JS 66: Investing in Panama with James Archer Agricultural Property Specialist & Sales Director of ‘Live and Invest Overseas’May 5th, 2014 by Jason | Comments Off on JS 66: Investing in Panama with James Archer Agricultural Property Specialist & Sales Director of ‘Live and Invest Overseas’
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James Archer is the Sales Director for Live and Invest Overseas. He’s also an agricultural property specialist. He joins the show from Panama to discuss the projects he’s working on in Panama. Archer talks further about property opportunities in South America.
ANNOUNCER: Welcome to the JetSetter Show, where we explore lifestyle-friendly destinations worldwide. Enjoy and learn from a variety of experts on topics ranging from upscale travel at wholesale prices, to retiring overseas, to global real estate and business opportunities, to tax havens and expatriate opportunities. You’ll get great ideas on unique cultures, causes, and cruise vacations. Whether you’re wealthy or just want to live a wealthy lifestyle, the JetSetter Show is for you. Here’s your host, Jason Hartman.
JASON HARTMAN: Welcome to the JetSetter Show! This is Jason Hartman, your host, where we explore lifestyle-friendly destinations worldwide. I think you’ll enjoy the interview we have for you today, and we will be back with that, in less than 60 seconds, here on the JetSetter Show.
JASON HARTMAN: It’s my pleasure to welcome James Archer to the show! He is the director of investments for Live and Invest Overseas, and he’s coming to us today from Panama City. James, welcome. How are you?
JAMES ARCHER: Hi, Jason. Thank you for having me. I’m very well; how are you?
JASON HARTMAN: Doing well, thanks. What are you up to nowadays? You’ve got several projects that you’re marketing in the greater Panama area, I guess?
JAMES ARCHER: Yeah, so, we’ve got opportunities across the globe, really. We have some in Panama, and in other parts of Latin America. Colombia, Brazil, even some in Europe, in places like France as well. So, a varied selection. So what we’re trying to do, really, is offer our clients a diverse vacation of potential projects that they can invest in, or obviously residencies for themselves. In various country, and you know, these are secular opportunities; they’re not from our portfolio as such, but what we do do is we carry out due diligence on behalf of our readers for those projects, and then give an unbiased view on those projects to our readers. So, it allows us to do some of the leg work, if you like, for our clients.
JASON HARTMAN: Okay, and so, now why do you say it’s unbiased?
JAMES ARCHER: Well, the main reason I would say that is obviously from our perspective, you know, it doesn’t make a difference to us whether it’s x project or y project that people are interested in necessarily investing. What we really focus on, and I’d like to call us really rather than a sales team, is a consultative team. So, our focus is finding out what any given person—and I’ll use investments as the example, but—any given person, what their goals are for their portfolio, and what they’re looking for, and then offering solutions to that, and allowing them to make the decision.
JASON HARTMAN: So, tell us about some of the projects that you’re recommending now.
JAMES ARCHER: Sure. Well, we’ve got some very interesting projects at the moment, and some interesting ones coming up as well. One of the ones I really like at the moment, as an income play, is in the agricultural sector in Panama. So, it’s actually a mango plantation opportunity in Panama. I really like it because it goes for 60-80 years, so there’s a constant income. You hold the hard asset, because you own the title to the land, and then it offers an income, and the developer makes their profits through the harvest of sharing those profits with you. So they take 30%, and you take 70% as the investor. I really like that one; Panama’s not only a booming market, but with the canal, it’s ideal for things like agriculture. We also have an interesting project in Brazil, which is a quick in and out, if you like. It’s a 12-month investment, and offers returns of about 15% after 12 months. Now, it’s not underwritten as such, but it is guaranteed within the contracts. But we are also bringing on another project as well similar to that, in Panama, which is underwritten by an insurance company, which offers the safety. But that’s an up to three year in and out sort of investment. And then we have Los Islotes which is actually our own project, which is in the Azuero Peninsula of Panama. Beautiful part of the country. And that’s more for people looking at end residencies. There are some capital appreciation possibilities in there as well. So, there’s a varied mix. I could go on for hours, to be honest, Jason, but there’s certainly a good selection that we have across the globe.
JASON HARTMAN: Okay, so maybe, given time, we’ll come back to the agricultural stuff. I just want to talk a little bit more about just the basic residential stuff. You know, for income property especially. What type of stuff do you have there?
JAMES ARCHER: Well, we’ve got a mixed type of projects. We have some in Panama; there’s a hotel condo opportunity, for example, in Panama City, where again, if you’re looking for something that’s turnkey, you know, you don’t want to have much hassle or thought process to it, then it’s an ideal opportunity to invest in something where it’s fully managed by a hotel operator that has a history across the world in investing in hotels, specifically from Colombia, actually I should say, and in convention centers. And we have Los Islotes, which is more directed towards, I wouldn’t say it’s a rental opportunity as such, although I’m sure it will be in the future, but really, that’s where you’re buying the land, and building your sort of ideal home in paradise, if you like. A place that people can use as a holiday home, or if they’re looking to reside in Panama. And then Colombia, you know, we have opportunities in Colombia with some developers we work with there. There’s some rental opportunities—
JASON HARTMAN: Are these all condos?
JAMES ARCHER: Not all of them. So, the Los Islotes, our own one, is for housing. So, it’s houses you can build. We will be doing condos ourselves on the projects. It will house, eventually, around 5,000 people. So, it’s a fairly substantial project. So, what we’re doing is the infrastructure—
JASON HARTMAN: Right, but that one—I think Lief talked about that on the show. That’s not really for investment though, right?
JAMES ARCHER: No, no. That’s more for the end user. From the investment side, we do have some housing projects in Mexico. But generally it tends to be condos, and that’s not by accident. It’s more based on the fact that there’s less need for maintenance, and it’s more turnkey when you’re dealing with condos, than you are when you’re dealing with housing as such, or houses, I should say, because of the fact that obviously it’s got its own maintenance happening in the building, there’s a security company overseeing the building, in many instances. So, it offers a bit more security to investors, and it offers potential for short term and long term rents, and gives you a bit of a wider audience.
JASON HARTMAN: You know why I just can’t make this whole investing overseas concept work? And God knows I’ve looked, James. I mean, I’ve been to 71 countries, I’ve looked at real estate in so many of them. And I keep looking. I keep liking this idea. But I can’t make it work! And I’ll tell you why. The reason I can’t make it work is because I just don’t know who the rental pool is! Like, where really are the renters? We’re not gonna rent these properties to locals. They just don’t have the money! And there’s some expats, you know, a lot of expats are, I guess they’re renting, buying, they’re doing different stuff. But it’s a relatively small market, isn’t it?
JAMES ARCHER: Yeah, it’s a great question, Jason. And many people, many of our readers, feel the same way. It can be confusing. And I think before even looking, and you’ve approached that in completely the right way—before even looking at a particular condo, or a particular development, you’ve gotta understand the country, its demographics, its economy, and also, then even in a micro scale, you’ve gotta understand the city that you’re thinking of investing in. So, I’ll use Panama as an example, and Cartagena, I guess as a vice versa, for example. In Panama, if you look at it right now, there’s a lot of building going on, and you’re right, you know, condos have gone fairly expensive. A two bedroom apartment for rental right now will probably at least cost you a thousand dollars upwards a month, and you know, the higher end stuff, you’re looking at two thousand upwards. So, there’s a lot of apartments coming upwards. There’s locals that can afford it, but obviously there’s a high population that can’t afford such housing.
So, all they’re really building here now is for the people that are moving into this country, and the population is growing, and I don’t just mean there’s a lot of expats obviously from the US coming into Panama, but, the expats from the US tend to be more—a lot more of the retirees that head into the other part of the country. But Panama City is an influx of people coming from the surrounding Latin countries. Colombia, there’s a lot of people from Colombia moving here. Venezuela, obviously, with the issues it’s having right now, has brought a big influx of people moving here. And these people are the wealthier side, if you like, in their home countries, but are moving for one reason: either because of Panama’s growth, or because of the situation in their own country. Rentals, short term—there was a negative thing that happened in Panama City short term for condo rentals, which is, it’s now by law, you can’t rent for less than 45 days. And they’ve done that to sort of appease the hotel industry, if you like—
JASON HARTMAN: So, you can’t put your condo on Airbnb, that’s for sure.
JAMES ARCHER: Exactly. There are still people doing it. I wouldn’t recommend it, of course, because if they do catch you, you will be fined. But there are people still doing it, because it’s hard to change their ways. But it’s certainly something the government is trying to tackle. And it’s only in Panama City; it’s not for the whole country. But that does put a damper on the short term. There’s a lot of people here as well—now I’ll give you an example, I had a client here on Tuesday who I was touring around, that asked me why they’d seen so many—well, not so many, but they’d seen quite a lot of empty apartments in Panama City. Now, there’s a number of reasons for that, but two of the main ones is that there are people that are, if you like, parking their money here due to the economic situations of their own country. And jumping back to Venezuela, to use that as an example, there’s a lot of people that if they can get the money out of Venezuela, they’re putting it into Panama, as they know Panama—you know, it’s a Spanish-speaking country, many of them have visited here before, it’s seen as a very progressive market, democratically political country that has a strong future.
So, a lot of them are buying apartments, and they’re buying them out in cash. And Argentineans as well—there’s a lot of people in Argentina getting their money out, and they’re buying in cash. So, it’s not like—I’ll use Florida as an example. Not to pick on Florida, but when there was a lot of issues with Florida during the crash, there were a lot of mortgaged homes in Florida, and that added to its woes. Panama generally—I mean, it is stepping up slightly, but as a foreigner especially, the best you get here is 50% mortgage. So, there’s a big outlay initially anyway. But there’s a lot of people buying cash. They’re not in such a rush to rent these, and it is sustaining the price a little bit. I do think it’ll have a bit of correction on the rentals here anyway, because it’s natural, but the population is still growing, so there’s a lot of opportunities. And in a place like Cartagena, I mean, that has a massive population already. There is a big demand for young professionals, for example, so, again, it’s about understanding your market.
So if you’re building or buying a condo, a three or four bedroom, to use an example, a three or four bedroom condo, that might not be the best market right now in Cartagena. And in my opinion, things like studios, one bedrooms, and a maximum of sort of two bedrooms, offer the best opportunity. Because the employment is stepping up in the middle class, and beyond that, of young professionals, is increasing dramatically. And of course, they need housing. And they’re looking for very specifics. So, it’s important to understand your market, and as you have done already, but boots on the ground is a key. You know, go to any place and see and feel it and touch it, and try to understand the market a little bit more, and do your research. You know, that’s the best advice I can give, Jason.
JASON HARTMAN: Well, I’ll certainly agree that boots on the ground matter a lot. There’s no question about that. That—you know, nothing can take the place of that. Not Internet searches, or anything. You know, it’s just boots on the ground really, really do matter. But maybe you can convince me. As I mentioned before, I keep looking at properties overseas, I keep reading your stuff, I keep reading the stuff from other promoters and so forth, and I just—when you look at other countries, it seems like, okay, maybe this is just this great emerging market opportunity. And things are potentially less expensive. I’m not quite sure about that, but we can discuss that one. But these countries, none of them have multiple listing services, do they? I mean, I haven’t been to one that does. It’s all just, you know, you go to a broker, and this guy has these properties, and another guy has another set of properties, right?
JAMES ARCHER: Absolutely, yeah. I mean, they have one in Panama called Encuentra24. But even that, the statistics I’ve seen, it offers something like 30% of actually available properties at any given time. So, it helps. Is it ideal? No. It will help on finding some price comparisons in certain areas, and certainly you can find property on there. It is a pain, you know, and it is because these countries are emerging. It also means that the real estate brokers are somewhat behind, and there isn’t—when I first got here, I was surprised, coming from London myself—all the big real estate companies in London—real estate brokers like Foxtons, etcetera—all have massive listing sites, where they’ve got thousands of properties at any given time, and they’ve got everything they’ve got on there. It doesn’t work that way here. The Internet is far behind here. There isn’t as much focus on the Internet. It’s starting to take off—
JASON HARTMAN: Well, remember, the MLS—the multiple listing service in the United States—did not evolve from the Internet. That was long before the Internet. And of course, there are websites—you know, the difference is that the MLS is the official thing that the entire brokerage industry in the US uses. Of course, you know, individual brokers can have websites, some brokerages are very large, and they have lots of listings on them, but that’s still not the MLS.
JAMES ARCHER: Yeah, and it’s important to note, you know, this is something that has helped the US system, is the fact that you are fully licensed brokers, you know. Anyone in the US that is a real estate broker has to have fully licensed. Even in the UK you don’t have to be licensed. So, it might surprise people that it’s not everywhere, it’s not a norm. With that, it means there’s a bit of chaos. And there’s a bit of chaos even in the UK. But in places like Panama, there’s even more chaos, because the growth in exponential. You know, everything’s going 100 miles an hour while the infrastructure, in terms of things like this, is still moving at five miles an hour. So, it’s about catch-up. It’s in its infancy. I’m sure they’ll get there one day. But we’re quite a few years away from that now. There are certain places that are better than others. I do find that Panama is a bit Wild West when it comes to real estate brokerage firms. In Colombia it’s a bit easier, but you still always have to really, you know, there’s no option but you’ve gotta speak to 20, 30 different companies, and see what opportunities they have. It’s a pain. I wish I could say there is an easier way. Unfortunately there just isn’t. Hopefully that’s part of what we do, is for our readers, is to help them with that search, by—we wouldn’t be brokers of finding you an individual home, you know, if you’re looking to see apartments and different buildings across the cities is not really where we come in, but certainly working with credible developers is where we do come in, and doing due diligence on them. But beyond that—
JASON HARTMAN: So, let me tell you why that MLS thing concerns me. You know, you say it’s the Wild West, and I agree with you, it is. It’s that way in Australia. Even more modern countries, like—you know, Australia, they don’t have an MLS system. At least they didn’t when I was there last. You go to this broker you got that, you go to that broker you got that. And what concerns me about that is that the whole concept of real estate is that, you know, there are three approaches to value. There’s replacement cost approach, there’s the income approach, but that’s only used for larger income properties in the US, meaning, over four units. But, really then, it’s still the third one, which is comparison, the most commonly used approach to value. And if you can’t look it up on a centralized database that is cooperative, that different brokers use, that they come to, you know, as a community, and use, it concerns me that the concept of value is very hard to determine. It becomes very subjective, it becomes unknown.
JAMES ARCHER: Yeah. No, I agree. And unfortunately, that is one of the issues. And I’ll give you an example of that. I do know cases of, especially in the interior of Panama, where you know, people have gone to, and it’s not just locals, I should add that as well. There’s a lot of Americans coming in, and Europeans that are opening brokerages, and sort of joining in the chaos, if you like. So an example is, a client went out and looked at a property, and the brokerage said that the—I can’t remember how much it was specifically, but let’s say it was a house, and the brokerage said $230,000. Eventually they managed to have a conversation with the actual owner, through someone they’d met locally in the town, and they met with the owner, and the owner said yeah, I’m selling it for $200,000. So, where has that $30,000 come from? In all honesty, and I hate to say it, because I don’t mean to give Panama a bad name, but, it’s come from the broker putting on an extra chunk for himself.
JASON HARTMAN: Yeah. So, what we call that in the business in the US, is we call that a net listing, okay? Where the seller says to the broker, hey, look, I want a hundred thousand dollars. Whatever you can get over that, it’s all yours. That’s called a net listing. And almost nobody does it, because it’s so rife for problems, and angry people, and litigation, you know?
JAMES ARCHER: Exactly.
JASON HARTMAN: It’s just, nobody wants to do net listings, okay? They usually do a typical exclusive right listing. The seller and the broker agree on the price, and then they agree on the commission that will be paid to the broker too, and that’s usually just a percentage of the price, so it’s pretty simple. And you know, one could argue, hey, well, the broker’s always gonna try to get the highest price, and that’s good for the seller, but it’s not good for the buyer—but really it’s not that significant, because it’s such a small, marginal difference. If they’re getting a 6% commission, and they sell the house for $10,000 more, it’s 600 bucks gross, and that’s before it’s all cut up between the broker and the agent and the other broker that’s cooperating in the deal, and it ends up to be not that much money, okay? They’d rather sell more volume than make a little more money in each deal, usually.
JAMES ARCHER: Yeah, most definitely. But the difficulty is, they do have, using Panama as an example again, there’s the government entity called ACODECO, which is for consumer rights. So, there are some official things that people should be doing, such as, you should be working with a registered broker, and when you—let’s take rentals, for example. When you rent an apartment, really a representative from ACODECO should come to the apartment, paid for by the landlord, and oversee the inventory check and everything else, in case there’s any disputes at the end. The problem is, it’s great, the systems there, but there’s very little people using it. So, I’m sure this will get better over time; unfortunately, the government has tried to put these systems in place, but it takes time. And there’s so much going on in these emerging markets that it’s hard for the government really to try and control everything, and improve it as quickly as they want.
JASON HARTMAN: Yeah, and the governments have, you know, too much corruption, and they have limited resources. It’s just, you know, these are just older, more primitive places than the US. The US is just more advanced in this kind of stuff. For better or worse. It’s not all good in the US. Believe me, the US has tons of problems. I’m not being a big apologist for the US here.
JAMES ARCHER: Yeah, yeah. But the flip side to that is, when you find good opportunities in emerging markets, they can be some of the best opportunities in the world.
JASON HARTMAN: So why is that? Tell us about that.
JAMES ARCHER: Because the markets are growing so much; there’s still—and I’ll use my home city, London, as an example. Rental yields in London right now, in central London, you’re, if you’re getting 4%, you’re doing quite well. If you’re getting 6%, you’re doing amazing.
JASON HARTMAN: Okay, so explain how that’s calculated, just for the listeners, because rental yield is not something that’s used in the US. Most people just use cash on cash return, they use cap rates, they use overall return on investment, which I think, in residential real estate, is much more actually legitimate than cap rates, because cap rates don’t include enough information. It’s too simplistic.
JAMES ARCHER: Yeah. Exactly. So, in simple terms, and we do keep it fairly simple in England, so, a rental yield is the annual return you’re getting from the rent. That is a percentage of your purchase price. So, for example, if you paid $100,000 for an apartment, then if someone says they’re getting 4% rental yield, that means they’re getting $4000 a year of rent. So, very simple. We don’t like to go too deep in economics and mathematics in England. Which is shown by our terrible situation right now economically. But anyway, that’s another conversation. But, so, rental yield wise, and that’s what I’m referring to, you know, you can get 4% in places like London; the capital appreciation is even lower. There is capital appreciation, but you have to find the needle in the haystack to get great capital appreciation. But in a place like Panama—I mean, for example, and I don’t mean to keep harping on Panama, it’s just that I’m based here, so it’s an easy ruler for me to use. But Panama City, you can buy bad properties, and you can buy overpriced properties, but generally, you’re buying into a good market. So I do believe that capital appreciation will keep on going up and up, and this is an important factor to make—people get scared of this. You do get corrections in emerging markets—
JASON HARTMAN: You get corrections everywhere, and that’s one of the reasons I just don’t like investing for capital appreciation at all. I’ve just gotten too conservative, seeing all these deals over so many years. And I just think you’ve just gotta be a cash flow investor, you know? Maybe it’s my age, I don’t know. Cash flow’s pretty predictable. I’m sure you’d agree with that.
JAMES ARCHER: Yeah, 100%. And what I’ll say to that is, when we work with income-generating investments in real estate, one of our stipulations is that the developers can never include capital appreciation in their basis for projections of returns. Because I’m like you; if you get capital appreciations, great, but no one can really predict what capital appreciation’s gonna be, or where it’s gonna go. You can predict the near future of yields, but you can’t really factor in capital appreciation, especially over an extended period of time. Yeah so—but on the rental yield side, if we’re going to talk about just rental yields, you can find quite easily—I don’t say very, very easily, but you can find rental yields offered certainly about 7% in Panama City—
JASON HARTMAN: Okay, so, the calculation—explain it.
JAMES ARCHER: So, $100,000 property, you’d be getting $7000 a year in rental return.
JASON HARTMAN: In gross income?
JAMES ARCHER: Yes. In gross income, yeah.
JASON HARTMAN: So that means that a $100,000 property produces $7000 per year, and divide that by 12 to see the monthly income. Now see—what are the association fees on a property like that?
JAMES ARCHER: Very—it differs, depending on the—
JASON HARTMAN: I know.
JAMES ARCHER: It’s a very hard question for me to answer. But, they range from sort of, I mean, on a property like that, they could be anywhere from $50 a month to $150. It depends on the quality. But on a $100,000—
JASON HARTMAN: That’s all? Only $100 a month for a condo?
JAMES ARCHER: Yeah. On a condo of that price point? That’s about right. I mean, in the—you know, in the higher term properties, and I’m talking sort of the Trump buildings, etcetera—of course you’re paying higher. You’d be looking at, on a two bedroom condo, you’d be looking at $250 up to $350 a month, I would say, as a guesstimate. But it’s not as high as—I don’t know the States inside out, and I don’t want to try to guess what the fees are, but it’s not as high, I believe, from clients that I’ve spoken with, as the US is, for example. It’s fairly lower here. But that brings up an important point as well here Jason, and this is something that I think so many investors don’t consider when they should when they’re looking at rental returns. And right now we’re talking about physical condos and houses. But—is, who are the management companies to look after that condo building afterwards? And there is a complete difference of service here, and I’ve seen it time and time again, where investors have bought in a condo building, and then the service has been atrocious. The paint starts wearing off the outside of the building—
JASON HARTMAN: Yeah, yeah, problems galore. But here’s the thing. In the US, investors can get 1% of the rental. 1% of the price per month, in the right places. And that means the rental yield, instead of being 7%, as you suggested, would be 12%. Because they’d be getting a thousand dollars per month on that $100,000 property, or $12,000 per year, versus $7000 per year. So, now, please convince me as to the value of doing something overseas, where you’ve got—you know, you’ve got this whole different situation. You’ve got a different set of laws, you’ve got the Wild West, as you mentioned. You’ve got a lower rental yield—now, the association fees are probably lower on that condo, and I’m gonna ask you about condos next, because that’s a whole nother subject—condos versus single family homes—but where do you make it? I know for a while they had a property tax moratorium in Panama, that was kind of a neat deal.
JAMES ARCHER: Yeah. Yeah. Well, I think that it’s important to note first of all that when I say 7%, that’s sort of starting level. So, it’s 7% upwards. People that are getting the right deals can be getting as high as 15%, maybe higher, a year, but they have to find the right deals. It’s also important to note that there’s good deals everywhere. There’s no such thing as—well, there’s a such thing as a bad investment property, don’t get me wrong, but there’s no such thing as the worst place to invest. There is a difference between value and different types of properties in a certain area. But, you know, and I get asked by clients about places like Spain. Also about the US, and what’s my view on the property market. My answer’s always the same—that if you can find the right property in the right country anywhere, it will do well. It’s about finding that right property, and seeing how much opportunity there is to get those sort of properties. So, there are good opportunities, but the Wild West side is really dealing with the brokers. From beyond that point—so, once you’ve got ownership of a property—it isn’t Wild West. It’s very secure, they have systems like you say, property taxes, land taxes, etcetera, in Brazil, that allow people to have security of assets. And I would say, another side that’s important, that we get asked a lot, is, in Panama, rights of ownership for foreigners—firstly, there’s parts of Panama that is rights of possession, and those have already been stipulated, usually around the Kuna Indians, or the natives of Panama, the areas of the country that they predominantly are based in. Never go for rights of possession in my personal view. There are some people that are going for it and then flipping it into titles. I don’t like it, it’s very—
JASON HARTMAN: What does that mean? I don’t even understand that.
JAMES ARCHER: So, rights of possession means that you have the rights of the property, but you don’t actually have the physical title of the land in your name. So, it means that you are given the right to use that property, and you can do what you want with it, the same as if you own a property outright; however, if someone wanted to change something, like the government, for example, if it’s rights of possession, they can actually change it slightly from if you have the full ownership rights, they could make different changes to your property than if you owned it outright.
JASON HARTMAN: Well, I think that’s one of the things that people really get concerned about with foreign countries in general. Is that regardless of that rights of possession issue, they just don’t feel—Americans feel pretty secure in rule of law. Of course there have been big scandals in Mexico, where the government has just come in and said, hey, we’re gonna take this land back. You know, if you were to invest in China, and the government wants to build, that’s the great efficiency of communism, isn’t it? The government can just do what they want. And therein lies the difference between China and India. The central planning has a bit of an argument, as much as I don’t like it philosophically. But there are some ways in which it’s a lot more efficient.
JAMES ARCHER: Yeah. No, I agree. There’s a long discussion that can be had about that. But I certainly think that places, you know, in Panama again, it’s based itself on the US system, really. So, for a start, all foreign—and that’s the point I was going to make—all foreign ownership here, you have the same rights as a local. So there’s no difference. And of course there is a fear that comes into people’s minds—what if someone wants to take my property back, etcetera? Well, the way I answer that is, in countries like Panama, there’s as much chance of someone taking your property away as there is in your home country. Because if a democratic system changes, and becomes a dictatorship, then that could happen anywhere. Do I expect it to happen here? No. They have debates—the election’s coming up in May, and they’re having debates on TV and everything else here. It’s very little difference from the US, other than the fact that it’s in Spanish. But it’s the same political scenario, etcetera. On new houses and stuff as well, just going back to that property taxes point—on new houses, I believe it’s 20 years that it’s tax exempt on new houses, whether you build it or buy it.
So, on houses I believe up to—I can’t remember the exact amount of years, but you—well, basically, it’s up to those 20 years. So if you were to buy one that was 5 years old, then you’d have 15 years left of no property taxes on it. So, there are tax incentives here for buying property. But, you know, there’s not a lot of historical building here, so in the city especially, everything is pretty new. So there are some freedoms in that way. What I would say, and this goes back to a point that we kind of touched on earlier, and we both agreed that it’s not something we consider in an investment; however, it is important to note that if I compare it to London, you know, London’s already very, very expensive for properties. Central London—extremely expensive. A place like Panama, you can come in at a lower level, and there is potentially an opportunity for capital appreciation to be better than especially somewhere like London.
JASON HARTMAN: Well, in all fairness, though, London and Panama? Come on. Right? That’s a pretty big stretch. I mean, you’re talking about the financial capital of the entire planet, you know, many people would say is London, okay, you know, whether it be London, New York, or Geneva, I don’t know. But London’s up there, for sure.
JAMES ARCHER: Yeah. But I mean, even places—okay, let’s use a different example then. Singapore. There’s been a very booming housing market for some time. One of my old colleagues, actually, was in Singapore recently, and you know, was saying how there’s a lot of people in Singapore now looking to get their money away from Singapore, rather than—Lee’s based in Singapore—
JASON HARTMAN: Oh, really? I’m on my way to Singapore in about a month and a half, so I’m glad you’re telling me this. That surprises me, because I just keep hearing Jim Rogers, who’s been on my show a couple of times, the famous Jim Rogers—you know, author, investor, etcetera—and he keeps promoting Singapore like there’s no tomorrow! Like it’s the best place ever.
JAMES ARCHER: Don’t get me wrong; I think that there’s a lot of opportunity in Singapore, but what I mean is, the market for real estate has become expensive. You know? It’s gone up in price dramatically over the last five years, maybe longer, and it keeps going up. So it is pulling people—not pulling people out of the market, but it’s limiting, if you like, a little bit of one, the budget of people investing into markets, but also, the viability of, there are some people, and again, this is just how people feel, and everyone’s different—but there are some people saying, well, I don’t believe there’s going to be as much capital appreciation, because the boom has really happened in Singapore, and will it carry on? How long is it gonna go for, and it is gonna have a correction for a few years, or what’s going to happen? So, that’s what I mean. And I should say that I think everyone’s portfolio, investment portfolio, should be that diverse, that it’s spread across different countries. For security. Not just for income and profit, but also for security of your portfolio.
And you know, your portfolio, unless you’ve made every single investment 100% correct, 100% of the time, should be changing somewhat at times. And that’s where you start moving for different markets. And I’ve got clients that are doing that that are invested in certain countries, and now they feel as if that country may have reached its plateau, and they’re moving into another country. So, it’s about individuals. You’ve gotta assess a lot of things. You’ve gotta assess risk and everything else, and I think there’s a lot of opportunity. And I’m glad you mentioned Jim Rogers, because I know of Jim Rogers quite well, and I had the opportunity to meet him and speak on stage with him actually at a show in San Francisco, some time back, on agriculture. And Jim Rogers, you know, big advocator of agriculture—I’m a big advocator of agriculture. A lot of my portfolio—not all of it, but certainly a high percentage—is in agriculture, and the reason being for that is I think that you can get, right now, a better return from an income perspective in agriculture than property, and I don’t mean all property, and I know people are gonna say, well that’s not true, I’m getting this, etcetera, but I’m just talking about generalization, obviously of an investment category.
But, agriculture, I like it a lot. Again, capital appreciation, don’t even think about it. Whether you own the title to the land or not, or doing lease hold, but I would say go for the title ownership, but don’t include capital appreciation, but from an income perspective, if you’re investing in the right projects, you can get very good returns in agriculture. And it’s a global market. And some of your fears that you mentioned earlier about, well, what if the local market changes? How do I know people are going to rent this? How do I know people are going to want to go into my condo that I just bought? Well, that’s where agriculture differs. Where if it’s the right type of agricultural investment, really it’s reliant on a global food value, as opposed to a local food value. If it’s being done correctly. And I don’t mean always, but I mean, for example, in Panama, and this is why I like the mangoes—they’ve got the canal here, so they could send these off to anywhere, and export to different countries, depending on current situation. But generally, prices in food are dictated by the global demand, not by a local demand.
JASON HARTMAN: Yeah, I mean, I get all those macro trends, of course, and I agree with them, and I know Jim Rogers is a big agriculture fan. But there are so many micro details, when it comes down to really executing something. I mean, when you—you guys do these agricultural things, people buy a piece of real estate that’s part of a bigger hold—this is my understanding of it—and then they have it managed by a manager, just like a property manager on a residential property. But this manager’s responsible for planting crops, and getting them to market, and selling them, and there are—you’re susceptible to just a whole nother bunch of issues that you gotta know about, you know?
JAMES ARCHER: Of course, of course.
JASON HARTMAN: You know, I mean, there are droughts, there are plagues, there are insects, there are things. And there are bad managers who rip you off! So, there’s all of this stuff. And that’s what your company does, is it ostensibly vets these investments, and that’s a heck of a lot better than going in alone without knowing anything, I will give you that a million times over, okay? And obviously, you know, you’ve built a reputation, and you care about that reputation, so, that’s important.
JAMES ARCHER: Yeah. And it’s always—there’s always risks, and agriculture has its own unique risk. But again, you can mitigate some of those risks at least but location—where is the location of what you’re investing in, what is the local market, who are they going to be selling to. And really, you’ve gotta do—and this is where we, you know, do this on behalf of our clients. But, if a client wants to carry on that due diligence, we encourage it, but we’ll certainly provide you with what we’ve found, which is, who is this developer, what’s their history, what have they done, what do they have up and running, who are they selling to now, do they have that market there, will they be able to sell it. A good developer in agriculture has all this in place, or at least has the plan in place, and can give you the details of it. And it’s like property; there’s good developers, there’s bad developers. It’s about doing as much legwork as you can to find the right ones. And then, we’ve all gotta make that leap of faith when it comes to any investing, unfortunately.
JASON HARTMAN: Let me ask you before you go, and I’m sorry to keep you so long, James, you’re just really chock full of information here. About the condo thing—I’m not crazy about condos. You know, there’s just so many outside forces. I just like buying single-family homes and apartment buildings. But, why is it that whenever I look overseas, everything—almost everything is about condominiums. It’s like, who—does anybody sell any detached homes in these countries?
JAMES ARCHER: Yeah, yeah. It’s a good question. And I feel your pain, and I have to say, that’s why my most recent investment in Panama—well, actually, it was an agriculture one, but the one before that—was a house. And the reason I bought a house is because it’s near to the city, and I must say, I live in this house, but I’m also viewing it as an investment—is because there is a lack of houses. There’s a lot of condos, like you say, but there’s not many developers building houses. Why? Pure and simple, developers can make more money from building condos than they can from building houses, unless it’s very high end. So for example, there is a person building Santa Maria Golf Course, and just outside Panama City, which is a Nicklaus golf course, and he’s building houses around that. But obviously you’re talking about homes that are hitting the one million dollar mark—
JASON HARTMAN: No, I’m talking—why can’t I just buy the kind of investment property I buy in the US? Whether it be Texas, Georgia, Indiana, I can do great deals. I can buy these hundred thousand dollar single-family homes that are only five, ten years old, and wow, they rent for a thousand bucks a month, no problem.
JAMES ARCHER: Yeah. I mean, firstly, you gotta consider, Jason, that the US has a lot more space than most countries.
JASON HARTMAN: Okay, that’s an interesting point.
JAMES ARCHER: It’s a very big country. A place like Panama is limited in land mass. But even with that, I agree that there does seem to be this philosophy of building upwards rather than outwards. But that being said, that’s in the central. In the other areas, across the Las Americas Bridge, for example, they are building these small houses, these gated communities. I live in a gated community the other way, towards the airport, and that’s the house I bought. For my house, and I’m happy to share this, I bought it for $250,000. And why did I buy that house? Because I think it’s an area that’s going to increase, the golf course is going in across the road from me, and I think there’s gonna be a good opportunity to make money there. So, there are opportunities. You have to find them, but there are opportunities. Outside of the city, they are building houses, and they’re building a lot of purpose-built houses for the low to middle income level of Panamanians. So, again, making sure that they’ve got their end market, which is something we discussed earlier, where is the need. But they are, but there is a lot of condos going up. And the only way I can honestly say, is there a thought process and reasoning behind it—not really, other than they will say it’s due to people liking the security of it, and the amenities—not amenities, but the maintenance and everything else is centralized. But really it’s about developers making more profit from building upwards than they would outwards. Because land is expensive, you know. And it gets more and more expensive as time goes on, especially in major cities. But outside of the cities, housing’s not an issue. You know, you can buy houses—and even on the beach town areas, like Coronado, where they do have condo towers, but there’s a lot of housing opportunities to buy there as well. So, it’s relevant to the city, and it is like, I’d say most cities build that way, really centrally at least, is upwards rather than outwards. But they are building more and more. It’s just in this specific part of the city, or this city itself, it’s quite hard to get those sort of house opportunities. But outside the city, there’s plenty of them.
JASON HARTMAN: Yeah, I would just love to get some single-family homes that are—you know, I mean, I remember reading, with International Living years ago, about single-family homes you could buy in Eastern European countries like Romania, for $30,000, and you get this chateau, and it was nothing like that in real life!
JAMES ARCHER: Yeah. If you can’t build for it, then I would worry about what you’re gonna get at the end.
JASON HARTMAN: Yeah, yeah, that’s very interesting. Very interesting point. And the reason that I’m just not crazy about condos, is that there’s so much what I call intermediary party risk. You have to deal with this homeowners association, you’ve got neighbors—if the neighbor above you has their pipe leak, it affects you, and everything just becomes so complex.
JAMES ARCHER: Yeah. I agree. But the flip side, Jason, is there’s an area in Panama called Chame, and it’s—they’ve now caught the people, but for a long time, there were a lot of expats with homes there, and for about a year, really, there was quite a lot of burglaries. Now, not harmful burglaries. It was when people were away. But you know, it’s easier to break into a house that has a bit of land around it than a condo building.
JASON HARTMAN: Oh, I agree, yeah.
JAMES ARCHER: There’s flip sides to both. But it’s about choice, and what people want, really, and where’s the market. And condos, sometimes, even for people coming to the city, you know, the executive level people, I would say, that come into the city—they want condos. That’s what they want to rent. Because it’s not their only home, and it’s generally just based on the fact that their business dictates they need to be here. And a lot of people in Panama, for example, Panamanians and foreigners that are here—have a condo in the city, and a house at the beaches.
JASON HARTMAN: What I have just found, is that the concept of suburbia, which in America is a pretty great investment, generally—of course, that’s a very general statement—is just not done in other countries. You know, the suburbia concept is kind of like an American concept. And I guess it started back east, with what’s it called, Levittown, and you know, in the post-World War II Baby Boomers, and you see a lot of this stuff in Long Beach, and Lakewood California. You know, you just see these suburbs. And the suburbs are not expensive, but they’re fairly close to the city. So, you know, it’s just sort of interesting, how that kind of development style just doesn’t really happen around the world like it does in the US.
JAMES ARCHER: Yeah, I’d say—yeah, depending on the country. But there’s certainly places like Panama where there isn’t as much of that going on. And I do honestly believe that a lot of that is because of the price of land.
JASON HARTMAN: Yeah, right.
JAMES ARCHER: And it’s just—it’s very expensive for them to actually implement something like that. I live in a gated community; it’s great; they just finished another section of it, so there’s probably about 5, 600 houses in that gated community. I really like it. Kids are going around the streets. They’re safe, we’ve got security. Panama’s safe anyway, but it adds an extra safe to it. So I like that. There are that, and I like living there; I lived in a condo in the city for a year when I first arrived, and after a year, myself and my girlfriend just decided we wanted a house, you know. So, we went and got a house. You can find them, but it’s the cost, really, and the land price, that’s stopping developers, or encouraging them from doing it on a bigger basis.
JASON HARTMAN: Very interesting. Yeah. Yeah. Makes sense, makes sense to me. Well, James, you really answered a lot of these potential objections that people have in their mind. They may not even be saying them to you, but I’m sure they’re thinking them. So, thank you for doing that. It’s been very informative. Give out your website, tell people where they can find you, and the properties, and so forth.
JAMES ARCHER: Sure. It’s www.liveandinvestoverseas.com, and you can also email me at [email protected] So, happy to help in any way that I can, and thanks for having me on the show, Jason; it was thoroughly enjoyable.
JASON HARTMAN: Fantastic. Well, James Archer, good talking to you.
JAMES ARCHER: You too.
ANNOUNCER: Have you listened to the Creating Wealth series? I mean from the beginning. If not, you can go ahead and get book one—that’s shows 1-20—in digital download. These are advanced strategies for wealth creation. For more information, go to www.jasonhartman.com.
ANNOUNCER: This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights and media interviews, please visit www.HartmanMedia.com, or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, or business professional for any individualized advice. Opinions of guests are their own, and the host is acting on behalf of Platinum Properties Investor Network, Inc. exclusively.
Transcribed by David