Oct. 14, 2009
Panama City, Panama
PLUS:
- "With Early Retirement, Our Pension Will Be Less Than What We've Counted On The Whole 20 Years My Husband Has Been Working For The Fire Department, But We Believe This Is The Time To Act"...
----------
The Perks, Privileges, And Peace Of Mind Of
Retirement Overseas
The trouble with some Paradises is that they make it difficult for foreign residents to enjoy what they have to offer...
And yet others roll out the welcome mat, offering benefits, discounts, and other perks for foreign residents. Some countries are even competing to get your attention, offering tremendous advantages and benefits for you...
Whether you're moving for a better life...a lower cost of living...or a chance to keep more of what you earn and pay less in taxes...
This is the Next Step Guide you need to make your dreams of a new life overseas come true.
More Details Here
----------
Dear Live and Invest Overseas Reader,
Friends halfway around the world are facing a challenge. A year ago, they invested in an apartment in Panama City, which they intended to renovate, furnish, and then make available on the short-term rental market.
A simple plan that has been derailed by a series of setbacks. Today, more than 12 months later, their apartment is still not ready for tenants, and they're regrouping.
I'm trying to lend a hand, as they're in Asia, and I'm here in Panama. The experience is reminding me of the fundamentals of a rental investment.
First, what's a reasonable return? The truth is, you aren't going to get rich as an international landlord. Why then is this my preferred investment vehicle right now? Because, in the current uncertain global climate, this is a way to generate sustainable, reliable yields. The rate of yield varies by market, of course, but 5% to 8% net per year should be your expectation. Less than 5% a year, and you're doing something wrong (more on this in a minute). More than 8%, and you're riding a wave. Enjoy it while it lasts.
Second, what's a reasonable purchase? It depends on the marketplace. What type of rental is likely to cast the biggest net for potential tenants over the long haul?
In most places, a one-bedroom makes most sense--though in Paris, for example, one-bedroom rentals are a glut on the market, but two-bedrooms can be in short supply...meaning, if you can afford it, a two-bedroom can make more sense (and yield greater return).
In a beach market, a beachfront unit is key. People are coming for the sand and the sea. Front-line units will always enjoy better occupancy.
In a city high-rise market, you want a building with an elevator, a doorman, and parking that's within walking distance of day-to-day services and amenities (grocery store, newsstand, restaurants, dry cleaners, etc.)
In an emerging market (like the northeast coast of Brazil), you want new, if possible. In a more mature market (like Panama City), resale can make more sense, because the per-square-meter cost for new can be too high to allow for a decent rental yield.
Third, should you rent your place out short- or long-term? To make this decision, you must understand the current dynamics of the marketplace. Who comprises the biggest potential tenant population? Visiting businesspeople (short-term)? Business executives placed in the country on extended contracts (long-term)? Tourists (short-term)? Retirees (long-term)?
When making this determination, also consider the local tenant laws. In some jurisdictions, a long-term tenant can be all but impossible to displace if he decides he doesn't want to move on. In France, for example, you won't be able to evict a tenant (no matter how many months in arrears he is with the rent) in winter. Can't put someone out on the cold street, say the French.
Fourth, should you furnish the place? If you intend to rent short-term, definitely. If you'll be renting long-term, maybe, again depending on the marketplace.
When considering the to-furnish-or-not-to-furnish question, understand what "furnished" and "unfurnished" mean in the local context. In some markets, unfurnished requires blinds or drapes at the windows...in others, it means you don't even have to spring for appliances or lighting fixtures.
Finally, what are the keys to success as an international landlord?
You want to buy right--the right kind of unit in the right location for the right price--of course. But, in my experience, having invested in rental properties in a half-dozen countries, these aren't the real secrets to realizing a decent yield.
You can pay a below-market price for an ideal unit in a perfect location and still not net 5% a year. I speak from experience.
The real secret to success at this is the rental manager.
We're currently netting better than 8% per year from our apartment rental in Paris. Yet we've had other rental units in this city (also charming apartments in sought-after locations that we were offering for rental during much stronger market climates) that didn't manage to yield us even our minimum 5% a year.
The difference? The rental manager.
How do you find a good one? Ask for references from other landlords who've been invested in the market for some time. Interview at least two. Go with a professional.
In most markets, things like commission structure and percentage and what's included for that fee are standardized (though you want to confirm and clarify in every case). Therefore, you should choose your rental manager based on the duration and the particulars of his (or her) experience. A friend of a friend who has been managing his own apartment rental for a couple of years and who is now looking to expand to manage others' investments isn't the guy you want. (Again, I speak from experience.)
You want someone with an established infrastructure (for advertising, taking reservations if you're renting short-term, negotiating contracts if you're renting long-term, reporting, etc.); existing support (for meeting tenants upon arrival with the keys, responding to tenants' cries for help turning up the heat in the middle of the night, and managing things like inventory in the case of a furnished rental); and a proven track record (for bringing in renters, keeping track of cash flow, and making sure the local tax and utility bills are paid on time).
Kathleen Peddicord
P.S. At least four solid, current buy-to-let investment opportunities will be detailed during resident global real estate investing expert Lief Simon's
Global Real Estate Profits Summit, kicking off tomorrow afternoon here in Panama City. I'm looking forward to considering them along with fellow attendees...
----------
Plan For Your Retirement
With A 12% Annual Yield In The "Next Napa"
Today, a 20-acre vineyard in Napa, California could set you back as much as US$7.5 million. Meanwhile, in Argentina, at current market prices, you'll pay just US$225,000 for a comparable vineyard with a similar grape yield.
Somewhere in the Argentine wine country, your dream retirement awaits...
----------
"Thanks to all the wisdom that you have shared through your newsletters, Kathleen, my husband is flying to
Panama Nov. 3 to buy a home for us.
"We have (we think) narrowed our search area down to Boquete. We have found a home there for sale by owner.
"My husband is a firefighter. He is preparing to take early retirement so we can leave the United States September 2010. Things here are not good and will only get worse.
"With early retirement, our pension will be less than what we've counted on the whole 20 years my husband has been working for the fire department, but we believe this is the time to act.
"If you have any words of wisdom to save us from wasting money by making a mistake, they would be so appreciated.
"Thank you again. Wish we could be there this week for your Conference. I know it will be good."
-- Nancy Y., United States
It sounds as though you've thought this through and are, indeed, ready to launch your retire overseas adventure.
As you do, here are a few things to keep in mind:
- Don't buy anything until you've engaged your own attorney (not the seller's attorney, not the developer's attorney, not the real estate agent's attorney) to review the history of ownership (that is, the title) of the piece of real estate you're interested in buying...
- In fact, maybe don't buy anything at all right away. I'm a big believer in: Rent first. Boquete is beautiful and safe. It boasts a pleasant climate and a growing and welcoming community of expat retirees. In other words, this inland mountain region of Panama has much to recommend it. But that's not to say it's the Shangri-la with your name on it. Maybe find a nice rental for a few months to give yourself a chance to get to know the place before you commit. You probably considered other opportunities before accepting your husband's proposal years ago. It pays for a girl to keep her options open until she's sure what she's signing on for long term...
- Speak with local legal eagle Rainelda Mata-Kelly regarding your residency visa options (and, when you're ready, your real estate purchase, as well). Rainelda, a longtime friend who has helped us with every transaction we've made in Panama over the past dozen years, including several property purchases and our own residency (through the country's Reforestation Visa program), is the most reliable and trustworthy legal resource in the country. Rainelda will keep you safe and save you money...
Bon voyage. Please report back to let us know how your plans progress.
