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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