A friend of mine rents a house in Las Tablas, Panama for $100 per month. The house is about 10 minutes to the nearest beach and 5 minutes to the town center.
Las Tablas, a mid-sized town near the coast of Panama’s Azuero Peninsula, has apparently been named a “top place to retire” by one promoter or another… or so I was told by a gringo real estate agent pushing pricey properties for sale in the area.
I don’t reject the idea that Las Tablas offers a decent standard of living, depending on how you define the terms “living” and “decent”. Certainly I’ve seen worse communities to call home, and Las Tablas, in terms of affordability, is hard to beat. The tap water won’t poison you and you can eat lunch for about $2.00. The nearby beaches aren’t the nicest I’ve seen, but you can generally get what you need to live a decent life without too many hassles. A small but growing expat community has started to take form, a trend I expect will continue in coming years.
It’s not a big house, granted. It’s not in a fancy neighborhood either, but it seems safe enough and the neighbors appear friendly. The house has three decent sized bedrooms, a bathroom, living room, a rather small kitchen that’s been expanded into the rear patio for extra counter space. The spacious front patio offers enough room for a dining table, chairs, and hammocks. The back yard includes fruit trees and plenty of open space. The lot size is maybe 3000 sq. ft. It’s not a McMansion, but what more do you really need? Parking is kinda tight, you have to parallel park between two palm trees.
Add high speed internet for $50/month, Cable TV for $50/month, water for $10/month and electric at maybe $50/month (if you use A/C at night). So all in, we’re up to $260/month, or about $9/day. It costs more than that to park a car in a major city in North America. I’ll foolishly blow more than $260 on a dinner for two and a bottle of wine at my favorite restaurant, and I swear I lose more than $260/month between my sofa cushions and car seats.
So when the owner told me the house was for sale, I became curious. She explained how her son will be attending university in Panama City later this year and she needs the money to fund her child’s education. She throws out the introductory price of $48,000. She figures my blond hair and blue eyes command a 50% price premium. I know this price is high, and after I physically shudder at her offer, she even admits it to be a “starting point for negotiation”. I ponder the situation as she reconfirms her rather urgent desire to sell.
Based on my limited knowledge of lower end Las Tablas residential housing, I take a guess that the house is really worth more like $35,000, and maybe only $30,000. Were I to get serious about buying this house, I’d offer her $30,000 cash, and see where it goes. If I woke up on the shrewd side of the bed, I might only offer $25,000 and see where it goes.
But the whole idea of buying this house makes me think… is this a good investment? Obviously, at $100 per month, I am better off renting than buying, and I mentioned this very thing to the owner. She explained the rent was extra low as a favor to my friend and due to his reliability as a tenant who pays on time. I agree, a rental rate of $100/month to a good tenant is better than a rental rate of $250/month for a tenant who doesn’t pay. In Panama, collecting rent from lower end tenants can be difficult, and evicting them can be a lengthy and potentially expensive legal process easily exceeding the money they owe and they know this.
I figure with some fresh paint, newer furniture, and modern era appliances, I can rent this house to a gringo for $500/month. Perhaps more if I offer short term month-to-month or even weekly rental terms. This opportunitiy exists because hotels in the area charge $30+ per night for a small room, and because houses for $100/month, if you can find one, come unfurnished with no appliances, and require a one year lease. There is in fact high demand among foreigners looking for reasonably priced rentals in Las Tablas and for most people $500 per month is reasonable, especially if it saves them shelling out a few thousand dollars for furniture and appliances.
Yet, I still ask the question, what is this house worth, and at what price would the deal become compelling to me as an investor? I know I can buy a house in Nevada or Arizona right now for $40,000 and rent it out for $600 per month, and this is in a major U.S. city where laborers’ wages range from $10 – $20 per hour. In Las Tablas, laborers’ wages range from $1.00 to $2.00 per hour. But does that matter? In Las Tablas, nicely appointed furnished rentals targeted at foreigners are in low supply; demand is high. In Nevada, 3 out of 10 houses are vacant. Which is the better buy?
Property taxes are a consideration… those might run $1000 per year for a U.S. house whereas in Las Tablas, this house probably doesn’t pay any property taxes, or if it does, they will be minimal. On a price per square foot basis, you get about twice the house in Las Vegas, NV than you do in Las Tablas, Panama. And unless you rent to a niche market – like a gringo looking for a furnished rental (a market the locals have not capitalized on or don’t know how to access) – the rent in Las Tablas is about one third what you would get per square foot in the U.S.
My conclusion? If you are a real estate investor, you have to favor U.S. properties… they offer higher yeild and more potential for appreciation. If you want to live in Las Tablas and you have a long term outlook, buying a house for $30,000 or $35,000 to call it your own isn’t a bad deal. At least you’ve locked in your housing expense (hedging against inflation or a U.S. Dollar crisis). With the prices of construction materials still on the rise in Panama, it’s unlikely little houses like the one in Las Tablas will go down, assuming you pay the right price from the beginning (ie. $48,000 is not the right price). And you can’t put a price on fresh mangos growing out your front porch, whereas in Las Vegas, you are more likely to find crack for sale on the corner next to your $40,000 house.
What are your thoughts? Submit your comments below…
P.S. As a bonus, we’ve included the contact information of the seller of the Las Tablas house to members of Retire Worldwide.