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The Best Place In The World To Invest In Real Estate Overseas?

A reader asked me this week to name the best real estate investment opportunity in Panama right now. A rental property in the city…or maybe at the beach? Land in the interior? A beachfront lot in some specific development?

Of course, there’s no such thing as the “best” investment, not in any market. It depends on your investment profile—the amount of capital you have to invest, your tolerance for risk, the level of diversification you’re after, your interest and ability to manage an investment directly, etc.

If the reader had asked me to name the world’s best investment market overall, that would have been an easier question to answer. If I had to identify a single market of focus right now, it’d be Panama, which offers a number of very good and very different investment options. This is a market where I think every global investor should consider taking a position. Current opportunities include…

Panama City Rentals

You can expect a net yield on short-term rentals in the range of 7% to 8%…maybe better if you’re in a good location (meaning higher occupancy rates). A long-term rental will net you something near the lower end of my standard range (5% to 8%).

On the other hand, long-term rentals come with lower risk…and you don’t have to furnish a long-term rental (although a furnished long-term rental should demand higher rent).

For a rental investment in Panama City, focus on the key expat neighborhoods—Avenida Balboa, Punta Paitilla, Punta Pacifica, and maybe Costa del Este. Of course, locals live in these neighborhoods, too, which is a positive thing. It means you’ll have more options for buyers when you go to sell. These are the neighborhoods to target for investment because the apartments are newer (meaning less maintenance) and units in these areas tend to rent quickly.

Costs per square meter run from US$1,800 to US$2,800 a square meter, which equates to apartment prices from US$200,000 to more than US$1 million depending on size. One- and two-bedroom apartments in these areas work well for both short- and long-term rental, while the three- and four-bedroom apartments would work best for long-term.

The other option for a rental investment would be a beach property. The best location would be the “City Beaches,” which refers to the stretch of Pacific coast about an hour to an hour-and-a-half outside Panama City. More and more expats are moving to these beach spots, which are also a growing tourist destination. A rental apartment in this area would be comparable in price to a rental unit in the city on a per-square-meter basis, but the return could be slightly better.

Capital Appreciation

If you’re more interested in capital appreciation than rental returns, Panama is a tougher market. It is still possible to buy for upside, but you’re going to have to work to find the right opportunity. I learned this week, for example, of a house in Panama City that I think could be a tremendous opportunity for someone. The owner is motivated. It’s an older lady who just wants the place sold. The property has been appraised at US$400,000, but the owner’s asking price is US$150,000. That was interesting enough to get me to go take a look.

Pulling up to the house, my first thought was, how could an appraiser say this is worth US$400,000? The place is a teardown. That said, the lot is probably worth more than US$150,000. What makes the property interesting is that the zoning allows for medium-density construction. You could tear down what’s there and erect a three- to five-story building with maybe 20 rental apartments. This would be a good location for what I’d term “local” rentals. I think you could fill the 20 apartment units at good rents with little trouble.

Not every investor is up for that much of a project, but my point is that great deals do come along here in Panama, including in Panama City, if you’re in the market and paying attention.

Land Banking

For this, I’d recommend Veraguas, which is Panama’s only province that stretches across both of this country’s coasts (Pacific and Caribbean). Veraguas also offers very good river buys in the mountains. Right now, this is one of my favorite plays in this country, and Veraguas is definitely the place for it (specifically in and around Santa Fe, where I’ve invested myself in riverfront). This province is right now mostly overlooked, meaning you can still get good prices on raw land that I believe is positioned to enjoy very nice rates of appreciation over the coming few years.

Lief Simon

P.S. Panama is one of the featured destinations in my wife’s new book, “How To Buy Real Estate Overseas.” If you haven’t yet bought your copy of Kathleen’s latest work, I recommend you do so now. Details are here.

Continue Reading: Retire To Los Islotes, Azuero Sunset Coast, Panama

 

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