Panama More Expensive Than Paris?

April 15, 2008

Paris, France

PLUS:

n  You Bought Pre-construction In Panama City...

n  The Benefits of Café Society...

n  Paris' Hidden Architectural Treats...

n  Big Upside in the Land of Genghis Khan...

n  Disney Does Mexican Beach Town...

n  Beachfront for $10 a Square Meter...

n  Net Rental Returns of 13% and Better...

n  The World's Safest Place to Live?...

n  The Best Rental Manager in Panama City...

n  Up and Coming in Ecuador...

Not only that, but, if you can write a simple letter about your adventures, you could earn up to $100,000 a year in the bargain. Make your own hours, keep your own schedule, be your own boss...and see the world.

I've hired and trained hundreds of travel writers over the years, and I guarantee you this: It's easier than you might ever imagine...and you don't need to be Mark Twain. Here's how to get started today: The Travel Writers Life

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Dear Overseas Opportunity Letter Reader,

I suggested he double-check his math. Lief's budget, which he presented to me last week, shows that it will cost more for our little family to be in Panama City, Panama, than it has cost us to be in Paris, France.

How could that be? I asked incredulously.

My husband the accountant assures me his numbers are correct, and, indeed, holding aside the cost of housing, which we're considering separately, it appears our day-to-day cost of living will be higher in Panama than it's been in France.

On the one hand, this is a comment on how affordable Paris can be. This is a place where even a modest lifestyle can feel rich, where the greatest pleasures--strolls along the Seine, afternoons in the Luxembourg Gardens--come gratis.

In Paris, we're happily car-free. We walk nearly everywhere. The butcher, the baker, the grocer, the wine shop, and Jack's school are all less than 15 minutes' walk from our apartment, as are the Tuileries gardens, the Louvre, six movie theaters, and at least a dozen cafés and restaurants. When we want to venture beyond our quartier, we take the metro. For 1.10 euro, we can go anywhere in the city.

Other things in Paris can be cheap, too--for example, telephone, cable, and Internet. Our phone plan, which costs less than 40 euro per month, allows unlimited free calls anytime to anywhere in the United States and anywhere throughout Europe. Hard to beat. Full cable and wireless Internet service cost, in total, less than 70 euro monthly.

On the other hand, in Panama, we'll need a car. Which will mean monthly insurance, gas, and maintenance expenses...plus the cost of a driver, at least while I work up the courage to navigate the streets of that city on my own.

Basic phone, cable, and Internet charges for our rental apartment in Panama City are comparable, in dollar terms, to what we pay in Paris--not including international phone calls, which, again, in Paris, are free to the U.S. and Europe.

In Paris, we pay for heat maybe six months a year. In Panama City, we'll pay for air conditioning year-round.

Groceries are more expensive in Paris, but not dramatically so.

Reviewing Lief's numbers with him, I couldn't argue. For our family, given our lifestyle and what's important to us, day-to-day living costs in Panama City will be slightly more expensive than in Paris.

Then there's housing.

In Paris, you could spend as much as 15,000 euro per square meter to buy an apartment in one of the city's prime neighborhoods and 8,000 euro per month or more to rent one.

You could also buy or rent for considerably less, of course. It depends on what kind of apartment you're in the market for and in which arrondissement you'd like it to be located.

And this is the fundamental point to remember, not only in Paris, but in Panama City...and anywhere.

When we contacted a friend in Panama, a local real estate agent, to begin to explore our housing options, we were surprised by his initial response. He told us about places for rent for $8,000 a month and for sale for $550,000, $800,000, even a million dollars and more.

In Panama City?

I know of people renting apartments in this city for less than $500 a month, and Lief told me the other day about a woman he knows who has just bought a resale apartment, off the water, in an out-of-the-way neighborhood, for less than $1,200 per square meter.

I'm going to show my biases by admitting that I don't think I'd want to live in any apartment renting today in Panama City for less than $500 per month. That's not to say it's not a viable option.

Neither do I, to Lief's relief, want to rent for $8,000 a month. Our agent friend assumed we wanted to be in one of "the" neighborhoods in the city. Lief says I'm picky...but I'm not that picky.

We're putting aside purchase options, right now, and focusing on rentals, for two reasons. First, moving to a new place, it's always wiser to rent for a while before committing to a purchase. The truth is, today, we don't have any idea which of Panama City's neighborhoods makes most sense for us.

In addition, I don't think this is the time to buy in this city, not in any neighborhood. The for-sale market has softened and will continue to do so. Better to rent and to watch.

Kathleen Peddicord

P.S. I introduced you last week to Jay Snyder, who is spending part of each year in Granada, Nicaragua. Jay shared with me his budget for life in that city. He estimates it costs about $1,200 per month, including a housekeeper, to live a comfortable life here. This does not include the cost of housing. Again, it's best to consider this separately, because it can be as much or as little as you want it to be.

P.P.S. Our agent friend in Panama understood when we explained that we don't need to be located in the city's best districts and we don't want to spend anything like $8,000 per month in rent. He also gave us some good advice:

"Wait until you arrive in July," he suggested, "before you begin your search in earnest.

"The Panama City market is so active right now that rentals are snatched up overnight. You've got to be in the city, ready to act as soon as a good one becomes available."

 

ALSO RIGHT NOW:

If you, like thousands of other investors over the past several years, bought a pre-construction condo in Panama City, you may be wondering what to do right now.

On paper, your condo is worth as much as two times what you paid for it.

In fact, it's worth what you can sell it for...and selling requires finding a buyer. Right now, the math for this isn't figuring in your favor. Yours is one of thousands of units in inventory, while buyers are scarcer than they've been.

You could reduce your price and still make a good return. A friend sold his pre-construction unit recently for 50% more than he'd contracted to pay for it two years prior. Not bad.

But this is better. Don't sell the place...rent it out. Panama City is one of the few markets in the world right now where you can realize enough return from a rental to make it worth the hassle.

In my experience, rentals aren't all they're cracked up to be. You're constantly repairing things and replacing things and responding to tenants' complaints.

Once you figure in the real costs--that is, the costs of maintenance and repairs, along with rental management, property management, taxes, and utilities--you're lucky to show a 5% return. Indeed, in Paris, where we had two rental apartments, we never met this modest investment target, not when all costs were acknowledged.

In Buenos Aires, where we continue to rent out our apartment in Barrio Norte, again, we can't seem to walk away at the end of each year with even 5% in our pockets. This year, a leak developed in the ceiling of one of the bedrooms, meaning we had to invest in repairs...and the apartment had to be off the market while they were being carried out.

It's always something.

Or it has been...until this current experience in Panama City, where our apartment on Balboa has been available for rent for nine months. Occupancy has been better than 80%, and our rental manager has gotten as much as $500 per night for very short-term stays. The returns are increasing monthly.

Annualizing what we've done to date, we'll end the first 12-month rental period with a better than 13% return...net of rental management, net of property management, net of taxes, utilities, maintenance, and repairs during that period.

Thirteen percent net of everything. And, in fact, the return could be as much as 15%, as, again, the revenues continue to increase monthly.

What's the difference between this experience and our previous rental experiences in Paris, for example?

Obviously, it's the market. Panama City is bursting at the seams. Engineers and executives are streaming into the city to help with the Panama Canal expansion and other infrastructure projects, while retirees and expats are migrating to Panama's sunny shores in ever-greater numbers.

While Panama City is glutted with pre-construction condos for sale...it has but a modest supply of hotel rooms. In this case, the math figures happily in favor of the would-be rental owner.

There's more to it than that, though. Our rental experience in this city has been our most successful to date by far, not only because the market is with us...but also because our rental manager is serious and professional.

In Paris, we placed our apartments for rent with a friend of a friend. Reporting was unreliable. Expenses were overlooked. Bills went unpaid. Arriving tenants were sometimes left standing outside the front door of the apartment building, keyless, while our friendly rental manager was held up somewhere else.

The woman managing our unit in Panama City also furnished the place for us. She had the Internet connected and the cable installed. She pays all the bills, including the local taxes. She's on call 24 hours a day for tenants, and we've yet to hear a single complaint. She's handled repairs immediately and kept the place occupied, again, better than 80% of the time.

If you don't already own an apartment in Panama City, should you run out to buy one so you can throw it into the city's rental pool?

I don't recommend buying at today's prices...although there are exceptions. The woman Lief knows who bought recently for $1,200 a square meter is renting her place successfully, even though it's not on the water or in the main downtown zone.

If you'd like the name of our rental manager, contact us at Editorial@LiveandInvestOverseas.com, and I'll put you in touch.

If you'd like to try to scout out a unit for sale at a reasonable price, get in touch with Maurice Belanger, e-mail: cembelanger@palmettorealty.biz

 

 

Commodity-rich Ulaanbaatar, Mongolia. Another market where you could realize 13%+ net rental returns each year?

 

Here's a more exotic play right now, for both rental and capital return: Mongolia.

A commodity-rich nation attracting big mining companies interested in its copper, coal, and gold stores, Mongolia is growing fast. The country's economy has expanded at rates of better than 7% a year for the past five years and is expected to keep up the pace for the next three to five years at least.

Not only the mining executives pouring into the country, but also tourists to the land of Genghis Khan need places to stay. Both the current supply of apartments and hotels as well as available land for expanding that supply are limited...meaning quality rentals are in big demand.

You can buy in Ulaanbaatar, the capital, for as little as $900 per square meter. I have no experience in this market and can only report the developers' projections, which call for net rental returns of 13% a year and capital appreciation of 30% a year for five years to come.

Yes, you can own freehold in Mongolia, but, as in most of this part of the world, only construction (that is, the condo), not land (which must be leased).

Take a look: Property Frontiers 

 

 

"Come on, there's more," she urged.

I followed her along the cobblestones to a second and then a third round courtyard. A string of interior, circular courtyards built hundreds of years ago...an architectural treat just off a road I travel almost every day. Yet I had no idea it existed.

This is the real appeal of Paris. The longer you are here, the less certain you are that you know the place. This city is like a mistress savvy enough never to reveal herself completely. Paris shows you a little leg, then covers up coquettishly, leaving you smiling and anticipating the next encounter. Turn right one day, instead of left, down an avenue you've traveled a hundred times before, and you're bound to find something new and charming.

"How did you discover this?" I asked.

"It's my job now," Emanuela told me.

Emanuela has gone to work for a group called Promenade des Sens. She leads personalized walking tours. You explain what you're interested in seeing, exploring, tasting, buying, hearing, or watching...and the folks at Promenade des Sens customize a half- or full-day itinerary to suit your interests.

"Most of our clients are the wives of American businessmen. They're in Paris with their husbands, but they can't work. They need to do something to fill their time. We take them shopping, introduce them to designers and their showrooms and workshops. Sometimes we even take them to the designers' homes. Along the way, we point out things of architectural and historical interest. We even do a treasure hunt."

I can't imagine a better way to spend a springtime day in Gay Paris: Promenade-des-Sens

"This town has grown dramatically since we were last here three years ago. Remember the bullring where we took Jack to see a bullfight? It seemed off the beaten path then, far outside the zone. Today, there's construction all around it.

"My hotel was full. I'd say all the hotels were full. Tourists everywhere, including lots of Spanish-speaking tourists from other parts of Mexico.

"This place has the tourist trade figured out. It's like Disney Does Mexican Beach Town. Everything is homogenized and packaged to be 'American.' Our restaurant choices included TGI Fridays, Champions, and Hooters. Hard to get a real taste of Mexico.

"Taxis from the airport are strictly regulated. You don't negotiate a fee. You pay a standard rate of $6 for a five-minute ride.

"Other things, though, are cheap. My hotel room, in one of the mega-resorts, was only $145 a night. I saw signs for two-bedroom, two-bath condos back from the water for as little as $125,000. And you can buy an oceanfront studio for $185,000."

"Ecuador's provinces are very territorial, and Playas has recently made a province shift. Until now, it's been a sleepy and depressed fishing village...with a beautiful crescent bay just like the one in Salinas.

"Now, though, Playas is part of the Guayas Province, and it's getting a lot of attention. Two highrises are under construction on the bay, and the town's beachfront is in demand. Right now, you can buy it for as little as $10 a square meter, but this won't last long."

This from a contact in Ecuador, whom we've asked to prepare a full report for you. Meantime, contact him directly with questions: Mike Sager, e-mail: redwulf3@juno.com

"The overall crime rate here is very low," reports David Finzer, who took up residence in Montevideo about 18 months ago.

"Despite having about the same population as Costa Rica, for example, where I lived before moving here, Uruguay's murder rate is far lower.

"I've never lived anyplace where I've felt safer. I don't even lock the doors or the front gate at night, unless we're going away."

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"A couple of real estate cycles ago, I heard a group of bank lenders make a presentation to their board of directors. The question on the table was: How could people afford to make such high mortgage payments. 

"The answer being proposed was that they could stop going out.

"To the real estate lenders, this made perfect sense. When a homeowner buys a big house, he can watch movies at home and cook in a well-equipped kitchen. Why bother to go out to see a show or to eat in a restaurant? 

"Once we stop going out, the lenders figured, we can make bigger mortgage payments.

"The analysis left me shaking my head. Does it really make sense to invest in bigger and bigger houses and then to spend more and more time in them?

"When we go out, we meet people, or at least we make human contact. We see things we've never seen before, and some of those things turn out to be worthwhile. At a minimum, we get a little exercise and adventure, a little new and different. We get a sense of being proactive, rather than reactive. We lead our lives rather than watching others lead theirs, on TV, for example.

"Vicki and I began traveling abroad in the 1970s, mainly to Latin America and Europe. We noticed that, in these countries, both foreigners and expats tend to go out more. They prefer watching a play to a movie on television. They meet at cafés rather than talking on the telephone.

"After all, the French developed their café society because, typically, they lived in tiny, unheated, sparse, plumbing-downstairs apartments. They went out to be comfortable and to relax.

"Those days of unheated apartments are over. We can now set ourselves up in lavish houses in Uruguay or Mexico, in Panama City or Santa Fe.

"Still, I've noticed that expats tend to go out more. When we first show up in a place, we explore our new surroundings--the nearby restaurants, the local shops.

"Later, when we get to know the neighbors, especially the expat community, we meet at the bar down the street. Once we've mastered the language, we go to plays, lectures, conferences...

"After more than 20 years of retirement abroad, I'd have to say that, for Vicki and me, this has been one of the best, if unexpected, benefits."