You Read It Here First—My Prediction For Panama City Property Values
Why would you want to buy a piece of real estate overseas?
That was the starting point for the discussions that have taken place throughout this week’s Global Property Summit down here in sunny Panama.
The big advantage of real estate anywhere is that it’s a hard asset, a real and long-term store of wealth. But why real estate overseas?
Bottom line, the point is diversification. When you purchase a piece of property in another country, you’re achieving diversification of market, of economy, of political regime, and of currency. Everything everywhere is cycling all the time, but the cycles are all different. Some markets are booming while others are in crisis. Currencies are always up or down one to the other, but the ups and downs are ever-moving targets. By spreading your property portfolio around, you can be insulated against the downs.
In addition, real estate overseas can:
- Provide income and cash flow in another currency…
- Make it possible for you to establish easy residency in the country where you’re invested…
- Allow you to keep your assets private and protected (against litigation, an ex-spouse, or an unhappy business partner, for example)…
We conceived the program for this week’s Global Property Summit around a series of five panel discussions. There’s no right way and no one way to buy real estate in another country or to build a diversified global property portfolio. The options are many, and so are the variables. That’s why, for this week’s meetings, we’ve showcased different perspectives.
On stage with me to lead these discussions have been Lief Simon and Lee Harrison, two guys with, among them, many decades of experience buying, selling, and profiting from real estate around the world. These are two savvy and successful investors, but each takes a different approach, according to his investment objectives, existing portfolio, and tolerance for risk.
Buying Real Estate Overseas
“In my case,” Lee told the group, “buying real estate overseas has allowed me and my wife to realize a dream retirement lifestyle. For us, the investment aspect is important, but at least as important is the personal side of any purchase. We buy in places we like and where we want to spend time. That’s the driving factor behind every investment we make.”
“I’ve bought real estate of all kinds in 23 countries,” Lief explained, “and right now, I hold property in 14 countries.”
One of Lief’s markets of focus—for the past 15 years and still today—is Panama City.
This morning, Lief led a group of 18 conference VIP attendees on a private Panama City property tour. I tagged along. First stop was an apartment on Avenida Balboa with an expansive ocean view. This is one of the best addresses in the city.
Lief toured apartments in the same building two years ago. Prices today, he noted, are up at least 20% in the interim. Rents are up, too, but not at the same rate. Walking the group through the numbers, Lief figured this rental unit would return a net annual yield of about 5.5%.
“That yield is at the low end of the 5% to 8% net I look for from a rental property,” Lief explained. “However, the capital appreciation in this part of the city should continue to be above average, as well, for the indefinite future, and, for me, that more than offsets the lowish annual rental return.
“An investment in property along Avenida Balboa is as solid a long-term bet as you can make right now,” Lief continued. “This front-line to the water district will hold its value while always attracting renters.
“The cost to own along Avenida Balboa today is as high as US$2,600 per square meter,” Lief said. “I predict that, in the next five to eight years, that cost will push close to US$5,000 per square meters.”
You read it here first.
“Lief, have you said the most secure trust funds are ones that are made international (not in the United States)?
“Can a trust fund have multiple properties, or does it have to be one per trust? Can the trust fund be set up as a working trust fund—that is, one that is gaining rental interest?
“I guess Kathleen and you could be a perfect example in that you have multiple properties and getting rental income from some could you all fold it into a family trust fund to help you and Kathleen on taxes when you pass and give your kids a security to carry on in your footsteps?
“Always appreciate your words of wisdom.”
An offshore trust is the most secure form of asset protection. A single trust can hold any number or properties, entities, or investments. Any income from a trust is taxable for an American, even if the trust is offshore.
Remember, though, that you don’t take your investments offshore for the tax benefits but for asset protection.