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Income and Yields

“I bought a condo on the beach on Ambergris Caye,” remarked a friend over dinner the other night. “I want to generate a little income.”

Income…and yields. In the current climate, these have become the name of the international investing game.

“Belize tourism figures remain strong,” my friend continued. “I should be able to earn a good rental return. Plus, now I’ve got a place of my own at the beach to use anytime I want.”

Belize, Nicaragua, Argentina, Uruguay, Panama…tourism figures remain strong in all these countries, worldwide financial meltdown notwithstanding. So many people–tourists, businessmen, and would-be retirees abroad–are traveling to Panama right now that hotels, in Panama City, certainly, but, increasingly, elsewhere in the country, as well, are routinely fully booked.

Hotels…and rentals, too. We’re renting our loft apartment on avenida Balboa at a rate that’s returning about 10% a year (based on the property’s current value…the return is 16.25% a year based on what we paid for the apartment three years ago).

We would have invested in a second rental in this town…but prices spiked. We’re watching now, though, because this market, like most around the world, is turning. The past 18 months have been no time to buy in Panama City. But wait six months longer. Prices are headed down, and owners are growing more open to your offers week by week.

And that’s my point this bright, sunny, Carnaval Sunday morning. The time to buy is just around the corner in key markets around the world. You need to be positioning yourself right now so that you’re ready to move when the right opportunity presents itself.

We met a longtime reader for drinks here in Panama City Thursday evening. He’s interested to buy a condo in this city. He knows what he wants–size, location, amenities. And he asked our advice about what or where to buy.

“Don’t buy anything,” Lief advised, “at least not right now. Continue to do what you’ve been doing. Research, scout, stay connected…

“Make sure the real estate agents you’re working with know not only what you want to buy but also that you’re serious and ready to move quickly for the right property.

“Explain that you’ve got cash, plus you’re pre-approved for financing if you decide to go that route.

“In a market like this one, you’re a seller’s dream. You’re motivated, you’re educated, and you’re ready to act.”

Lief refers to it as “being in the market.” You can’t wake up one morning and decide you’re going to invest in a rental property in Panama…or Nicaragua…or anyplace else.

Well, you could, I guess. And you could then proceed quickly to buy. But, operating in that context, the chances that you’d get the best deal possible are slim. And the chances that things wouldn’t play out the way you hope are not.

You need to be in a market, as Lief says, long enough to understand the difference between the local market and the gringo one. You need to establish relationships with real estate agents and scouts you can trust. You need to find an attorney who’s experienced helping foreigners to invest. You need the experience of vetting opportunities…and of negotiating price.

You aren’t going to accomplish those things in a single visit to a country or in a matter of a few weeks.

I say again: Interesting real estate investment opportunities with the potential for good yields are emerging around the world right now, thanks to the worldwide financial meltdown…chances for you to scoop up highly rentable apartments and condos in highly touristed markets.

Specifically, here’s where you should be paying attention:

  • Panama…this is our number-one choice, not only in Panama City (where you should not buy today but where you should be watching out closely for the good deals that are going to begin presenting themselves over the coming months)…but elsewhere in the country, as well…
  • Nicaragua…especially Managua and Granada (
  • Portugal’s Algarve…Euro-correspondents report a second no-money-down property investment opportunity, this time in one of the Algarve’s top championship golf resorts.
  • France, especially Paris, one of the world’s most recession-proof markets. That said, the Paris market is softening, and the U.S. dollar (if that’s the currency you’re shopping with) has rallied against the euro.
  • The Philippines, where we know of an opportunity to purchase a very rentable apartment for less than US$70,000. First years’ yields (of about 7%) are guaranteed.

Kathleen Peddicord

P.S. As the current Retirement Revolution builds momentum and Baby Boomer retirees from the States continue to consider their retirement options beyond U.S. borders…the opportunity to position yourself for long-term rental investment yields expands. Increasingly, the market for rentals in key cities is not only tourists and executives…but retirees, as well. As one reader wrote recently, “We’re ready to consider retirement choices outside the United States, but, at this point, after the beating we’ve taken on our U.S. real estate, we don’t have any interest in buying in another country. Can you tell us where we should think about renting?”…

 

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