Panama Equity currently manages and leases a portfolio of 63 apartments in the downtown core of Panama City, Panama. This article was written for guidance regarding investment-geared properties in Panama.
The average cash on cash return for a property located in Panama City is 4.5% on purchases made within the last 5 years. This is not taking into account bank financing which is currently 6 – 7% for properties designated as “rental use.”
Holding costs include the following:
- Homeowners Association Fees: Anywhere from $1.25 – $2.25 per square meter, or between $0.12 – $.0.22 per square foot. This covers building gas, security, and common area maintenance.
- Property Management: Most property management companies will charge 10% of the gross monthly rent to manage the unit, collect the rent, handle repairs, and deliver statements.
- Realtor’s Commission: Most real estate agents in Panama will charge you the first month’s rent of a 12-month lease as commission.
- Taxes: All new buildings have some level of tax exoneration. This is based on the registered value and when the building was completed. When there is no exoneration, property taxes are based on a table and will be 2.1% or less per year of the registered property value. Income taxes on the rent depend on the ownership structure.
- Water/Trash: Most leases have the owner paying for water and trash pickup. This is generally under $40/month for an apartment or home.
- General Maintenance: Less on newer buildings, we generally budget in 5% of the gross monthly rent.
- Special Assessments: Vary by building, but for large projects like painting the facade, plan on roughly ½% of the property value every 5 years.
- The tenant in Panama is responsible for paying for electricity and internet.
- Depending on the property, you can plan on anywhere from 15-45 days vacancy per year.