Panama Is the New Black: a Family Office Property Ladder
There is one thing which has created more millionaires than any other asset class, and it’s not gold, it’s not crypto, it’s good old fashioned real estate. Indeed real estate is virtually one of the few asset classes that use other people’s money (renters) to pay for the investment, if properly structured.
Of course, in this time of global uncertainty you may say that real estate will fall – this is true in many cases, but in a number of countries real estate is expected to rapidly rise due to the size, location, immigration potential of the country in which they are situated.
At Mundo we are dedicated to demonstrating the very best investment strategies of the world’s family offices and it would come as no surprise that almost all the top family offices around the world hold significant portfolios in real estate, diversified across different countries and currencies. In fact, many of the family offices actually started as simple real estate investors and gradually built a property portfolio on which they continued leveraging and buying until they became multimillionaires or even billionaires.
There are many strategies, but one of the most tested and indeed the simplest is what is called preconstruction finance.
The Global Financial Crisis and Who Will Benefit
The countries which are benefiting from the financial crisis are the net migration countries which encourage investment and have low taxes and high lifestyle. The wealthiest are relocating to such countries in record numbers from the United States, Europe, China and Africa.
Family offices choose their investment portfolio based on diversification, tax optimization, and long-term growth. Imagine if you had invested in preconstruction in Singapore 30 years ago your millions would now be worth billions. This is exactly what many family offices did.
Whilst the Singapore train has now truly taken off and entry is too high there are still many countries which are ideal for real estate preconstruction investment. Warren Buffett's most famous investment saying is “Be fearful when others are greedy. Be greedy when others are fearful“, applies directly to preconstruction now.
Family offices view real estate as just another financial product and are very careful to calculate the risks and benefits. That is why they make money. Middle class investors, on the other hand, deal mainly in emotion and buy highly priced above market properties based on look and feel. That is the difference mainly why the rich get richer and the poor get poorer, it is about knowledge of the market.
The average real estate agency sells its stock without really looking at the long term financial benefit to the buyer; indeed few real estate agencies even analyze the ROI (return on investment) in any systematic way.
How Preconstruction Investment Works
Developers who build property need financing in the short term to increase their liquidity. This is usually connected to their bank’s loan structure where the bank requires the developer to presell a certain number of units to release the loan money.
And here is where the excitement starts. The developer will connect with his family office contacts and presell an apartment which will be sold after for, let’s say, USD200,000 at a preconstruction price of USD100,000 as long as the family office commits itself to buying in bulk.
Such limited preconstruction offers are usually snapped up by the family offices before they reach the public but sometimes the opportunity to come in at a fantastic price is opened up to early investors as well.
However, preconstruction deals can be even sweeter than this because the developer only expects a deposit to secure the unit, so if timed right, the unit actually rises in value (sometimes by double) between the time the deposit is paid and the time it is built.
But sometimes the developer not only allows the family office to buy the units at discount but actually provides finance for them to hold and rent the units. This is where the investment potentially really takes off.
- 100 units are sold at USD100,000 each preconstruction with 30% down: USD 3 million down payment.
- It takes the developer two years to build and the market price is USD200,000 to the public – 20 million value (profit USD10 million).
- The units are financed for five years with short-term rentals of USD1500 a month – total income USD150,000 a month – USD1.5 million a year.
- The interest rate is 5% on the remaining USD7,000,000 (USD350,000 a year)
But the units will rise in capital gain, if properly located, at least 5% a year, cancelling the interest and effectively bringing the family office a windfall.
Thus, over five years a three-million investment can return 10 million or more. This is how family offices get to win the whole floors in buildings, which is much better than money in the bank. Of course, the numbers are not always so high but this example was taken from an actual case.
Why Invest in Panama Preconstruction Now?
The first goal of a family office is to analyze the long term prospects of a country based on a number of factors including immigration potential /capital gain /low taxes /entry cost etc.
In this sense Panama ticks all the boxes and here are only some of the reasons why:
1. Panama will always be one of the most politically stable countries in the world because of the Panama Canal. Since 5% of the world’s trade goes through the Canal, Panama will not be allowed to fall into civil war or communism as arguably the entire world is interested in its political stability. The Canal also creates free revenue for the country. Each ship which enters the Canal pays something like a million dollars to go through. This creates revenues in the billions which is a lot for the country of only 4 million people.
2. Panama has modeled its investment legislation based on Singapore’s one , there are only 5% capital gains on property, worldwide income is not taxed, a new law gives tax credits for tourism and international companies gain tax free advantages by relocating to Panama: you will find head offices of most of the world’s major companies dealing with Latin America in Panama. Further Panama has the free zone legislation and the largest free zones in the world allowing transshipment of goods and services.
3. If the above is not enough, Panama has consistently been voted by most of the major international journals and magazines as the best retirement destination in the world attracting retirees from around the world.
4. Panama is a mecca for international family offices which find in Panama a combination of tax optimization opportunities, safety and a nice lifestyle. Panama has a modern city similar to Miami and Singapore city in style and design with numerous shopping, dining, and entertainment opportunities. It is definitely the safest country in Latin America and has the most amazing eco system in the world: from highland coffee plantations to coral reefs: Panama is blessed with pristine nature.
5. But the good part is that due to the recent financial crisis Panama’s real estate is the cheapest it has ever been in the last ten years and the time to buy it is now because there is a huge influx of wealthy Latin American, European , South African and American families attracted by these opportunities.
6. Panama's investment is priced many times below the similar-quality one in Miami, Gold Coast, and Singapore, yet the potential for huge capital gains is the same as in these countries twenty years ago. Plus Panama is dollarized; this makes it the only dollarized economy in Latin America. Since America is the only country able to print money without collapsing this means that the dollar will experience strong inflationary forces and converting cash to real estate in dollars is a further safe hedge.
Mundo’s Best Panama Investment Offer
Mundo Club chooses the best investment opportunities for its members by working only with the most reliable developers and selecting the best investment products. However, in this proposal we bring you as our members what we have selected is truly out of the ordinary!
The Developer is a long-term friend of Mundo Investment Club and has been responsible for the most famous projects in Panama City which have become the city icons.
The developer has decided itself to offer a family office investment product which is made available to Mundo’s members on a preferential basis.
Recently released through Mundo, the pre construction apartment complex is located in the city center with nightlife, banks, gyms, supermarkets and restaurants around the perimeter.
The target occupants are international businessmen on a short-term stay who want an aparthotel complex or middle-class-salary earners in Panama who want an inner city apartment.
Panama has recently enacted a loan program whereby Panamanians who buy the property at a price under USD180,000 will receive 25-year loans, so demand is likely to be high from the internal sector both to buy and to rent.
The Price Offering and Financing
We can assure our investor that there is no deal currently in Panama at the same quality and price. The developer has just opened an offer, so we can sell the first 30 units through our network at a huge discount.
Here are the price points:
|Sale price||USD 103,000|
|Deposit||40% - USD 41,200|
|Interest rate||5.5% for 5 years|
|Unit size||from 35 sq.meters|
The size of a unit makes it ideal for a short term air B and B or aparthotel rentals to tourists or long-term – to workers in the district
|Estimade completion date||2Q2023|
|Estimade price upon completion||USD130,000|
|Estimated rent amount for short - term rental periods||USD1000 per month (over five years – USD50,000 with two months discounted)|
|Interest only repaid with outgoings + maintenance||USD400 per month|
|Capital gain on apartment over five years combining rental profit and resale||approx. USD60,000|
60% return over five years without having to put in the total cash
The Icing on the Cake
As a further special bonus to our Mundo investors we include in the package the following:
A. A 5-day investment tour in Panama where you will personally meet with the developer. Additional we will reimburse your flight ticket up to 1000 USD value if you purchase a unit or we will open a personal bank account in Panama where you will be able to receive your local income from renting.
B. Under Panama’s new Friendly Nations Law if you purchase real estate to the value of USD300,000 you can get an investment visa. This will happen if you purchase 3 apartments.
Why Act Now?
We have a limited time to sell 30 units at this incredible offer price and therefore reserving your unit is absolutely critical.
When this development begins to be marketed to the general public the price will rise and it is likely that Panamanian buyers will snap it up.
For further detailed information, don’t hesitate to contact us.
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