How To Find A Good Deal On A Rental In An Inefficient Market
The office space we’re currently renting in Panama City is nearly four times as big as the space we occupied before this one. Our monthly rent here? It’s but 15% more…
Friends are renting a two-bedroom house on the water…with a complete one-bedroom guest house on the grounds…on the east coast of Panama’s Azuero Peninsula for US$200 per month. I’ve seen pictures. This is a comfortable house built and finished to North American standards…
Another friend moved recently into a brand-new loft-style apartment in a high-rise building in the trendy and popular El Cangrejo neighborhood of Panama City. He took us to see the place.
As he described it (and as I’d agree), “This is the kind of place you might find in Manhattan but that I’d never be able to afford there.” From his living room and loft bedroom, he has an expansive view of the city skyline, and the building features full amenities, including a doorman, a swimming pool, a gym, a sauna, even a squash court. The rent is US$1,100 per month…
On the other hand, during our search for new and bigger office space, we viewed a building that was (no kidding) little better than a shell. It was a nice shell, of brick, with a red clay tile roof and interesting architectural features. However, the inside had been damaged by flooding and was not habitable. We calculated what we’d be willing to pay in rent, given the condition, and what renovations we’d expect the owner to carry out before we took up occupancy.
When we called to inquire, we had to ask the agent to repeat the rental amount three times. We were sure we were misunderstanding or mistranslating the Spanish. But, no, the lady confirmed. The owner was asking US$36,000 per month…
We viewed commercial space on offer for as much as US$25 per square meter per month…whereas the high-end space we finally found and are now currently renting is costing us but US$9 per square meter per month… Even harder to understand is the amount of office space sitting vacant around the city. There is growing demand, yes, but there is also big and growing supply.
A U.S. expat we know is renting in El Cangrejo, in a building two blocks from where the friend I mentioned above is living. This building is older, not as nicely finished, and lacking the amenities of our friend’s new pad. Both apartments are about the same size on a per-square-meter basis, but the first is less dramatic, as it’s not a loft. For the older, less nice place, the expat we know is paying US$1,500 per month…more than 35% more per month than our friend.
But wait, it gets even harder to understand…
In his research, our friend found other loft apartments available in his building, identical to the one he’s renting, on offer for as much as US$1,800 per month…more than 60% more than he’s paying for his place.
How in the world do you, the would-be renter in this town, make sense of all this?
Here are some Panama City rental fundamentals:
#1: There’s no such thing as the “going rate.” What you pay depends on what you’re able to negotiate…
#2: Direct comparisons are difficult…even, for example, when considering seemingly identical apartments on offer in the same building. Some are more expensive because they’re being offered furnished. However, “furnished” can mean a cheap bed, a cheap sofa, and a small, cheap table with two chairs. Some are more expensive because they come complete with what’s referred to here as “linea blanca“…that is, the white line (refrigerator, washing machine, dryer, etc.) installed. (Meaning you can’t take this for granted.) Some are more expensive because their owners are delusional or greedy. And some are more expensive because their owners don’t really care if they rent or not (see below)…
#3: Not all landlords care if their rentals are rented. There’s a big universe of absentee Venezuelan and Colombian landlords in this city. They’ve been parking capital in Panama City real estate for years, seeing this city and this country as a safe haven. For them, renting can be a hassle, a management headache, worthwhile only if they’re able to get a premium return…
#4: It’s possible to get a tremendous deal on a rental if you invest some time and shoe leather. That US$200-a-month house on the coast of the Azuero Peninsula that our friends are renting? They never would have found that on an Internet site or from an agent. They found that house by word-of-mouth after having spent months becoming known and making friends in the area where it is located. The American owners wanted to rent to someone they felt they could trust to take care of their house as well as they would take care of it themselves. For them, this was more important than the rental yield.
Lief Simon
