Renting In Panama/Rental Management In Panama
We’re preparing for another move. No, we haven’t lost our marbles entirely. We’re not moving from Panama. We’re moving across town to a bigger place.
Which means our one-bedroom apartment on Avenida Balboa will be returned to this city’s short-term rental pool.
Lief is delighted. Until we took up residence last month, this little apartment was rented better than 80% of the time. Rents were covering all associated costs and fees…and leaving us with a nice net yield (about 15% annualized) accumulating in our local bank account.
As international rental experiences go, this qualifies as a home run.
Owning to let doesn’t always work out so well. In fact, every other experience we’ve had as rental owners (a dozen properties in five countries) has gone something other than well. “Disastrous” has sometimes been a more apt description.
What’s the key to success?
Certainly, the market has a lot to do with it. The Panama City rental market, both short- and long-term, is on fire right now.
But even in a market that is hot, hot, hot, like this one, you’re not guaranteed a profitable experience…or a pleasant one.
Lief met a fellow expat here in Panama City the other day who complained that his apartment, also on Avenida Balboa, isn’t renting at all.
“Who’s your rental management company?” Lief asked.
“I’m not using a management agency. I’m managing the place myself.”
Many factors contribute to the quality of both your experience and your returns as a rental owner in a foreign country…but, if I had to identify one secret to overall success in this game, that’d be it:
The management agency you work with.
We’ve known people who’ve successfully cut out the middle man and managed their rentals themselves. A guy we knew in Paris had made his living for years managing his four rental units in the center of the city. And we know a woman here in Panama City who recently bought two condos that she’s right now renting out successfully (that is, with good occupancy and generous per-night rates).
But these are exceptions. We’ve also known many people over the years (including ourselves) who’ve struggled.
There are so many ways things can go wrong. You need systems to manage bookings, renter comings and goings, payments, expenses, cleaning, inventory, repairs, maintenance, renter complaints, keys, breakage…
Plus (and most important), you need a system for generating reservations. Where do you advertise? How do you market?
That’s perhaps the most important thing a good management company brings to the table—a developed marketing and reservations system.
Plus, a good management company (like the one we’re working with in Panama City right now) will:
- Be flexible enough to accommodate reservation changes and to fill the gaps. Say you’ve got someone in your place for two weeks…then someone arriving three days after Renter #1 departs for another two-week stay. A good management agency (in an active market) will fill a couple of those gap nights.
- Meet and greet every renter. A representative from the management company should meet each renter, deliver the keys, explain systems (how the DVD player works…the trick to using the dishwasher…where to find the air-conditioning controls), suggest restaurants and services in the area, answer questions, etc. Some of these things should also be explained in full in a Renter’s Manual, conspicuously displayed in the property.
- Perform a post-renter check…to look for damages, to check inventory, and to confirm cleaning.
- Keep a detailed and current inventory of everything in the unit from wine glasses to pillowcases.
- Contact you immediately if he (or she) notices anything damaged or broken. We own an apartment in Buenos Aires. Our rental manager there neglected to inform us for two months of a leak in the master bedroom. In fact, she never did inform us. We got in touch with her when we noticed in her reports that the place hadn’t been rented for weeks. Nada. “Que pasa?” we asked. “Oh, well, I can’t rent the place with all that water damage in the bedroom…”
- Solicit estimates for necessary repairs, oversee the repairs, and update you in real-time as to the associated costs.
- Send you (by e-mail) regular reports (say, monthly) on occupancy, nightly rental rates, expenses, fees, taxes, and (with luck) profits.
- Respond to your e-mails. You’d be surprised how many times this final point becomes the most challenging…
One agency we worked with in Paris regularly left renters standing alone and confused outside the front door to the apartment building awaiting someone to show up with the key to let them inside…
One agency we worked with in Paris never thought to keep an inventory of the apartment contents. We’d visit now and then ourselves to check in…to discover that there was a single drinking glass in the cabinet…or two lonely forks in the cutlery drawer…
It’s the exceptional agency that remembers to factor in ALL related expenses, fees, taxes, etc., in projections and, even, in reporting. In Paris, for example, don’t forget the building fee (it’s called the syndic fee) or the local property taxes that you, the owner, are liable for (called the taxe d’habitation and the taxe fonciere).
And don’t forget to plan for the things that can’t be planned for—leaks in the bedroom ceiling, exploding water heaters, lost keys (it costs $150+ per to have a key made in France)…
This current Panama City rental was our last-ditch attempt at making a go of an overseas rental. Our other experiences were so fraught with hassle and headaches and often so downright unprofitable (from a rental perspective…in nearly every case, we have seen capital appreciation) that, finally, I beseeched Lief to focus on other global real estate investing opportunities.
“Let’s give it one more go,” I suggested. “Then, if that experience is as painful as our previous experiences, let’s admit that we just aren’t cut out to be international landlords…and cross that investment strategy off our list.”
Unfortunately, this last-chance experiment here in Panama, thanks to the market timing…and thanks, mostly, to the management company we’ve been fortunate enough to connect with, can only be described as…profitable.
Alas…Lief’s going to want to try this again…