Published on and written by Cyril Jarnias
Investing in Panama can be an excellent idea… as long as you know where you’re stepping. The legal framework is generally favorable to foreigners, the currency is the U.S. dollar, economic growth is solid, and certain neighborhoods offer very decent rental yields. Yet, stories of foreign investors who lost 20, 50, or even 100% of their investment are not hard to find.
Most problems encountered are not due to bad luck, but to foreseeable errors such as lack of due diligence, blind trust in an agent or developer, misunderstanding between titled land and derecho posesorio, overlooking certain tax costs, or a risky bet on a pre-construction project.
This article summarizes, in English, the main pitfalls and mistakes to avoid before investing in real estate in Panama, based on a broad body of data and recent experience (2025–2026).
Understanding the Panamanian Framework: An Open but Demanding Market
The first reflex of a foreign investor is often to compare Panama to their home country. This is a mistake. The Panamanian system is based on different reflexes: the Registro Público, the absence of a centralized MLS, a very strong role for notaries… and a court system to be handled with caution.
The right to private property is protected by the Constitution and applies to foreigners almost as it does to locals. You don’t need a visa or special permit to buy an apartment or a house, and you can purchase in your own name with just a passport in most areas of the country. However, this simplicity means the responsibility for verifying, securing, and documenting the transaction rests largely on the buyer, not the state.
Disputes exist, the justice system can work, but procedures often take years. Foreigners who thought they could “settle” a problem through a lawsuit discover that prevention – serious due diligence upfront – is worth far more than any legal action. This is the first big lesson: in Panama, you make or lose your money at the time of purchase, not in front of a judge.
Title Deed or “Derecho Posesorio”: The Mistake That Costs Everything
If you had to remember just one pitfall, it is this one. The confusion between titled property and “Right of Possession” (derecho posesorio, or ROP) is the number one cause of real estate disasters for foreigners.
Title Registered with the Registro Público: True Legal Security
A truly secured property in Panama is a “finca” registered with the Registro Público, with a unique finca number, a clearly identified owner, and corresponding cadastral plans. This type of property:
– can be mortgaged (banks require this title to grant a loan)
– is enforceable against third parties: the register is conclusive in case of conflict
– allows you to verify the history, mortgages, easements, attachments, and ongoing lawsuits
Start by requesting an up-to-date certificate (dated within the last 15 to 30 days) showing the official owner, mortgages, attachments, lawsuit annotations, easements, and verifying the area and boundaries.
“Derecho Posesorio”: Use Without Title, Maximum Risk
The “derecho posesorio” is a right of possession, not a right of ownership. In this case, the land technically remains state property. On paper, someone “occupies” the land, sometimes for decades, and has a bundle of documents (private contracts, neighbor affidavits, local resolutions) supposedly proving this possession. In practice:
– there is no finca number in the Registro Público for this land
– banks almost systematically refuse to lend on it
– a third party can claim a “better” right of possession (priority, continuous occupation)
– the state can reclassify the area (protected park, indigenous comarca, maritime zone)
Result: you can lose your entire investment if another possessor, an indigenous community, or a public entity challenges your rights. And even if you keep the land, reselling it is very complicated: few savvy buyers accept taking over an ROP, especially from a foreigner.
Common occurrence in surveys: investors regret not distinguishing between titled land and “derecho posesorio” before signing, not verifying this status during initial visits, and believing that a thick file of photocopies was equivalent to a valid land title.
Why This Pitfall Is So Common
The trap works all the better because many advertisements use ambiguous vocabulary: “oceanfront property,” “ownership,” “finca”… without clearly stating that it is actually ROP. In certain coastal or rural areas (especially on some islands, near indigenous comarcas, or the Caribbean coast), most low-priced offers are actually possession rights.
To avoid falling into the trap, the rule is simple: demand the finca number registered with the Registro Público before any serious negotiation. If there is none, consider that you are dealing with an ROP and that the level of risk is entirely different. And if you are not prepared to assume that risk, walk away.
The Registro Público: Your Best Insurance… If You Use It
In Panama, the concept of ownership is based on what is written in the Registro Público, not on what an agent says or on a yellowed document in the bottom of a drawer. Yet, many foreigners pay a deposit or sign a promise of sale without even consulting this register.
The most expensive mistakes are often the simplest: depositing money before seeing the Registro Público certificate, or accepting a photocopy provided by the seller without direct verification.
Key Checks to Make at the Registry
The basic tool is the certificate of ownership and encumbrances (certificado de finca), which costs a few dollars but can save you hundreds of thousands. It allows you to verify:
The ownership record contains 4 categories of information: the owner’s identity, mortgages and attachments, the history of transfers, and easements.
A discrepancy between this certificate and what the seller tells you is an immediate red flag. For example, an apartment sold as “debt-free” when a bank mortgage still appears in first place, or a plot presented as fully buildable when the register mentions an energy easement crossing the lot.
For land, you must also cross-check information from the Registro Público with the cadastre (ANATI). A difference of more than 5% between the actual area and what is described in the escritura must be regularized, otherwise you risk later discovering that the land does not cover what you thought you were buying.
The Crucial Role of an Independent Lawyer
Many foreigners make the mistake of relying on the seller’s or agent’s lawyer. This is one of the most frequent regrets. One lawyer cannot properly defend your interests and those of the party selling to you. Yet, that is often where the flaw lies: unbalanced contracts, vague clauses, lack of protections in case of delays or defaults, absence of clear conditions precedent.
In Panama, the lawyer is your main safeguard. Their role is not limited to “doing the escritura” on the day of signing; they must:
Panamanian lawyer
– obtain and analyze all Registro Público certificates
– verify the tax situation with the DGI (paz y salvo)
– check cadastral plans with ANATI
– review the condominium regulations (PH) and the building’s financial statements
– secure the promise of sale contract, deposit terms, and exit conditions
Refusing to invest in an independent lawyer to “save” 1 to 1.5% of the price is often what leads to losing 50, 80, or 100% of your investment.
Restricted Zones and Waterfront: When Location Becomes a Legal Trap
Another source of nasty surprises: buying in an area where, in reality, a foreigner cannot hold full ownership, or thinking you are buying “waterfront” when the first 22 meters belong to the state.
The 10 km Border Zone and Indigenous Comarcas
The Panamanian Constitution prohibits foreigners (and companies controlled by foreign capital) from acquiring properties located within a 10 km strip along the borders with Costa Rica and Colombia. Added to this are the indigenous territories (comarcas) where land is collective and cannot be seized: no private sale can be registered in the Registro Público.
Buying in these areas through opaque arrangements, concessions, or ROPs that are “someday titleable” carries high risk, as evidenced by numerous scandals of illegal securitization sometimes involving officials, with a real risk of subsequent annulment.
The Myth of “Waterfront Land”
On the coasts, another principle is often forgotten: the first meters from the high-tide line are public domain. On the Pacific coast, the “ribera de playa” extends 22 meters; on the Atlantic coast, 10 meters. This zone cannot be privatized. What is sold to you as “oceanfront land” is very often, legally, a plot just behind this public strip, or a maritime concession right.
Failing to clarify the following points can cost you dearly: beach actually inaccessible, obligation to leave public access, discovery that the dream house built by the previous owner actually encroaches on public domain, etc.
Before any purchase promise on waterfront property, it is essential to:
– verify via the Registro Público where exactly the finca begins
– request official cadastral plans
– check with the Maritime Authority if a concession is involved
Airbnb, Condominium Regulations, and PH: Hidden Traps in Panama City Towers
For a rental investor, Panama City is often the first target. The temptation is great to envision an apartment in a skyscraper with an Airbnb-type strategy. That is where many get burned.
Prohibition of Rentals Under 45 Days
In the capital, renting an apartment for less than 45 days on Airbnb is illegal if the building does not have formal authorization (tourist license). Administrative fines range from $5,000 to $50,000 and, in extreme cases, can lead to seizure. Yet, many sellers continue to present their properties as perfect for “short-term rental.”
Condominium buildings (PH) can prohibit short-term rentals through their internal regulations, even beyond 45 days. Not checking these regulations exposes you to an inability to rent as planned.
Hidden Costs of PH: Condominium Fees and Special Assessments
Condominium fees are another gray area. In mid-range buildings in Panama City, the typical monthly range is $100 to $400, often calculated per square meter (about $1.5 to $3 per m²). In high-end buildings, it can go up to $3 to $5 per m².
These fees generally cover 24/7 security, maintenance of common areas (pool, gym, elevators), administration, sometimes water. This is not negligible in rental yield calculations. A frequent mistake is to look only at the purchase price and forget that $250 to $400 in monthly charges significantly reduces net profitability.
“Cuotas extraordinarias” are special assessments decided by the condominium assembly to finance major works such as facades, elevators, or generators. In poorly managed buildings with insufficient reserves, these amounts can reach several thousand or even tens of thousands of dollars per apartment.
Foreign buyers often complain about not having been informed, even though this information was contained in the assembly minutes or the condominium’s financial statements. Not requesting these documents is accepting to sign a blank check.
Numerical Example: The Real Impact of PH Fees
Here is a simplified example for an apartment of 100 m² in a mid-range tower:
| Item | Estimated monthly amount (USD) |
|---|---|
| PH / Condominium fees | 150 – 400 |
| Routine maintenance | 50 – 125 |
| Insurance (monthly prorated) | 25 – 75 |
| Property management (10–20%) | 100 – 400 |
In practice, for a property purchased for $250,000, your monthly “carrying cost” can easily be between $400 and over $800, even before any loan repayment. Not including these amounts in your business plan leads to completely unrealistic yield calculations.
Taxes, Fees, and Hidden Costs: The False Sense of “Net”
Another recurring mistake: thinking only in terms of purchase price, without correctly including all costs associated with the transaction and holding the property. In Panama, the total “round trip” (purchase + resale) easily represents 8 to 12% of the property’s value, between taxes, notary, lawyer, agent, registration.
At Purchase: Transfer Tax, Notary, Lawyer, Registration
For a buyer, the main costs are:
| Type of Cost | Order of Magnitude |
|---|---|
| ITBI (transfer tax, 2%) | 2% of the higher between sale price and assessed value |
| Lawyer’s fees | ~1 – 1.5% of price (min. $1,500 – $3,000) |
| Notary fees | ~0.1 – 0.25% ($300 – $800) |
| Registro Público registration | ~$200 – $500 |
| Translations / apostilles | ~$200 – $800 |
| Additional due diligence | $200 – $500 (complex cases excluded) |
On a $250,000 apartment, the direct costs for the buyer (excluding agent commission, usually paid by the seller) often run around 2.3 to 2.8% of the price, or about $5,800 to $7,000.
Foreigners also regularly underestimate 2 other elements:
Remote purchases can involve additional costs and risks that are essential to anticipate
You might have to pay condo fee or property tax arrears left by the seller if this is not clarified contractually.
Remote purchases incur additional costs like notarized powers of attorney, apostilles, or sworn translations, which can reach $500 to $1,500.
At Resale: ITBI, Capital Gains Tax, Agent Commission
On the seller’s side, you need to plan for:
– 2% ITBI calculated on the higher value (assessed or declared sale price)
– a 3% withholding on the price as an advance payment of capital gains tax (the actual rate being 10% on the gain)
– an agent commission typically 5% of the sale price
These costs directly affect your net price and therefore your overall return. Another common trap is “under-declaring” the price in the escritura to reduce ITBI. Not only does the tax administration now have the means to cross-check data (bank appraisals, project prices, etc.), but this maneuver artificially inflates the taxable capital gain at the time of resale and exposes you to fines of up to 5 times the amount of tax evaded, plus interest.
Annual Taxation: Property Tax, Holding Company, etc.
Property tax depends on the assessed value and status of the property (primary residence or investment). For a primary residence up to $120,000, you can be exempt. But once you enter values of $200,000 to $400,000, you quickly reach $1,000 to $2,500 in annual tax.
If the property is held through a corporation (SA), budget $500 to $650 per year including the single tax ($150–$300 depending on activity) and resident agent fees. Add to that international reporting obligations (FATCA/FBAR for Americans, RW table for Italian residents) with significant penalties for non-compliance.
Ignoring these recurring costs gives a distorted picture of net profitability. Many investors say they “underestimated holding costs” as one of their main regrets.
Financing, Pre-approval, and Over-Indebtedness: Another Minefield
Since 2026, the lending context has changed. Mortgage rates for foreigners generally range between 6.5% and 8.5%, with high equity requirements (30% to 50% down payment for non-residents). Banks are much stricter on documentation (income, solvency, source of funds) and the connection to the country (residency, employment, retirement plans).
Possible gross yields in Panama City, but they are reduced by fees, taxes, insurance, management, vacancy, and borrowing costs.
The most at-risk profiles are investors who:
– finance to the maximum of their borrowing capacity, with no safety margin
– underestimate vacancy periods (in practice, an occupancy rate of 65% to 85% is more realistic than a theoretical 100%)
In the long run, this can lead to a forced sale in a low-liquidity market, with the need to sell at a loss.
Pre-construction and Developers: Discounts That Can Cost 100% of Your Investment
Buying off-plan attracts many foreign buyers: lower prices, installment payments, promises of appreciation upon delivery, and flashy programs. It is also one of the favorite playgrounds for scammers and fragile developers.
Questions to Ask Before Any Deposit
The major risks are always the same: economic crises, natural disasters, geopolitical conflicts, pandemics and cyber attacks.
– the developer does not complete the project (bankruptcy, administrative blockage, lack of sales)
– they deliver years late
– they deliver a product of much lower quality than promised
Before considering a pre-construction purchase, you must imperatively:
For a secure off-plan purchase, study the developer’s track record (completed projects, timelines, finishes, litigation), verify the municipal building permit and registration with the Ministry of Housing. Demand that deposits be placed in a locked account (bank escrow) and negotiate resolution clauses with refund in case of excessive delay or substantial modifications.
Unfortunate experiences from 2025–2026 show that when the developer defaults, buyers can lose between 20% and 100% of their funds, with little practical recourse. Again, an independent lawyer is not an option; it is a shield.
Typical Payment Structures
The common structure for a pre-construction project looks like this:
| Stage | Typical percentage of total price |
|---|---|
| Contract signing (enganche) | ~10% |
| Progress payments during construction | 10–20% (over 18–36 months) |
| Balance at delivery | 70–80% (equity + loan) |
If these amounts are paid directly to the developer without any guarantee mechanism, you are effectively financing their working capital, with total risk if the project goes off track.
Scams, Fake Agents, and Pressure to Move Fast
Available texts describe an ecosystem where real estate scams remain frequent enough to say: every foreign investor will encounter at least one shady situation along the way. This ranges from simple commercial exaggeration to organized fraud.
Red Flags to Take Very Seriously
A few “red flags” come up systematically:
Several warning signs should raise your suspicion: the seller or agent refuses to provide the finca number, pressures you to make a deposit before any check with the Registro Público, advises against hiring your own lawyer and offers their lawyer for both parties, displays an abnormally low price without a coherent explanation (like an ROP, a dispute, a hidden mortgage, a zoning problem, etc.), or presents confusing, incomplete documentation, or only in Spanish without translation when you don’t speak the language.
Added to this is the problem of unlicensed “agents”, ubiquitous: taxi drivers, small hotel owners, long-time expats. The regulatory framework exists, but the reality on the ground is quite different. Unofficial commissions multiplied by 2 or 3, hidden margins between the price paid to the seller and the price quoted to the foreigner, double sales organized through shell companies… all of this has been documented.
The only antidote is systematic verification: agent license, Registro Público certificates, consultation of an independent lawyer, use of a reliable escrow account.
Investment Strategy: Don’t Be Trapped by “Cheap”
On a purely economic level, Panama today offers moderately positive prospects. GDP growth is around 3.8%, international demand is growing, rents are increasing in some areas, prices remain generally contained with expected appreciation of about 3% to 4% per year. This is not a quick-flipping market, but an environment for patient investors.
The most frequent strategic mistakes are:
Do not rely solely on a low price while ignoring actual demand and condominium management. Avoid buying above $300,000 for rental purposes, as yields are low, vacancy is high, and resale is difficult. Beware of oversupply risks in mid-range towers in Panama City or beach areas. Prioritize already occupied buildings with a healthy condominium over 3D renderings.
Field data shows that a portfolio of several apartments worth $150,000 each is often more profitable, liquid, and resilient than a single property worth $450,000. The key is to establish yourself in “liquid” neighborhoods with strong local demand (Panamanian families, executives, students) and not to bet on a single speculative segment.
Building a Secure Path: 360° Due Diligence
In summary, before investing in Panama, you must accept that your real “insurance” will not be a title policy – sometimes unavailable or limited – but the rigor of your due diligence.
This rigor rests on three inseparable pillars:
1. Legal: Title at the Registro Público, verification of encumbrances, chain of ownership, easements, cadastral conformity, PH regulations, tax situation (paz y salvo), compliance with areas permitted to foreigners, titled vs. ROP nature, etc.
Have the structure inspected by an independent architect or engineer. Check electrical and plumbing installations, especially in older properties. In a tropical climate, verify ventilation and humidity management. Finally, examine the condition of the roof and major common elements.
3. Economic: Realistic expected rents, estimation of vacancy periods, inclusion of all costs (taxes, PH, maintenance, insurance, possible corporate structure), consistency between property type and target clientele (local family, expat, retiree, healthcare professional, etc.), possible exit within 3 to 5 years.
Ignoring any of these aspects opens a breach through which hazards, even scammers, can enter.
Conclusion: Panama, Good Deal or Minefield?
The Panamanian market is neither a guaranteed Eldorado nor an impassable minefield. It is an environment where the rules are clear for those who take the time to learn them, but unforgiving for those who rely on intuition, haste, or blind trust.
The major traps – ROP, lack of verification at the Registro Público, poorly supervised pre-construction, ignorance of PH and ITBI, using the seller’s lawyer – are now perfectly identified. Avoiding them requires discipline, a little patience, and the humility to be guided by independent professionals.
In exchange, Panama offers something few emerging markets combine: a dollarized economy, relatively protective property rights, still competitive real estate taxation, and reasonable medium-term growth prospects. Provided you navigate the pitfalls, real estate investment in Panama can thus become a solid pillar of a “Plan B” strategy or a well-constructed international portfolio.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
