3 Real Life Examples of How to Handle Overseas Rental Properties

Editor’s Note: This story appeared on Live and Invest Overseas.

A few years ago, I had a conversation with another real estate investor about his rental properties.

He had bought many flats in three places and was happy with all of them. They were returning good yields, and prices were stable in US dollar terms, despite currency fluctuations in two non-US dollar markets.

The three markets are St. Petersburg, Russia; Santa Marta, Colombia; and Panama City, Panama.

After a while, I met my colleague and got an update. All three markets are still hiring well. However, due to the pandemic and the war in Ukraine, the way his portfolio works has changed for others.

The changing market in Colombia

During the pandemic, Colombian properties are still renting well due to local tourism replacing the international tourism that once attracted her.

Wealthy Colombians who take their beach vacations in Santa Marta often have second homes there, so they don’t rent. However, with no options for international travel during the pandemic, the local middle-class population, as well as the wealthy who did not have them in Santa Marta, were able to fill the gap created by the lost Europeans.

His retention rates never fell below 80%.

Since the pandemic has passed, mostly European short-term renters have returned, and now you have a few Colombian renters.

Settling in Panama

Properties in Panama are leased for a long time, so they have little volatility from day to day to live in and produce a stable yield before the pandemic and in the years since.

Panama City is a market with many expats working for international companies. These workers are usually part-time workers, so they are not real estate buyers. However, they are a large tenant pool for long-term furnished apartments.

They earn internationally, and the company sometimes pays rent as part of their contract. That means you don’t have to worry about paying your rent.

The benefits of long-term furnished apartments are generally lower than short-term rentals, but in Panama City, rentals of less than 45 days are limited.

A complication in Russia

The last place in St. Petersburg has a complicated story.

The apartments are well rented during the violence for local tourists. With the travel ban on Russians, with no one going to Russia right now, apartments continue to rent well for wealthy tourists from Moscow.

In fact, despite the current economic situation in Russia, apartments continue to have high occupancy rates and have grown significantly in value, according to our partners.

The issue is that he cannot take his money out of Russia because of all the sanctions.

That leaves him with no real options, other than continuing to rent and accumulating rubles in his Russian bank account.

Create a diverse portfolio of properties

The good news about his portfolio, during the crisis and now, is that he has diversification – three different markets with very different economies around them and three different currencies.

He has been building his portfolio for over 20 years, since before Airbnb existed as a way to find tenants. For the first apartments in his portfolio, he used rental managers to keep the properties full … including in Panama before the 45-day rental limit went into effect. As new options like Airbnb emerged, he adjusted his management strategy.

However, he didn’t really change his investment strategy. He wanted to diversify but knew not to be in too many markets or he would face management challenges.

Actually, for me, St. Eventually, he should be able to end his hold on Russia and get his money out.

Meanwhile, other markets continue to generate good cash flows that are accessible.

Be flexible to maintain cash flow

Apart from diversification, flexibility has helped his portfolio to continue to generate good returns. Another change he created. Some of it was natural in the markets. Some of it had to be worked out.

Being able to go from landlords to Airbnb and managing properties himself (for the most part) allowed him to keep more of his rent and improve his bottom line.

However, it is because he spends most of his time managing. He has put together local teams for the property management side, as he is not there to do things like cleaning or restocking the toilet paper.

Going from short-term rentals to long-term rentals in Panama is the kind of flexibility you should look for in every market you’re considering investing in. I have been able to make that transition from one side to the other in many markets over the years as the market or my needs have changed.

In Argentina 20 years ago, we moved to a long-term apartment from a short-term one just because it was easier to manage, and it didn’t change the yield at that time.

We changed from short term to long term in Paris because our HOA does not allow short term rentals.

The apartment we bought in Lagos, Portugal, was a long-term rental when we bought it, and we turned it into a short-term rental to improve the yield.

If you’re buying in an area that isn’t really a long-term rental market, like Santa Marta, Colombia, then having local and international renters as an option gives you the flexibility that my partner found when the pandemic shut down international travel.

Short-term rental markets that rely solely on international tourists, and in particular, international tourists from one part of the world, are not very flexible.

At the very least, you want a market that attracts people from different countries to help avoid settlements if a recession occurs in just one country and that’s the country all your employers are from.

In Russia, the partner had to create his own flexibility … at least from a cash flow perspective.

He is still stuck with Russian bank rubles and can’t get them out right now. He could sell, but the money would stick to Russia. Therefore, he continues to rent properties and save the ruble until the situation changes. That requires some flexibility in his thinking and planning.

As with all investing, not everything goes as planned with real estate. Markets, exchange rates, management, weather, and market popularity are all subject to change.

Diversification helps keep your portfolio from falling apart, and flexibility can help you adjust so you can continue to earn profits by changing the way you manage your properties.