Hi everybody, it’s Kent Davis, and today I’m going to talk to you guys about renting a property in Panama. We’re going to talk about prices. We’re going to talk about the rental pitfalls and what to watch out for. And we’re also going to talk about what is different about renting in Panama versus renting in other parts of the world. To get started, I would say this general guidance applies to both beach property, mountain property, and city properties.
So what can you expect from the Panama real estate rental game? Well, you can expect that right now today, prices are probably going to be negotiable. Now, every now and then you may run into an owner, who’s just trying to burn it out. Not to say that the market is particularly soft, but by the same token, it’s not overheated. This means that people aren’t standing up and overbidding properties. For example, in parts of the United States, that’s happening and in other markets around the world, however, this is not the case in Panama. So that’s the first takeaway — everything is negotiable.
Furnished and Unfurnished Rentals
In terms of pricing, we found that, in general, furnished properties are going to be about 10% more. So that means if a property is $1000 a month unfurnished then it will be around $1,100 a month furnished. That’s a really kind of quick and fast example. But I would say 10% is a good general rule of thumb in terms of price differences. Now you are going to find a lot of furnished rentals, that said you might find that the standard to which some of them are furnished is not necessarily equal to say the property itself. You might find a beautiful million-dollar property with not-so-nice furniture. So my advice here would be to perhaps consider renting furniture to get the property furnished in a manner that you like. You can talk to our friends over at Deja VU about used furniture as well. If you are happy to purchase new furniture then there are quite a few options in terms of new furniture to be purchased in Panama. All in all, I wouldn’t let furniture be a limiting factor.
Panama Rental Process
So what about the rental process? Well, it’s fairly similar to the US. Panama landlords do require, for example, the first and a security deposit. In other words, if you’re renting a property again at $1000 a month you will have to put down $2,000. So that’s going to cover the first month’s rent and also the security deposit of the same amount.
In terms of the contract, mot contracts run 12 months at a time. They tend to be extendable by 6 months to 12 months. Sometimes they go month to month after they expire. That’s actually the law unless it gets formally rescinded by both parties. Then it’s off to the drawing board and start over and sign a new lease.
Panama Landlord Quality
So let’s talk about landlords for a second. Landlords in Panama are kind of hit or miss. If you’ve got a good aggressive property manager then they’re going to do a great job. They will be keeping up the property, responding to requests, and advising the owner of what needs to be done. Versus absentee owners who might live in other parts of the country, who are hard to get ahold of, and who are not necessarily super excited about fixing things. So be aware.
A good vetting question is to ask who’s managing the property. Is it the owner? Where do they live? Do they speak Spanish, English, or both? So do a little due diligence and ask your agent or if you’re looking on your own then ask directly.
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Find your Property with an Agent
There are a number of advantages to having an agent help you find your Panama real estate for rent. Of course, we advise on the wording of the contract, on due diligence questions to ask and we advise on market pricing. It’s always beneficial to have an expert along the way. Typical commissions are the first month’s rent, just so you know, the owner is going to be paying that. So there’s no additional cost of having an agent.
There are some great sources online for rental listings. We have a very comprehensive website Panamaequity.com, of course so come on by if you’re looking for something specific, and if don’t see it on our website that doesn’t necessarily mean it doesn’t exist. And of course, we work with all the agencies in Panama.
Lease to Own
There are actually a few developers who are now renting. That’s an interesting subject to talk about as well, lease to own. Typically a lease to own is going to have a couple of components. You’re going to want to say, okay, well I’ll rent it for this, but how much of my rent is going to apply to the purchase price? How long do I have to make a decision?
It’s essentially an option where you’re saying; Hey, I want the option to be the first guy that can buy this property and I don’t want you to sell this to anybody else while I’m renting. And I want to agree on the price now and perhaps even pay you something to hold that option. And also while I’m paying your rent, I want to accrue towards a purchase price that we agree upon. That’s what we would call a lease to own in Panama.
Now, if you go in specifically looking for those, you’re going to want to start with properties for sale at that point because a lot of times landlords are not necessarily going to be super interested in selling. Versus sellers who might be interested in saying, okay, well maybe my deal is going to take 12 months to execute the sale.