I've been on the receiving end of the rumor mill in this part of this country. Someone, for example (I can't remember who...doesn't matter), started telling people that Los Islotes doesn't have any roads and never would have any roads. Those statements are out there in the universe now, being repeated and retold, exaggerated and enhanced. They come back to me regularly. What can I do? Nothing. Except point out that, in fact, Los Islotes is crisscrossed by roads that our Project Manager Gary Mosely has spent the past 18 months cutting, covering, and providing drainage for. I suggest to every naysayer that he come down to have a look for himself. Usually, when I do, I don't hear anymore from said naysayer. Because most people spreading rumors aren't interested in knowing the truth. It's more fun to continue the gossip. I spent the past two weeks in Cayo, Belize. Talk about a Coconut Telegraph. This region suffers more than most. The level of gossip at work here is a marvel. And frightening. In fact, San Ignacio and environs suffer from two levels of rumor-mongering...local and expat. The two cross over from time to time. Belize's infrastructure is Third World. Still, somehow, everybody knows everything about everybody else all the time. The less true or more exaggerated the thing, the quicker everyone knows it. Today's Coconut Telegraphs are powered by social media. While I was in Belize last week, someone forwarded me a Facebook posting by a lady who made a specific and hard-to-believe accusation about something someone said. I know the someone being quoted, so I called him. Nope, he had not made the statement being attributed to him, nor had the event during which the statement was supposed to have been said ever taken place. Why did the lady make the post? Who knows. As they say, it's only fun until someone gets hurt. Rumors are no different. For some, gossip is entertainment. For others, the agenda is more malicious. In my experience, in the developing world, rumor and deception are the friend of the con man (or woman). Bring down your legitimate competition, and you can more easily fleece your mark. What's the point for you, as a would-be expat, investor, or businessman overseas? I'd say it's this: While you want feedback from expats already in residence on what it's like living in a place or what you should know before investing there, you must realize that, by tapping into the local expat community for information, you're going to have to wade through all the gossip. Until you know who's who, who you can trust, and who is operating with an agenda, take everything you hear with a grain of salt. You don't want to end up labeled as part of one clique or another until you know who the cool kids are. Lief Simon Editor's Note: Lief Simon writes a twice-weekly dispatch on living, investing, and doing business overseas called Offshore Living Letter. If you're not on the list yet to receive it, get on board here now.
Now that they've reached this important phase of development, the developer is planning a price increase. I'm writing today to let you know that I have talked them into postponing this for Live and Invest Overseas readers. I believe this is one of the best agri-land investment opportunities you'll find right now, and I want to be sure you have a chance to get in on the ground floor, so to speak. I also, as you know, recommend that you buy what you see...meaning you should, if you can, come see this organic mango plantation for yourself. The developer is offering a tour of the property in September and have agreed to hold current pricing for Live and Invest Overseas readers through the dates of that tour. One key risk in any agricultural project is implementation. In this case, at this stage, this risk has been minimized significantly. With planting underway, you can have a higher degree of confidence that your trees will be planted according to the contractual timeline. Another risk for any agricultural project is water, as I've mentioned. Farmers in California are having a rough time right now thanks to the prolonged drought. Panama is in the tropics and enjoys significant rainfall every year. Nevertheless, the developer here chose for his mango plantation land with several rivers running through it, including a river that runs year-round, even through the dry season. They have the rights to take as much water from it as they need. Market risk is something else to consider with any turnkey project. With an agricultural project, this translates to: Who is going to buy your product? Mangos are the most eaten tree fruit in the world. The market is large. That said, the tropical fruit markets in the United States and Europe could be considered in their infancy...but expanding big time. The USDA's figures for mango consumption between 1980 and 2012 show an increase of a staggering 896% (from 0.25 pounds per person to 2.49 pounds per person, on average), and the demand continues to grow. In 2013, mangos made up 39% of this market. Not all mangos are created equal. The agricultural partner of the developer behind the plantation in Panama has created a variety of the fruit that has more meat and is naturally sweeter than most any other mango you'll find. A quality product and a big and growing demand aren't a guarantee that you'll be able to sell your inventory, right? You have to have access to buyers. In this case, the developer already has a 350-hectare mango plantation in production and is selling those mangos to juice companies in Panama. These same outlets have said they'll take as many additional mangos as the developer can produce. Right now those juice companies have to import the vast majority of their mangos for processing, which is far more costly than buying locally grown fruit. While having that ready-made outlet available is great, it's not the most profitable strategy. Therefore, the developer is in discussion with several groups in the United States, from dried fruit wholesalers to grocery stores, lining up contracts for selling your mangos directly into the U.S. marketplace where they would be able to charge substantially more than the local Panama juice companies are paying. Selling directly into U.S. markets would mean a more profitable operation; however, the financial projections the developer has put together are based on selling at local Panama prices. In other words, the projections are conservative. Using those numbers, the projected annualized yield (or IRR) through 15 years (although the project will produce for 60 to 80 years) is 16.52% at the current investment price. The mango trees don't start producing until year four, but, when they do, the annual cash flow is very healthy. By year five, when the trees are fully producing, the yield on your original investment is projected at 30% per year. The investment price is US$33,500 per hectare right now. The developer hasn't finalized the plan for the coming price increase, but it will be at least 10%. As he's sold out phase one already and has started selling phase two, it's been a tough conversation to persuade him to hold the original launch price for a couple of months more for Live and Invest Overseas readers. But, as I said, he has agreed. If you're interested in an agricultural investment and like the idea of mangos or Panama, now is the time to take action. You can find out more here. Lief Simon
Lief and I spent the day yesterday at Los Islotes, checking in on progress of the Founder's Lodge we're building there. The foundation has been dug, and the footers are going in. The views, now that we can see them more fully, are even better than we thought. Just like Pat and her husband, we have ocean views to the front and mountain views in every other direction. I have to agree with Pat. It's just awesome. I've told you about Los Islotes before. This is a long-term personal project for Lief and me, part of our own retirement plan. We're delighted to have folks like Peg and Pat joining us in creating the oceanfront community we've long imagined. Simply put, our goal is to layer 21st-century, luxury-standard amenities and services over a natural situation that is, we'd say, based on lots of experience, as good as it gets. And now that the pieces are coming together, the first houses are underway (including five spec houses), and we're getting to know new friends like Peg and Pat better, we are more excited about the proposition than ever. You can find out more about what's going on out at Los Islotes, on the western coast of Panama's beautiful Azuero Peninsula, here. And you can hear more from Peg and Pat, in their own words, here and here. The ladies were kind enough to sit down and video their thoughts on why Panama and, specifically, why Los Islotes. Kathleen Peddicord P.S. Panama is one of the 21 countries we'll be featuring during this year's Retire Overseas Conference in Nashville next month (Aug. 29–31). Today is your last chance to save up to US$300 when you register for this, the biggest and most important retire-overseas event of the year. That's because the Early Bird Discount expires tonight at midnight. Sign up now here.
April 21, 2014
"Kathleen, my wife doesn't believe we can be safe and have a low cost of living in Belize or Mexico or Roatan or other places that I'm very interested in. She can always find bad news on the Web about muggings, murders, etc. "How do you address these concerns?" --Darrell B., United States If you were to ask my husband for his advice on this subject, Lief might reply: "Well...you could always make a move without your wife. You could leave her at home..." And, in fact, that's an option. You wouldn't be the first reader we've spoken with who has resorted to that strategy. I don't recommend it, though. Relocating overseas shouldn't mean giving up your nearest and dearest. We get this question often, and, instead, here's what I recommend: Take this step by step. Suggest to your wife that you and she take a trip somewhere on your list. A 10-day vacation, say. No pressure. No commitment. Just a vacation. In most every case I've known where this strategy has been employed to try to adjust the thinking of a reluctant spouse, the result has been positive. If the reluctant spouse keeps even a slightly open mind...and the motivated spouse doesn't push too hard...usually good things result. Specifically, usually, the reluctant spouse has a surprisingly great experience and then is open to a similarly low-key second step...maybe a more extended visit to another interesting place. This approach can stretch out the decision-making process, but that's OK. It's not a race. We've had many cases at conferences, for example, where a reluctant spouse has come along for the ride, maybe kicking and screaming at first. Every time I've spoken with said spouse, maybe a couple of days into the experience, the story goes like this: "I didn't want to come here. And, on the first day, I had a pretty bad attitude. I was sure this was all a waste of time because I was sure I wasn't moving anywhere. But now that I've had a chance to speak with others who are already living new lives in new places and now that I've seen some of the options up close...well, I have to say, I'm intrigued..." Your wife seems especially concerned about safety. Don't try too hard to argue her concerns away. Instead, again, get her on a plane. Try to get her to go see for herself. What she'll see is that these places that have your interest really are beautiful and appealing. No place is 100% safe, and bad things happen everywhere, but the places we recommend are safer than many places Stateside and certainly not "unsafe." Sure, if you Google around, you'll find scary statistics—for anywhere in the world. Ignore the statistics and the one-off horror stories. Get on a plane. Worst case, you and your wife will have a vacation, return home, and move on with your lives. But I believe, based on long experience, that if you can get your wife to take this first small step, you and she will be on your way to the adventure you're dreaming about. Bon voyage.
Owners of apartments in the next building we toured don't have to debate whether or not they're comfortable renting short-term, as the HOA documents for this building require all leases to be one year or longer. This was the first time I've heard of a building in Panama City specifically forbidding short-term rentals, but I think this may become more common. As the short-term rental market in this city has expanded dramatically over the last decade, more and more residential (as opposed to investor) owners are fighting back against transient renters in their buildings. In this second building we viewed one of several developer units still available. The asking price for this 287-square-meter three-bedroom apartment is US$630,000, which works out to US$2,200 per square meter. Similar apartments in the building are renting for US$3,200 per month. That rent would translate to a net annual yield of 5.3%. A smaller two-bedroom apartment on a higher floor is priced at US$2,600 a square meter. The projected annual net yield for this place is a bit higher at 5.6%, based on monthly rental income of US$2,200. In both cases, the yields are in the acceptable range, but buying at the highest end of the current market leaves limited upside for capital appreciation. The next apartment was in the Trump Tower, which I learned has also banned short-term rentals—despite many original buyers having been sold on the idea of being able to put their apartments in the rental pool of the building's hotel. By all accounts, the hotel is struggling, as is the resale market for this building. Pre-construction prices were as high as US$3,500 to US$3,800 a square meter when Donald launched the building. (Really, he didn't do much more than sell his name to the developer and make an appearance at the groundbreaking.) The apartment we saw is listed at a little more than US$3,500 a square meter fully furnished. With no opportunity to rent short-term, buying the place furnished could be a negative. It's possible to find a renter for a long-term furnished apartment in Panama (I've rented out my furnished apartment on Avenida Balboa long-term for the last five-and-a-half years), but this market is narrow. This Trump Tower unit is one bedroom and 90 square meters. It feels a lot like a hotel room (which, again, was really the idea when the building was conceived and launched). Given the size of the unit and the fact that many units in this building are unoccupied and available, the estimated monthly rent of US$2,100 is high. I'd say drop that down to a more realistic US$1,500 a month. That means you're paying US$3,500 per square meter (beyond the acceptable high-end per-square-meter range for this market) for an investment that might be expected to return you 4.5% net per year. In other words, this apartment is a pass unless you simply want to be able to tell people you own in a Trump tower. Those first three apartments are all in buildings at posh addresses. The fourth apartment we viewed is not. This unit is the final developer unit in a building recently delivered in El Cangrejo and much more modest in terms of size and amenities. This project was built for a more local market, but it is priced as though it's on Balboa Avenue. They're asking more than US$2,100 a square meter, which is too much given the location and building amenities. Still, using the developer's US$1,600-a-month projection for rental income, your net yield for this two-bedroom unit would come in at 6.8%. However, I'd say it's unlikely you'd achieve that rent. Ocean-view apartments on Balboa with better amenities are renting for that much. On the other hand, it's worth noting that there is a strong rental market for El Cangrejo; some prefer to be in this part of the city with restaurants and shopping on Via Argentina within walking distance. Bottom line? The first two apartments are priced well but would generate only a reasonable, not a great yield. They're question marks as investment properties. However, for an end user they could be right on the mark, depending on what location and what kind of lifestyle you're looking for. The final two units are simply overpriced and therefore don't make sense for an end user or an investor. Is that the best Panama City has to offer? No. These four units were chosen as case studies, for educational purposes. Dig a little deeper, and you can find well-priced units in good locations where the numbers work out to net you an annual yield of 8% or even a little better and that come with the potential for steady capital appreciation. Lief Simon P.S. This is the kind of thinking and discussion we engaged in over the three days of last week's Global Property Summit. You have 48 hours remaining to purchase the complete set of recordings from the event at a prerelease discount of 60%. Go here now to find out more about our new Your Dream Home Overseas: The How To Buy, Own, And Profit From Foreign Property Program.
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Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.
Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.
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