I'm looking for a simple business idea for Panama. I will retire in a few years with a monthly pension...I will be 45. I want to live in Panama so I will be able to monger whenever I want. But, I will need to start a business to keep myself busy and generate a little income.

If you had around $500K or the ability to borrow that much, and you were headed to Panama (or any Latin or South American country)...what kind of business would you get into?

AJ

AJ,
I have never been to Panama, but since you asked about "South America" I will try to answer you. I have been in Brazil for almost 4 years and have had several different businesses. The only ones that I have enjoyed success with where those businesses where I earned my revenue there in the US. It is too difficult to try to earn your money here, the locals will rip you off every step of the way.

AJ, put that money in the bank, or set up a gig where you can work a virtual office and keep your business in the states. If you decide to invest and do a local business in South America, only invest what you can lose, because you probably will.

Gcl -

I have a friend who runs a small restaurant and bar in Panama City. He makes most of his money from the bar. The restaurant is almost an afterthought...people drinking sometimes eat as well (who'd figure?). My friend puts in 12-14 hour days and he wants to sell the place because it is burning him out. When I asked him why he didn't simply hire a Pan to run the place for him his response was that the locals would rip him off...he has to be in the bar all the time keeping an eye on the cash register.

Therefore, I'd probably need to have a business whereas there is infrequent exchange of petty cash and a good record of patronage...such as a physical fitness center...clients join the club through me...I collect the money and issue a pass with their photo on it...to get in they must show their pass and/or have it visible while they are working-out.

Or I could buy a dozen used compact cars, turn them into taxis and rent them to wannabee taxi-drivers for $25-$30 per day. I know a guy who does this for a living. His office is a hotel restaurant where he meets each driver everyday over a cup of coffee. The drivers pay him every morning...cash up front before the day starts...if they lease the vehicle 6-days they get Sunday for free. When their lease period is up, they return the car full of gas. Biggest risk here is getting reliable drivers. Also, costly Mx repairs is a risk. Insurance is about $100/month per vehicle. Monthly intake is between $600-$700. Vehicles will need to be replaced typically every 3-4 years and as they periodically get totalled.

Another idea is to start a push-button hotel. Pans typically don't earn much money, so they all move in with other relatives under one roof...a typical family unit is made-up of brothers and sisters, aunts and uncles and cousins. Those who are able to work pool their paychecks to cover electric, gas, groceries and to put all the kids through school. Often 2-4 people sleep in one room...some 2-bedroom houses may have 8 or more people living inside. This works from an economical standpoint, but absolutely does nothing for privacy. So very often Pans take their significant other to a push-button hotel where they can fuck for a couple hours in privacy. Upon arriving at the discreetly marked push-button they typically drive their car into a vacant parking stall (or if by taxi they walk into the parking stall). They slip $10-$15 into the open slot, then push a button to close the parking stall garage door behind them. As soon as the door closes the door to the hotel room pops-open and the lights and air-conditioning turn-on. The power stays on for 2-hours with a warning tone about 10-15 minutes before the 2-hours are up. The rooms typically are nice and clean. Beds are good with clean sheets. Cable TV, room service and hot shower are available. These places are very affordable and meet the Pans need for privacy nicely. In a given 24-hour period one room could be used as much as 5 or 6 times...maybe even more. Since maid labor in Panama is so cheap, the $50 or $60 earned per room per day really adds up, especially a 10-15 room push-button clearing $500 per day...a $300,000 push-button with 15-rooms can break even in about 3-years assuming each room is used 5 times per day.

Any other ideas?

Alecjamer,
There is a gringo here in Rio that owns a couple of very successful bars called Shenanigans, and he does quite well. So it can be done. However, he admits that the brazilians rip him off, but he makes enough to cover that.

Here has been my experience here doing business:

1. I opened an internet chat site. The type of site where you chat with the girl and can pay to go private and they strip, masturbate, etc. I did everything to the letter: formed a corp, business licenses, paid taxes, health insurance, etc. Totally legal. The police showed up one day and said they wanted to be paid every month for me to remain open. I refused. They took me to jail. I got out on bail, fought my case and won. Now I have permission from a judge to do it, but it is a hollow victory because my business closed during the time everything was idle. THis was a 'quasi' sex related business so a little controversial--but totally legal nonetheless. Your hotel idea is similar in that regard--it is dealing in an area that could cause you some scrutiny by corrupt police (again I know nothing about Panama so maybe that is not a concern).

2. I tried Taxis. Me and some friends of mine had a small fleet of them. There are so many ways you can get cheated by Brazilians i wont get into all of them. Here are a few anecdotal examples:

a. Taxi drivers call and say car is broken down and they are 2 hours outside of Rio... therefore they cant pay the daily "rent" on the taxi.

b. Taxi breaks down and goes to the shop for repairs. Shop charges for new parts but breaks down 2 days later--same problem and we discover used parts had been installed.

c. When I suspect the drivers and the repair shops are in collusion, I hire someone I trust to sit at the shop and oversee our repairs. That person discovers some impropriety so I fire some drivers. A week later the person I hired is murdered. No investigation is done by the police.

d. Drivers who are a day or two behind on their "rent" decide they will leave our employ. THey then proceed to drive like maniacs and get speeding tickets, parking tickets and other violations. Tickets dont show up until a month later after the driver is gone. I had one driver who racked up $500 in one day. You have to pay the tickets or you cannot renew your plates at the end of the year.

I could go on an on. We lost everythign we invested in the taxi business. I now know that the successful taxi companies are basically mafia and the drivers and repair shops are afraid to cheat them. I had no such clout. By the time I sold off the cars to pay the mounting bills, I still owed money.

If you figure out a way for the drivers to be the ones that lose ('lease the vehicles to them with a large downpayment, or require substantial deposits) then perhaps you can have a go at it. But I strongly suggest you dont invest in taxis.

On the other hand, you can get quite good interest rates on money in Brazil. So if you make some deposits you can collect interest. And if you live here or travel enough to spend Reals, you dont have to worry about repatriating the money to the US. You biggest risk would be a collapse of the currency.

Good luck to you.

AJ,

If you can borrow $500K, what is the percentage rate?

I do hard money loans and can hook you up on the float.

For instance, I borrowed $500K at 8% and I have a hard money loan out for 12%. I pocket $20K per year on the 4% float. No work, no servicing, fully backed by high equity real estate in California.

Easy to do and no worries about managing people. Has not lost money (not one dime) since 1985 when I first started doing this.

If you have cash, you can get creative. Don't bother with local money, restaurant failures are at 80% in the US, I'm sure it's worse outside the US.

Who would pay 12% if they had "high equity real estate in California" as collateral?

I'm just asking, maybe they need a used car also?

AJ,

I'm retired and looking for something to keep me busy and out of constant trouble. I have an International Drivers License and a Pan- American Drivers License that covers Central and South America.

My driving record is a little spotty, but I'm all paid up on my past outstanding in-state tickets. The out-of-state ones still need a little work to clear up.

Simply put, my question is this: Can I drive one of your cabs? BTW, where's Panama? Also, what side of the road do they drive on? If they drive on the left, please completely disregard this post.

Hope my offer puts your mind at rest.

Jag

Bluelight,

Very well put. My mortgage company floated me a $500k line of credit using the equity in my house as collateral, and the rate was around 7% I believe. Sorry Sniper, I'm not sure what you're into, but as I've had an offshore (way offshore) account for over 10 years and am routinely partnered up in at least 1 or 2 LLCs doing real estate and home building as well as certain other investments, I do question what you are doing and how much you're really making. Borrowing money at 8% and then reloaning it at 12%, unless you're doing it in a back alley somewhere any financial shop with a non-idiot running arbitrage would be all over any legitimate business like that in a heartbeat.

I see hard money loans secured by real estate (50%LTV) all the time at 12 to 14%. AZ

Jag, if I recall right? When you start driving a taxi, you can also offer your services as a body-guard too! As you would be packing your Sog blade and mace.

Personally, I would pay you a premium with a tip at the end. Because with your luck it will alway's be an adventure!

I thought Jag's job was manning the Mobile Command Post on Hooker Beach?

We certainly know he can't get a job as a writer, he's 10 months behind on his last assignment.

Wow, Cat and Bluelight I guess you guys really don't understand the financial markets. Better do your research before you throw out comments like that.

I'll make it simple, bad credit (I mean really bad), lot of equity in your home, and you need an equity loan. You go to a substandard lender like Residential Capital Mortgage based out of San Diego and you borrow money at 14%.

Residential Capital Mortgage then sells the paper to guys like me at 12.03%.

Go to http://www.rescapfunds.com/ and check it out if you don't believe me. They are registered with the NASD, have a prospectus, and can be held in your Schwab, TD Waterhouse, Fidelity accounts. So it is completely legit.

Now there are probably 3 or 4 others that you can go to that are equally legit. I just like this one because the manager of the fund is very good. Look at their performance over the past 10 or so years, right around 12%.

If you want to take on a little more risk, you can buy individual mortgages. But that is a little more work and I would not suggest it for those who don't know what they are doing.

So Catocony, fire your financial advisor, he/she apparently sucks.

Sorry, I didn't want to be too harsh but I do this for a living and I realize that bullshit is often spread by people on CH. But I am not one of the Bullshit Artists on the board.

By the way, I do non secured loans for up to 25%. Its much more risky but the returns are pretty good as you can see.

If you doubt that as well, go to www.prosper.com and see what people are willing to pay for unsecured loans.

I just wanted to provide hard proof for some of the doubters on the board.

(Message edited by sniper on August 22, 2006)

(Message edited by sniper on August 22, 2006)

To add a little more.

When you borrow and relend it is called "Margin". If you have a Schwab account, you can borrow on "Margin", again completely legit. Margin is probably around 10% if you borrow directly from your broker. I chose a cheaper route by taking equity from a commercial property I own.

So if you are a qualified investor, as I assume you are if you are since you are involved in the building industry so I assume you make enough money, you can buy alternative investments.

To give you a little about my background, I manage about $300 Million (10 times the Federal Registered Rep average) in insurance and financial services products for my clients. Some of the guys on CH know me personally and some are even clients.

So I am really territorial about my reputation. Sorry again for the harsh words. I tried editing them out, but I waited two long for the last edit.

Well Sniper I still would like to sell them a used car.

As for your business, I think you've explained it clearly enough. You and other members of CH are part of a network that loans people, with Titled Real Estate as collateral, money at 14%. We all know what that business is.

Nah, I'll just stick to the 15% returns off of my land loans. Borrowing money at 8% to relend at 12% isn't that much of a investment, a 7-month CD will earn you close to 5% now and it's FDIC insured.

Thanks though for explaining more in depth. As you said, there is more than enough BS on this board and I've heard a million get-rich schemes over the years. Most are either pyramid schemes of some sort. The rest are the usual "I'll go and open a bar/restaurant/bed and breakfast/etc that end up being money pits in reality.

Here's the point about living in mongering spots - they are great places to spend money and shitty places to make money. If you can work from home in the US and need minimal contact with others, then looking into moving internationally and working from Panama or wherever. Just make sure you keep a small piece of home in the US - a Mail Boxes Etc or something or a business address with a receptionist or someone who can FedEx you bills, magazines, all that stuff that you need to actually put pen to paper every once in a while. Going virtual can work but you have to stay current in the US on things like drivers licenses, insurance and whatnot.

Note - do not go virtual unless you work for yourself. You do not want to be set up in another country and working out of a home office and get a layoff notice or something and you're left in the lurch. Don't ever do so if you plan to live paycheck-to-paycheck. I've seen layoffs and firings happen quite a bit over the years - if you're the one nobody ever sees, it's easy to make you the first to go. It's ugly if you don't have a fat bankroll and you're suddenly unemployed.

Mongering spots are places to spend money, not make money. Make your money somewhere else, then spend it in the mongering spots.

Alec, if you have a fairly healthy bank account, here is one plan if you are not adverse to risk. I've had a Panamanian bank account for over 10 years and prior to the IRS crackdown a few years back, I ran all of my credit card transactions using that account. I was earning, on average, 25-30% per year, so it took foreever to put any dent in the priniciple. I used those cards for everything, including my business expenses. That's what drove the IRS nuts - you put business expenses on a card, then the card is payed mostly by interest earned in a foreign account. Then, you put your expense check (no taxes there) in your bank in the US and, voila, you've just repatriated $1k-4k per month without paying a dime in taxes.

Those days are dead but the interest rates on investments are still high. If you don't mind the risk, put a few hundred thousand in the bank in Panama or wherever and try and live off of the interest. Keep your stock investments, real estate, etc in the US and try and not tap into the principle in Panama. If you can earn 20%, that $200k investment brings you back $40k a year, which still goes a long way in a lot of countries, even with the ever-weakening dollar. Just make sure that principle you invest offshore isn't your complete nest egg and if one day some army general takes over and freezes the accounts - or just flat-out steals your money - you're not out on the street.

Guys, agreed. Make your money in the US.

I encourage my clients to make money off the float even for conservative investors. 4% with no cash down is better than a 7 month CD worth 4% because you are not putting down the capital, the bank is. You are being paid 4% just for accepting risk. In reality, the risk is slight because it is backed by high equity real estate.

Even if you make 15% on some of your investments, isn't 4% earned with no money still good? I think it is.

The bulk of the money I earn are from other investments paying as little as 8.5% to as much as 60%. But it is here in the US or through securities that are listed on US exchanges. I wouldn't put the bulk of my wealth in foreign markets unless you know what you are doing.

Now if you want a small coffee shop or something that will make you a few bucks but won't cost much to set up, fine. But these delusions that you are going to open up this big company in Panama will leave you broke. I think we all agree on that.

AJ, I would discuss foreign earned interest with your accountant before you move forward with foreign based accounts.

(Message edited by sniper on August 22, 2006)

Sniper,
I know a guy who does the same thing and he does very well for himself. Actually, he says that for the most part he ends up making a lot more than 12% and that's just the basis for his loans. Then there are points and standard junk fees. Then there's the 10% late payments that eventually kick in for those that can't make their payments by the grace period as well as the 5% interest on all money owed while it is in foreclosure. And it's all pretty much risk free if you stay within a lending business model that he explained to me, only lends on first position with a proper debt/equity on the property.

I ran this model by a couple friends that I respect their finacial opinions and now they want in on the deal. I haven't even started yet and don't want other people's money just yet.

They proably buy individual loans. I unfortunately don't have time for that, but there is great money in it.

Do they do their own servicing? That can also pay well.

I also own oil wells that return 30% a year sometimes. And the price of oil going up in my mind is a good thing since it puts more dollars in my pocket, not to mention that you can 1031 into them and you can get good tax breaks on them as well.

Yes, RE brokers come to him for their unconventional loans (i.e., people with less than stellar credit) he services them himself but he didn't portray it as a way to make money but as not being an additional expense. He doesn't buy paper as he likes the points and the RE brokers like their kickbacks too.

Different business, I prefer to buy the paper because its consistent return.

You can make good money doing that but it can get difficult. I'm assuming he is properly placed on the loan so he can foreclose if necessary.

Too involved for me. But can be very lucrative.

You can buy loans from Res Cap at a higher percentage rate and pay them to service it. I like this but it doesn't spread my risk, so I'm a little hesitent to do it.

Buying the Res Cap pool is very stable (look at the historical performance) and is basically a no-brainer.

I'll give up 2-3% if I don't have the aggravation and exposure. The loans Cat refers to above at 15%, it sounds like he may have to service them as well.

I buy and forget basically.

We do the servicing, not me personally but the managing partner of each LLC. I've cut back on my investments there since the good investments are gone and most of the new stuff is speculative or outside the local area. I know who pays for what kind of land in and around the DC area, I have no clue what a parcel of land is really worth in North Carolina or some out of the way place.

Most of our returns have been in the 60-80% range over the life of the deal, usually a couple of years. We did flip one parcel 3 months after we closed on it and netted 65% for 3 months investment, but most average out nicely. We stayed away from condos and did mostly single family homes and some townhouses, primarily on close-in parcels. Buy some old houses on nice half-acre lots, tear everything down and put up greater density. No problems at all.

The investment I posted about is a bridge loan of a few million I think, maybe $3.5M or so. It's a note with good collateral, 15% annual for 24 months. Standard deal, investment units are sold in shares of $50k apiece, no limit to the number of shares per person although we get as many of the group involved in each deal as possible to spread the risk out and to make sure everyone gets a slice of the profits. Each share is actually $150, with the $50k per share packaged as a loan. The $150 goes to group expenses and the MPs new Beemer probably.

A few deals went dead in the water last year, which I was glad about. None of the deals that have closed have ever returned less than 50% or so, but when the deals fail to close a few of the group tend to get pissed because they've already made some other investment decisions and now have cash they need to park somewhere. It's always a great problem to have but if you plan on dropping $50k on something and then it's held up, it can be a tough decision on what to do in the meantime, particularly a few years ago when money market funds returned nothing and no-penalty short-term CDs were barely worth the effort to do the paperwork on.

Good deal, I'm glad it working for you. I thought about servicing directly, too much effort for me and too much risk since foreclosure is a pain in the ass in California.

I gladly hand over 3% for all of the servicing, underwriting, and foreclosure (if required) service.

There is a mint to be made if you don't mind servicing.

Nice thing is that my risk is spread over about 100 loans, so if one person doesn't pay, I have 99 more loans to pick up the slack.

The same goes for my Prosper.com loans. I have over 100 loans in small amounts. I'm earning a little over 16% right now (average), some loans as high as 28%.

My retirement job essentially is going to be originating loans.

That being said, the bulk of my wealth is in securities and real estate. I only have about $500K or so in hard money lending