, struck by the beauty before our eyes. Before us unfolded 108 fertile acres of soil waiting to be planted with Malbec vineyards.

We knew our task would be daunting but we were up to the task.

Fourteen years have followed and during that time we learned the truth of the aphorism, “Everything that glitters is not gold”. It has visited us and more than once.

If you would like a Free copy of my 137 page eBook, “The Argentine Vineyards Buyer’s Guide” written shortly after my wife and I began our quest to purchase a vineyard in Argentina, just send me your email

I also have a 100 Color Slide Presentation of how we built La Vida Buena Vineyards, just ask for it too.

Sincerely,

Thomas and Yvonne Phelan

La Vida Buena Vineyards

FRACTIONAL VINEYARD OWNERSHIP 

SAN RAFAEL, MENDOZA PROVINCE, ARGENTINA

US $19,500 = 1/10 Interest in 5-acre Malbec Grape and Wine Producing Vineyard

An innovative, unique and affordable method (IRA & Individual 401k approved investment) for owning a 10% portion of an established vineyard. Each year you can sell your grapes (estimated at 1,500 – 2,000 kgs) to generate income (estimated at 6% ROE) or make personal wine or collectively make wine with others.  Contact: Tom at tomphelany@yahoo.com (919) 321-8448 USA