March 12, 2010
Panama City, Panama
PLUS:
- "But They Get Earthquakes In Panama, Don't They?"...
- New Visa Restrictions In India Could Be A Deal Breaker...
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Amidst vistas of nearly indescribable beauty, you can pay US$100 a month for rent, spend only 1% of the usual cost of health care, and eat a full lunch for only 50 cents.
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This land of ancient kingdoms, emperors, explorers, adventurers, traders, and pioneers is also beautiful, safe, welcoming, and, in some parts, completely at peace.
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Dear Live and Invest Overseas Reader,
A fellow reader wrote this week to express concern at receiving information about buying and investing in international real estate in these dispatches. "It's not relevant to retirement," he pointed out.
In fact, though, I see a direct connection. Diversifying your investment portfolio can be a critical part of maximizing your retirement nest egg. Unless you're retiring on your Social Security or pension income alone, you should be thinking, as early on as possible, the sooner the better, about allocating part of your investment portfolio into real estate. And part of that allocation should include some international property assets, for diversification's sake (including, importantly, diversification of currency).
This diversification could be achieved just by buying a second home in Mexico or the Dominican Republic, for example, that you rent out when you're not using it. That rental income, while not likely to provide a huge yield if you use the property for six months a year yourself, still would add some cash flow to help support your retirement, while also providing some security in the form of assets held outside your home country. Then there are always the potential capital gains.
I have a friend who has used this real estate as an early retirement strategy idea to fund his retirement 100%, even though he's nowhere near traditional retirement age. He has managed in less than a decade to build an impressive retirement portfolio trading in international real estate. He buys and sells actively in key markets (right now including Panama, Brazil, and the Dominican Republic), mostly pre-construction. Taking advantage of the leverage pre-construction allows, he has been able to generate profits enough to afford himself a comfortable lifestyle while putting minimal cash at risk. For him, real estate investing is the critical topic in the context of his retirement plan. It has allowed him to be a 30-something "retiree."
Lief Simon
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"Kathleen, I have been reading your newsletter regularly for the past six months. One question I have about
Panama has to do with the extent of seismic activity in that region (the U.S. Geological Services shows the Central America region to be quite active) and whether the buildings (condos and houses) are built to code so they could survive a major earthquake.
"I would appreciate your advice on this subject, given the concerns potential retirees may have following the recent earthquakes in Haiti and Chile."
-- Jay A., United States
Yes, Panama gets earthquakes. We've experienced several since we've been living here. The only one that made an impression happened about a year ago, while we were living in a high-rise tower in Paitilla. We were awakened at 2 a.m. because the 30-story building was swaying back and forth...back and forth...in slow motion. We heard paintings shifting on the walls and knick-knacks falling off the shelves, but, by the time we were fully awake, it was over. We found out the next day that the quake had been a 5.7 on the Richter scale. There'd been no damage to our building or to any other.
In other words, yes, there are building codes in Panama, including those meant to protect structures in the event of an earthquake. And, so far in our experience, they seem to be effective. But I wouldn't say they're up to California earthquake-building standards, for example.
Remember that the entire Pacific coast of the Americas is on one fault line or another. But Panama seems to suffer from less extreme quakes than its neighbors.
Also note that Panama sits outside the hurricane zone and is hurricane-free.
"Kathleen, you should include an important fact in your
India reports, something that eliminated India from my retirement option list. As of January 2010 (in response to an American terrorist in India), anyone in this country with a tourist visa (the only option, as there are no residence visas) must leave the country for two months after every six-month stay. No longer can you leave for 24 hours and then return for another six months.
"For a low-income senior retiree like me, this is a deal killer. I cannot afford to maintain an India rental and an out-of-country one at the same time. On top of that, there are the travel costs. Many low-income senior retirees want a fixed residence, not to be living out of a handbag jumping between countries. This means India and Thailand, with their current visa requirements, are not viable retirement havens for us."
-- Brian W.
Intrepid Correspondent Paul Terhorst, in reply:
"The question is whether Indian migration officials are set up to enforce this. I kind of doubt it, but you never know. As you say, though, for low-income retirees, this is a deal killer."
