Financial Preparation

• Determine your total investment budget (property + closing costs + reserves)
• Establish banking relationships for fund transfers
• Explore financing options if needed (mostly self-financing or developer terms)
• Set up international wire transfer capabilities with your home bank
• Consider establishing a Panama bank account for ongoing expenses

Market Research

• Identify target regions based on investment goals (appreciation vs. rental income)
• Research neighborhood-specific price trends and rental yields
• Join expat forums for Panama (Facebook groups, International Living)
• Subscribe to local real estate market reports
• Plan an exploratory visit to your target markets

Professional Network Development

• Connect with bilingual real estate attorneys specializing in foreign clients
• Identify real estate agents with international client experience
• Research property management companies in your target market
• Establish contact with international banking services
• Connect with existing foreign investors through expat communities

Expert Tip: Panama’s rainy season (May to November) is an excellent time to view properties, as you can assess drainage issues, leaks, and other potential water-related problems. Additionally, visiting during both high and low tourist seasons is recommended if purchasing in areas with seasonal tourism, as this provides a complete picture of rental potential throughout the year.

Required Documents for Corporation Formation: Passport copies of shareholders/directors, articles of incorporation, corporate charter, and registered office address in Panama. An experienced attorney can complete this process in approximately 1-2 weeks, with the corporation ready to purchase property immediately thereafter.

Banking Setup

• Opening a Panamanian Bank Account: Possible but increasingly selective due to international compliance regulations. Requirements typically include:
  • Passport and second form of identification
  • Proof of income/funds source (bank statements, tax returns)
  • Reference letters (professional and banking)
  • Local address in Panama (can be your attorney’s office)
  • Minimum deposit (varies by bank, $1,000-10,000)
• Recommended Banks: Banco General, Banistmo, and Multibank have established departments for foreign clients with English-speaking staff.
• Alternatives: Many investors maintain accounts in their home country and transfer funds as needed for property purchases and expenses.

Financing Options

Panama offers several financing pathways, though most foreign investors use cash purchases:

1. Local Bank Financing: Available but challenging for non-residents
   • Typically requires established banking relationship
   • Maximum 70% LTV for foreigners
   • Interest rates 1-2% higher than for locals
   • Terms generally 10-15 years with balloon payments
2. Developer Financing: Common for new construction and pre-construction
   • Typical terms: 30% down, 70% financed over 5-10 years
   • Interest rates of 6-9%
   • No credit check or income verification requirements
   • Often structured as interest-only with balloon payment
3. Seller Financing: Occasionally available in resale market
   • Typically short term (3-5 years)
   • Higher interest rates (7-10%)
   • Requires substantial down payment (40-50%)
4. International Financing: Many investors leverage equity from their home country
   • Home equity lines of credit
   • Cash-out refinancing of existing properties
   • Investment portfolio loans

Transaction Security

Secure fund transfers are essential in international real estate transactions:

• Escrow Services: Available through law firms and specialized providers
• Wire Transfers: Most common method for property purchases
• Documentation: Maintain clear records of all transfers for tax compliance
• Payment Timing: Never transfer funds until all documentation is verified

All international transactions should be properly documented for both Panamanian and home country compliance requirements. The dollarized economy eliminates currency exchange risk for US investors, while Canadians should consider timing of transfers based on CAD/USD exchange rates.

Property Search Resources

• Online Platforms:
  • Encuentra24.com – Panama’s largest property portal
  • Panama-realtor.com – MLS-style listings for Panama
  • Casa.mitula.com.pa – Aggregator of multiple listing sites
  • ACOBIR.com – Association of Real Estate Brokers listings
• Real Estate Agencies:
  • International agencies with Panama offices (Coldwell Banker, Century 21)
  • Panama-specific agencies with expat focus (Panama Equity, Inside Panama)
  • Developer direct sales offices for new construction
• Specialized Resources:
  • Panama Relocation Tours – Guided property exploration tours
  • Expat Facebook groups and forums
  • International Living events and resources

Property Viewing Trip Planning

Organize an effective property viewing trip:

1. Pre-Trip Research: Identify 15-20 potential properties before arrival
2. Trip Duration: Plan 10-14 days minimum to explore multiple regions
3. Local Agent: Work with a bilingual agent experienced with foreign buyers
4. Regional Exploration: Allocate time to explore different micro-markets
5. Property Shortlisting: Visit 10+ properties to develop market understanding
6. Second Viewings: Return to top choices with fresh perspective
7. Infrastructure Assessment: Evaluate water reliability, internet quality, and roads
8. Community Integration: Visit local expat hangouts to gather insights

Property Evaluation Criteria

Assess potential investments using these key criteria:

• Location Factors:
  • Proximity to amenities (shopping, healthcare, restaurants)
  • Transportation infrastructure (roads, public transit, airport access)
  • Future development plans for the area
  • Neighborhood safety and security measures
  • View considerations (ocean, mountain, city)
• Building Quality:
  • Construction materials and standards (particularly important in tropical climate)
  • Age and maintenance history
  • Building systems (electrical, plumbing, HVAC)
  • Common area amenities and maintenance
  • Security features and access control
• Rental Potential:
  • Historical occupancy rates in the building/area
  • Rental restrictions in HOA or building regulations
  • Competitive rental inventory in the area
  • Seasonal vs. year-round rental market
  • Target tenant availability (expats, tourists, locals)
• Financial Considerations:
  • Price per square meter compared to market averages
  • HOA fees and included services
  • Property tax status (exemption eligibility)
  • Utility costs and infrastructure reliability
  • Renovation or updating requirements

Expert Tip: Panama has distinct micro-markets that can vary drastically in price and potential returns even within short distances. For example, properties in Panama City’s Punta Pacifica might be priced at $2,500/m² while similar properties in San Francisco (just 10 minutes away) might be available at $1,800/m². Evaluate adjacent neighborhoods to find value opportunities with similar amenities and lifestyle benefits.

Legal Due Diligence

• ✓
  Title Verification: Obtain a property certificate (Certificado de Registro Público) to confirm ownership and encumbrances
• ✓
  Ownership History: Review chain of title for at least 20 years
• ✓
  Liens Check: Verify no mortgages, liens, or encumbrances on the property
• ✓
  Tax Status: Confirm no outstanding property taxes or municipal taxes
• ✓
  Survey Verification: Validate property boundaries with official survey plan
• ✓
  Utility Verification: Confirm no unpaid utility bills
• ✓
  HOA Status: Verify no outstanding HOA fees and obtain HOA regulations
• ✓
  Zoning Compliance: Confirm property use aligns with zoning and development regulations

Physical Due Diligence

• ✓
  Professional Inspection: Hire qualified inspector to evaluate structural integrity, systems, and potential issues
• ✓
  Water Testing: Check water quality, pressure, and reliability (particularly important in rural areas)
• ✓
  Internet Service: Test internet speed and reliability (critical for remote workers)
• ✓
  Electrical Systems: Verify electrical capacity, wiring quality, and backup power options
• ✓
  HVAC Systems: Test air conditioning, particularly its capacity during hottest hours
• ✓
  Moisture/Mold: Inspect for moisture issues, especially in coastal and highland areas
• ✓
  Infrastructure Assessment: Evaluate roads, drainage, and common areas

Financial Due Diligence

• ✓
  Comparative Market Analysis: Verify price aligns with comparable recent sales
• ✓
  Rental Market Research: Confirm realistic rental expectations for the property
• ✓
  Expense Verification: Detailed assessment of all ownership costs
• ✓
  Tax Exemption Status: Determine eligibility for property tax exemptions
• ✓
  ROI Calculation: Develop detailed cash flow projections and ROI analysis
• ✓
  Future HOA Assessments: Research upcoming building maintenance or special assessments

Expert Tip: For titled property, Panama has a well-functioning online public registry system at https://www.registro-publico.gob.pa where you can verify basic property information. However, this doesn’t replace the need for a full title search by a qualified attorney. For properties in beach or island areas, verify the property is fully titled and not based on Rights of Possession (ROP) or concession rights, which carry significantly different ownership implications.

Promise to Purchase Agreement (Promesa de Compraventa)

This legally binding document outlines the terms and conditions of the sale:

• Key Components:
  • Property details and legal description
  • Purchase price and payment schedule
  • Deposit amount (typically 5-10%)
  • Closing date and timeline
  • Conditions and contingencies
  • Default penalties
• Deposit Handling: Typically held in attorney escrow account
• Timeline: Usually signed after preliminary agreement on terms but before extensive due diligence
• Legal Review: Essential to have qualified attorney review before signing

The Promesa is a private contract that establishes the framework for the transaction. While not recorded in public records, it is legally enforceable and should include thorough contingency clauses to protect the buyer during the due diligence period.

Closing Process (Public Deed)

The formal property transfer occurs through the creation and registration of a public deed:

1. Documentation Preparation:
   • Final public deed (Escritura Pública)
   • Property certificates from public registry
   • Tax clearance certificates
   • Utility clearance confirmations
   • HOA clearance letter
   • Identification documents for all parties
2. Notary Process: All property transfers require notarization by a Panamanian notary public
3. Final Payment: Balance of purchase price transferred at or before closing
4. Document Signing: All parties (or their representatives with power of attorney) sign the public deed
5. Registration: Public deed must be registered with the Public Registry Office
6. Tax and Fee Payment: Transfer taxes and registration fees paid during registration process

Registration typically takes 2-3 weeks in Panama City and major urban areas, potentially longer in rural regions. The property title is officially transferred once registration is complete, not at the moment of signing.

Transaction Costs

Budget for these typical transaction expenses:

• Transfer Tax: 2% of property value or cadastral value, whichever is higher
• Notary Fees: 0.25% of transaction value (approximate)
• Registration Fees: 0.25% of transaction value (approximate)
• Legal Fees: 1-2% of property value for comprehensive representation
• Real Estate Agent Commission: 5-7% (typically paid by seller but can affect negotiated price)
• Title Insurance: Optional but recommended, approximately 0.5% of property value
• Escrow Fees: If using escrow service, fees range from $500-1,000

Total buyer-side transaction costs typically range from 3% to 5% of the purchase price, plus real estate commission if applicable. New properties may have additional documentation costs but often come with property tax exemptions that provide long-term savings.

Expert Tip: For transactions conducted while you are outside Panama, ensure your promesa includes clauses that protect you from potential delays in funds transfers or travel complications. Additionally, if purchasing pre-construction, structure payments to coincide with construction milestones verified by an independent inspector, not simply based on developer timelines.

Administrative Tasks

• ✓
  Property Tax Registration: Update ownership information with the Ministry of Economy and Finance (MEF)
• ✓
  Utility Transfers: Register utilities in your name (electricity, water, internet)
• ✓
  HOA Registration: Register with building administration or homeowners association
• ✓
  Insurance: Obtain property and liability insurance
• ✓
  Payment Systems: Set up mechanisms for ongoing expense payments

Property Management Setup

If planning to rent your property:

• Management Structure: Decide between self-management or professional property management
• Rental Readiness: Furnish and equip property based on target market
• Marketing Strategy: Develop listing strategy for long-term or vacation rentals
• Legal Documentation: Prepare standardized lease agreements
• Tenant Screening: Establish protocols for evaluating potential tenants
• Maintenance Network: Identify reliable contractors for various property needs
• Tourism Registration: For short-term rentals, register with the Tourism Authority

For properties intended as vacation rentals, registration with the Panama Tourism Authority (ATP) is required. This process includes property inspections and compliance with specific requirements for tourist accommodations.

Record Keeping

Maintain comprehensive records for tax and legal purposes:

• Purchase Documentation: Keep all closing documents, property deed, and transaction records
• Expense Tracking: Maintain detailed records of all property-related expenditures
• Income Documentation: Record all rental income with formal invoicing
• Improvement Investments: Document all property improvements with receipts and contracts
• Tax Filings: Archive all property-related tax filings in Panama and your home country
• Insurance Policies: Maintain copies of all insurance documentation
• Correspondence: Save important communications with property management, tenants, and authorities

For tax purposes, Panama follows a territorial tax system, meaning only income generated within Panama is taxable. However, proper documentation is still essential for compliance with both Panamanian and home country requirements.

Expert Tip: Panama’s property tax exemption program for new construction is one of the most generous in Latin America. Newly built properties are often exempt from property taxes for 5-20 years depending on value and construction date. When purchasing, obtain written confirmation of the exemption status including the specific exemption period remaining. This exemption transfers with the property and can significantly impact your long-term ownership costs.

Panamanian Tax Obligations

• Property Tax (Impuesto de Inmueble):
  • Progressive rates from 0% to 0.7% based on property value
  • Properties under $120,000 are exempt
  • New construction often has 5-20 year exemptions
  • Due annually with discounts for early payment
• Income Tax on Rental Income:
  • Subject to standard income tax rates from 0-25% on net income
  • Alternative simplified 10% gross income tax option available
  • Deductions include maintenance, administration, property tax, and depreciation
  • Annual filing required if generating rental income
• Capital Gains Tax:
  • Flat 10% tax on property gains
  • Alternative: 3% of gross sale price as advance payment with remainder subject to standard rates
  • Gains calculated as sale price minus (cost basis + improvements + transaction expenses)
  • Primary residence exemptions may apply in certain cases
• Municipal Taxes:
  • Vary by municipality but generally minimal for residential property
  • Commercial properties may have additional municipal business license requirements

Home Country Tax Obligations

Panama has a territorial tax system that only taxes locally-sourced income, but your home country likely requires reporting of worldwide income. Working with tax professionals familiar with both tax systems is highly recommended.

Tax Planning Strategies

• Property Tax Exemptions: Focus on properties with remaining tax exemptions
• Depreciation Benefits: Utilize available depreciation allowances in both jurisdictions
• Entity Structures: Consider whether a Panamanian corporation provides tax advantages
• Expense Documentation: Maintain thorough records of all deductible expenses
• Income Timing: Strategic timing of income recognition and expense payments
• Sale Planning: Timing property sales to optimize capital gains treatment

Panama’s investor-friendly tax system offers multiple opportunities for optimization. However, ensure all strategies comply with both Panama and home country regulations to avoid costly compliance issues.

Expert Tip: For U.S. taxpayers, establishing bona fide residence in Panama can potentially qualify you for the Foreign Earned Income Exclusion (FEIE), which can exclude a significant amount of income from U.S. taxation. While this doesn’t directly affect real estate income, it can be part of a broader tax strategy for those planning to relocate. Consult with a tax professional specializing in expatriate taxation for personalized advice.

Selecting a Property Manager

Evaluate potential property managers using these criteria:

• Experience with Foreign Owners: Familiar with the unique needs of international investors
• Communication Capability: English proficiency and responsive communication systems
• Technology Integration: Online owner portals, digital payment systems, property monitoring
• Relevant Portfolio: Currently managing similar properties in your target market
• Tenant Screening Process: Rigorous vetting procedures for potential tenants
• Maintenance Network: Established relationships with quality contractors
• Financial Reporting: Clear, comprehensive financial statements and disbursement systems
• Legal Compliance: Understanding of Panamanian rental laws and regulations
• References: Verifiable testimonials from other foreign clients

Management Agreement Essentials

Ensure your property management contract includes these key elements:

• Scope of Services: Detailed description of included and excluded services
• Fee Structure: Clear explanation of all management fees and additional charges
• Reporting Schedule: Frequency and format of financial and property condition reports
• Maintenance Authority: Spending limits requiring owner approval
• Tenant Selection Criteria: Standards for tenant approval
• Lease Terms: Parameters for rental agreements and rates
• Security Deposit Handling: Procedures for deposit management
• Termination Provisions: Clear process for ending the management relationship
• Insurance Requirements: Coverage expectations for all parties

Have your attorney review any management agreement before signing. Ensure it complies with Panamanian regulations while protecting your interests as a foreign owner.

Expert Tip: Panama’s rental market has distinct high and low seasons, particularly in beach and tourist areas. When evaluating property managers for vacation rentals, focus not just on their high-season performance but on their strategy for maximizing occupancy during shoulder and low seasons. The most effective managers maintain relationships with corporate clients, relocation services, and long-term rental prospects to fill potential gaps in the vacation rental calendar.

Exit Options

Sale Process

When selling your Panamanian property:

1. Market Timing: Evaluate market cycles and upcoming developments
2. Property Preparation: Address maintenance issues and enhance marketability
3. Valuation: Obtain professional appraisal and comparative market analysis
4. Marketing Strategy: Decide between:
   • Local agency with Panamanian market connections
   • International agency targeting foreign investors
   • Multi-channel approach combining both markets
5. Documentation Preparation: Organize all property records, maintenance history, and rental performance data
6. Tax Planning: Consult with tax advisors to optimize transaction structure
7. Closing Process: Similar to purchase process but in reverse:
   • Promise to Purchase Agreement
   • Buyer’s due diligence period
   • Public Deed preparation and signing
   • Registration with Public Registry
8. Fund Repatriation: Transfer proceeds through banking channels
9. Tax Compliance: File Panamanian capital gains tax returns and report in home country
10. Reinvestment Planning: Develop strategy for proceeds utilization

The sale process typically takes 2-4 months from listing to closing, depending on property type, price point, and market conditions. Premium properties in desirable locations often sell more quickly, while rural or high-value properties may require longer marketing periods.

Market Exit Timing Considerations

Several factors should influence your exit timing decision:

• Market Cycle Position: Panama’s real estate market tends to follow 7-10 year cycles; selling during expansion phases typically optimizes returns
• Infrastructure Completions: Major infrastructure projects (metro lines, highway expansions, etc.) often trigger neighborhood value increases
• Local Development: New commercial centers, schools, or healthcare facilities can significantly impact property values
• Supply Pipeline: Upcoming competitive inventory in your market segment
• Tourism Trends: For vacation properties, changing tourism patterns affect potential buyer interest
• Tax Considerations: Both Panamanian and home country tax implications
• Exchange Rate Factors: For Canadian and non-USD investors, currency strength relative to USD
• Personal Timeline: Alignment with your overall investment and lifestyle objectives

Successful investors often establish specific performance benchmarks that would trigger consideration of an exit, rather than making purely emotional decisions. Having clear criteria helps optimize returns while removing some of the guesswork from timing decisions.

Expert Tip: Panama’s property market has historically demonstrated strong seasonal patterns, particularly for properties appealing to North American buyers. The high season for property viewing and purchasing typically runs from December through April when many “snowbirds” visit Panama. Timing your sale to coincide with this period can significantly increase exposure to qualified buyers and potentially shorten the time to sale. Additionally, many Panamanian sellers are willing to offer seller financing, which can expand your buyer pool and potentially justify a premium price.