Buying Land in Panama: Is It Worth the Hassle and Risk?
By Ives Brant
The answer: most definitely, if you know what you are doing. A high percentage of the articles in this website detail the pitfalls, risks, potential problems, and issues that can must be handled for a clean, low-risk, profitable land purchase in Panama.
Given the risk factors covered in articles on this website, is it just too much trouble and risk? Perhaps the best response here is a question: would you expect a fairly reliable 25% per year, net return, to be easy?
One reason the outsized returns are available is that the market in Panama is still inefficient. Not everywhere, of course. Panama City has something like a Multiple Listing Service and nobody is oblivious to the potential appreciation.
But if you go to the edge of a development zone, and a few kilometers further to where it's still inconvenient because the roads are still rough and the electricity is not in yet, you have a good chance of finding that perfect point on the development path. The established realtors take clients where it's easy to drive, easy to present the land, and easy to get back to the office and sign a deal. Where we buy, land is still viewed as being suitable or not for cattle or farming. Sellers are not thinking suburban development.
Why Foreigners Come to Panama
by Ives Brant
Ten percent of England's citizens live outside its borders, but Americans have been far more hesitant to venture abroad to live, with only about two percent living as expatriates. That's changing, and a lot of them are considering Panama. Here's why:
1. Baby Boomers. You've heard the statistic: 70 million Americans retiring in the next 15 years and seeking their place in the sun. If 1/10 of just one percent of them head for Panama, that's 70,000 folks with a Social Security and pension income.
2. Returning Military. Tens of thousands of US servicemen know Panama already, because they were stationed there. If they retire abroad, it's a likely destination for them. Already they are buying lots and building homes in Coronado, or snapping up condos in Panama City.
3. Cruise Ship Passengers Every year hundreds of thousands are treated to the sight on Panama City's skyline upon traversing the Canal. They tend to be near retirement age and their cruise leaves them with excellent impressions.
4. Panama is Inviting Them. With funding of documentaries and commercials on US and Canadian TV, the country is serious about promoting itself as a tourist and retiree destination.
5. The Internet. With a Vonage phone (so talking with friends and family back home is just a local call either way) and e-mail, it isn't so lonely or scary abroad. Chat groups like Yahoo's viviendo_en_panama help too.
6. Terrorism. The tragic events of 2001 triggered an outflow of Americans. Suddenly, the citadel of America did not feel as safe, and countries with warm climates, unlikely targets for terrorists, became attractive to many.
7. Panama's Housing. Suddenly, Panama City and the surrounding beach areas have extremely attractive housing options for any budget.
8. The Skyline. With hundred-story residential towers going up, Panama City conveys such dynamism that its attraction is felt immediately.
9. Retiree Benefits. For "pensionados" there is a long list of breaks on transportation, food, lodging, entertainment, and health care.
10. Stability and Infrastructure. Panama is now a solid country, and the United States will not let it be otherwise. Anything that could threaten the Canal guarantees immediate US intervention.
11. Red Frog and Vista Mar. Ambitious developments pave the way for more upscale developments and higher demand for land, just by showing how it's done.
12. High Costs at Home. For retirees, who need more personal services, including quality health care, but don't buy many imported goods, Costa Rica has been a fine haven. In Panama, they get all that plus extensive retiree benefits and it's a great place to buy almost anything.
13. Familes. Suddenly, suburbia has arrived around Panama City, with Balboa and Costa de l'Este, not to mention fine international schools. Employees of the US embassy, of multinationals with subsidiaries in Panama, and those who have found a way to make a living internationally are flocking into these areas.
(continued from previous column)
How you buy is important. There are three or four techniques that help keep prices under control, and the purchase price is the one variable you really control - because you don't pay if you don't like the price. One of mine is having the contract ready to fill in. Only on two occasions have I waited for lawyers to figure out the contract. From experience, I know exactly what should be in our contract. Often, a lawyer would not expect the Seller to accept the conditions I insist on.
When I bought and sold Finca 416 in Rodeo Viejo, the price jump was from 50 cents per meter to $1.75/meter in one year. And I sold too soon, as my neighbor, ex-President of Panama Ernesto Balladare, began developing and improving. Obviously on this deal I netted more than 25% per year; even with all the expenses of roads, bridge building, and some other improvements - I still netted 130% counting all taxes and marketing costs.
It was right on the cusp of future development, and having a celebrity neighbor helps too ! That's the "magic moment" we look for and it's still findable in Panama.
And there's always Plan B. More on that in another article, but if you buy correctly, you have more options later on in case the market doesn't cooperate with us.
