The 7 Essentials for Successful
Panama Real Estate Investment

Considering Panama Real Estate Investment? Here Are 7 Essentials.

Panama real estate investment

Panama is an incredibly beautiful country with excellent city, beach and mountain property available. Here are 7 essential ingredients to successful Panama real estate investment.

Panama real estate investment
  1. A great buyer’s agent
  2. A knowledgeable lawyer
  3. A reliable escrow service
  4. Land surveyor
  5. Building Inspector
  6. A hard working property manager
  7. A reliable way to remember to pay your property taxes

Best key to Panama Real Estate Investment: A Great Buyer’s Agent

Whether you are an experienced investor or new to Panama real estate investment, a great buyer’s agent can be extremely helpful. A knowledgeable agent who keeps up with the laws, regulation and news of the industry can share the latest tips and tricks with seasoned investors, and be indispensable to those new to Panama real estate investment.
A buyer’s agent should not only be able to cross check the work of your attorney, but help to structure deals to legally minimize taxes and make deed transfers smooth and risk free. He or she should be up to date on the ways Panama real estate investment deals can go bad, and pitfalls to avoid. You should ask your agent to do quick title checks before even wasting time to see a property that may have title problems down the line. They should also be reasonably skilled at finding and evaluating “comps” (comparable property sales) to make sure you’re negotiating a good price.

Panama real estate investment buyer's agent
Most agents will want to give priority to showing their properties first, so don’t be shy to demand they do a wider property search that fits your criteria, and show more than just their own properties.
In short, an excellent buyer’s agent is key to helping you identify the top investment opportunities that best fit your goals and personal situation, and make sure you get a great price on a property with no bad surprises.
Where can you find a great buyer’s agent? Surprise! You’ve already found one here with Panama Sun Realty!

An Absolute Essential to Panama Real Estate Investment: A Knowledgeable Lawyer

One major thing that is different in Panama real estate investment is that there are no title agencies as North American’s know them. If you’re an experienced real estate investor, you know the value of title checks and insurance. In Panama, lawyers serve the title checking function, as well as forming holding corporations and contracts if you choose to own real estate through a corporation rather than in your personal name. Panama real estate investment attorney Title insurance is available in Panama. However, it is much more expensive than you might be accustomed to. Rather than spending a lot of money on insurance, most prefer to spend a little less, but still plenty on title checks by an attorney (or 2 if you want to be very sure), building inspection, and a good land survey. Your lawyer should also write 3rd party arbitration into all your contracts, because if a contract dispute ends up in the Panama court system, resolution becomes expensive, time consuming and risky, especially for foreigners.

Reliable Escrow Service

Because of the way purchasing Panama real estate investment works, there is a multi-day (or multi-week) delay between the time a deed transfer is filed in the public registry, to the time you are confirmed as the new owner. In that delay time, the seller needs to be wholly assured the money will be paid, but the buyer needs assurance the seller won’t take the money and run. While it is typical to pay an earnest deposit (usually about 10%) directly to the seller (which he will often need to pay the transfer and capital gains taxes), the escrow in Panama is used for the balance.
Escrow companies in Panama usually charge between 0.5% to 1% of the sales price. Attorneys will also sometimes hold funds in escrow if you choose to not use an escrow company. Lastly, some banks will also hold escrow funds in the form of an irrevocable letter of payment.
Whatever you choose, never pay the balance of the contract directly to the seller.

Land Surveyor

Unless the property does not involve any land ownership, or a reliable survey was recently done, you will probably want to re-survey the land. That is because older surveys in Panama tend to be inaccurate. Panama real estate investment surveyor You might also want to have your buyer’s agent double check that the results of the new survey are agreed to with neighboring land owners. Make sure all easements are fully documented and surveyed, and sufficient to your needs.

Building Inspector

Just as in your home country, you do not want to rely on the seller’s word about the condition of the buildings. Panama construction standards are good, but probably not as high as what you may be accustomed to. House Inspection Service How do you know your building inspector is a good one? Ask him to show you a few copies of reports he’s already done. The report should include details of many important items, whether they are in excellent condition, or in poor condition. A good report should include at least (hopefully more) the condition of:
  • Evidence (or the lack) of water damage due to leaks, either in plumbing or from the roof.
  • A mold level report. Especially under sinks and in closets. House mold can unexpectedly deteriorate your health without you even realizing what is the culprit.
  • Water heater(s)
  • Air conditioning system. Especially checking the fluid levels / pressure, and pressure differentials when the system is running, but also whether the condenser water catch system is properly removing condensation out of the house.
  • Heating system (if you are buying in an area that gets cold)
  • Evidence of structural issues, such as certain types of cracks in the walls.
  • Exterior walls, fences, driveway, landscaping, irrigation, etc.
  • Doorways (especially doors to outside), floors
  • Termites
  • Roof / attic, insulation
  • Wiring, breaker panel, electric and light sockets.
  • Plumbing
  • Fire suppression, smoke and CO2 detectors.
  • Windows, latches, and opening mechanisms.
  • Appliances that will come with property
  • Swimming pool, pump, filter, water treatment systems.

A good report will contain many pictures of what was found. A great report contains annotations on the pictures so that it is very clear what he’s talking about.

A Hard Working Property Manager

It’s as true in Panama as it is anywhere, that an excellent property manager makes all the difference between a difficult investing experience and an easy one. A great buyer’s agent can also find an excellent renter for your property, as well as a hard working maintenance coordinator. It’s often good to split those roles, because maintenance workers do not often make good rental property marketers, and vice versa, but there can be exceptions.
The author’s personal experience is that large property management corporations do not do as good a job as independent people, but your experience may vary.

Remember to Pay Your Property Taxes

This is the one rule you will always want to remember for Panama real estate investment. No one in the government will send any bills, invoices or reminders. This is completely up to you. If you forget or procrastinate, you will have to pay penalties. The more you forget, the more penalties you will pay, and the last and only reminder you will get is when you go to sell your property, you’ll find an enormous bill to pay before you’re even allowed to sell.

Your property may be in a 20 year exemption, or may be eligible for one. If you have the paper work to prove your property is in an exemption period, congratulations, but set a reminder to begin paying when the exemption is expired!

So put it on a calendar you will not lose. Make 30 reminders if you have to. Remember to pay your property taxes.

Panama real estate investment property tax reminder

Many internet articles are out of date on the subject of property tax rates. Starting in 2019, property taxes have been drastically reduced. The new property tax rates are progressive and are as follows:

Primary Residence

$0 – $120,000 ==> 0%
$120,001 – $700,000 ==> 0.5%
$700,000+ ==> 0.7%

Secondary Residence, Commercial Properties, Industrial properties

$0 – $30,000 ==> 0%
$30,001 – $250,000 ==> 0.6%
$250,001 – $500,000 ==> 0.8%
$500,000+ ==> 1.0%

Payments can be made at major Panama banks. To know how much is owed and when, you can consult the DGI website and click go to their online service area. Ask your buyer’s agent or lawyer to help get you set up with a NIT (taxpayer number). Your property will have it’s own unique RUC (another tax ID number). With those 2 numbers, you can consult your tax bill, which is due 3 times per year.

Panama Sun Realty is Here to Help

Panama Sun Realty is one of those great agencies that can fulfill the essential role of a great buyer’s agent. We can do the leg work for you, and make sure your Panama real estate investment experience is an easy and profitable one. If you have any questions, we’d be happy to talk with you day or evening, weekday or weekend, so don’t hesitate to contact us.