How to Get the Best Rental Yields in Panama

Saturday, July 5, 2008

Read more about investing in foreign real estate in International Living Postcards—Saturday Edition

My former Panama condo is now a boutique hotel suite. I’ve just seen the photos.

The Panama City condo market first got my attention 4.5 years ago. Back then, many prime ocean-view condos were more than 279 square meters (3,000 square feet). I considered these to be a risky buy, as they were too large (and expensive) to sell to the new market of retirees, second-home owners, or visiting business people.

So instead, I bought a 120-square-meter condo right on Ave de Balboa off plan. This one-bed, one-bathroom condo—without a maid's quarters—was the perfect size and layout for retirees, second-home owners, or business people. The broader the market is for end users, the lower the risk for the pre-construction buyer. I paid $1,225 per meter for a 120-square-meter condo. On completion, I listed my condo, and sold for 60% more than I bought for.

Today, there is still an opportunity in Panama to buy condo units like the one I bought and sold. I don’t expect to see the same level of capital appreciation I enjoyed during the build period of my unit anytime soon, but there is one of the world’s most exciting short-term rental yield opportunities at play today in Panama City.

I mentioned recently about the serious shortage of hotel beds in Panama City and told you about one strategy to profit from this: Buy a hotel room. Another strategy is to buy a unit in a recently completed building and make it available for short-term rentals. You can see net rental yields in the region of 11% on today’s purchase price of the unit I sold. Working with a strong property management company is key to achieving these returns.

The guy who bought my unit saw the shortage of hotel rooms and high-end short-term condo rentals and took advantage of this business opportunity. He has been buying high-end condos, giving them a luxury fit-out, and throwing in a full concierge service and fully stocked kitchen. His company, Fusion Lofts, charges up to $345 for a night's stay in one of its luxury condos and is seeing occupancy in the region of 80%.

Ronan McMahon

Editor’s note: Ronan is always visiting different countries around the globe in search for the best places to invest. He comes back with some very impressive finds, which he shares with his Real Estate Trend Alert readers. To find out more about this service—that could earn you a fortune—follow this link.

Read related IL Postcards:

- He Speaks Softly, but Carries a Big Opportunity

- Mega Savings in Panama Property

- Apartments for Less Than $70,000 in Panama City