Want to Buy Property in Panama? Here’s the Right Way to Do It
Contents
- Choosing Your Path: STR vs. LTR vs. Personal Use
- Short-Term Rental (STR)
- Long-Term Rental (LTR)
- Personal Use
- The Best Locations in Panama for STR, LTR, and Personal Use
- For Short-Term Rentals (STRs)
- What About Long-Term Rentals (LTRs)?
- Best Locations in Panama for Long-Term Rentals (LTRs)
- What About Personal Use Properties?
- Structure Considerations: SRLs, SAs, PIFs & Fideicomisos
- Sociedad de Responsabilidad Limitada (SRL)
- Sociedad Anónima (SA)
- Private Interest Foundation (PIF)
- Fideicomiso (Trust Agreement)
- Practical Takeaway for US Clients
- Common Mistakes American Buyers Make
- Should You Hold Panama Property in an IRA?
- The “Secret” to Buying Well: Understanding Panama
- Making Informed & Guided Buying Decisions
- How We Can Help
Panama has long drawn foreign interest—for its role as a global trade hub, for its welcoming residency programs, and for its mix of modern infrastructure with tropical lifestyle. Retirees, investors, and multinational companies alike have all found reasons to plant a flag here.
Even Hollywood has taken notice: several scenes from the 2008 James Bond film Quantum of Solace were shot in Panama, standing in for locations as varied as Haiti and Bolivia.
But beyond the glitz, Panama offers very real opportunities for those looking to buy property—whether as a personal getaway, a rental income play, or simply a hedge outside the US.
This article gives you the full picture of buying property in a place often called, “The Hub of the Americas”… Where to look, how to structure ownership, and what pitfalls to avoid.
Choosing Your Path: STR vs. LTR vs. Personal Use
Before diving into specific markets or legal structures, we need to look at the bigger picture and understand how you plan to use the property. This decision determines what locations make sense and how best to structure it.
Here’s a breakdown of the three main options:
Short-Term Rental (STR)
Best for: Income-focused investors.
What to expect:
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Seasonal revenue potentially tied to tourism.
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Higher gross returns but more volatility.
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Requires professional management and more hands-on oversight.
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Subject to local regulations or HOA restrictions on nightly rentals.
Biggest risk: Overestimating occupancy or pricing based on optimistic projections.
Long-Term Rental (LTR)
Best for: Buyers wanting lower-maintenance cash flow.
What to expect:
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More stable but generally lower income.
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Easier property management (especially with local tenants).
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Better suited to urban or expat-heavy areas with year-round demand.
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Legal protections for tenants can make eviction difficult if needed.
Biggest risk: Underestimating how hard it could be to get a problem tenant out.
Personal Use
Best for: Those planning part-time or full-time living in Panama.
What to expect:
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More emphasis on lifestyle fit than financial performance.
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Still requires legal planning (especially estate planning).
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Residency planning becomes essential if staying more than 90 days.
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Rental income may not be a priority.
Biggest risk: Buying based on a vacation impression without living locally first.
When you plan to use a property in different ways
Some buyers start with personal use and later rent. Others mix STR income with occasional personal stays. Knowing your primary goal up front helps avoid mismatches between expectations and reality.
And most importantly, it helps you avoid the all-too-common scenario of buying a property for one purpose, then later wanting to change its use—only to find out you can’t. (This mostly applies to personal residences later wanting to convert to a STR.)
The Best Locations in Panama for STR, LTR, and Personal Use
Beauty’s in the eye of the beholder, of course, but there are certain areas of Panama that are better for certain uses. This is especially true for short-term rentals, so let’s start there…
For Short-Term Rentals (STRs)
Short-term rentals are a common entry point for US buyers looking to earn cash flow while holding real assets internationally. If structured properly, an STR can provide monthly income, grow through appreciation, and help you protect some of your wealth outside the US.
There’s no one-size-fits-all approach, but the most successful STRs tend to:
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Be professionally managed (often by a full-service firm in Panama).
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Perform reasonably year-round (not just in one season).
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Sit in markets with strong demand and good infrastructure.
Here are three of the more active STR markets in Panama:
- Panama City
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Avg. Daily Rate: $95 ($110 for pro-managed, $170 for luxury).
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Avg. Annual Revenue: $17,200 (apartments), $16,200 (houses).
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Occupancy: Peaks at ~60% during dry season, ~50% otherwise.
- Colón
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Avg. Daily Rate: $296 ($303 pro-managed, $450 luxury).
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Avg. Annual Revenue: $43,400 (apartments), $27,800 (houses).
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Occupancy: Peaks at 45% in December & February, ~35% other times.
- Bocas del Toro
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Avg. Daily Rate: $147 ($250 pro-managed, $288 luxury).
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Avg. Annual Revenue: $24,400 (houses), $18,900 (apartments).
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Occupancy: Peaks at ~65% (February), drops to ~30% (May), ~46% avg.
The numbers provided above are collected from properties currently actively listed on sites like Airbnb and VRBO.
If you’re thinking about buying into a pre-construction development and are presented with proposed projections, be skeptical.
A recent example to illustrate: A developer in next door Costa Rica approached us about promoting their new project. As with any opportunity, we ran it through our due diligence (the same process we use to verify all of our real estate data).
They promoted a gross return of 10% a year for owners who rented on Airbnb and limited their personal use to the off-season. That sounded optimistic, so we dug in. Using the last three years of market data, we compared their projections against reality:
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Their occupancy estimates vs. actual occupancy rates in the market.
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Their nightly rental rates vs. what travelers are actually paying.
Then we matched these figures against the prices they were asking. The result? The most likely scenario wasn’t 10% — it wasn’t even close. Our analysis showed a gross yield closer to 3%. And that’s before factoring in management, maintenance, insurance, or taxes.
Once you include those expenses (not to mention any financing costs), the net yield likely drops into negative territory — meaning buyers would lose money on a strict cash return basis.
What About Long-Term Rentals (LTRs)?
Long-term rentals in Panama require a different approach. While not as flashy as STRs, they can be easier to manage and less susceptible to seasonal swings.
They’re typically better suited for:
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Buyers who want passive income without frequent turnover.
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Markets with growing expat or retiree populations.
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Properties in areas where STRs are restricted or oversaturated.
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Investors who want to keep things simple.
However, there are some key differences to consider:
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Tenancy laws lean more pro-tenant than in the US. Evictions can take time.
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LTRs often gross less annually than STRs. Convenience and consistent cash flow come at a cost!
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Turnover & management are easier, but returns tend to be flatter.
Make sure to assess realistic rents by checking what expats or local professionals are paying in the submarket you’re targeting—not what sellers or developers advertise.
(If you need help, feel free to get in touch. We offer a number of turnkey options for people trying to get into this market.)
Best Locations in Panama for Long-Term Rentals (LTRs)
Just like short-term rentals, success with long-term rentals depends on buying in the right neighborhood. The best-performing LTR markets tend to be places where:
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There’s a growing or stable expat population.
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Infrastructure supports year-round living.
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There’s steady demand from professionals, retirees, or locals.
Here are three of the top long-term rental markets in Panama for US buyers:
- Boquete (Chiriquí Province)
This mountain town in western Panama has become a magnet for US retirees. It offers cooler weather, an active expat community, and good medical infrastructure. In fact, among our clients, this is the most popular place to build their Plan B.
- Typical Monthly Rent: $750–$1,500 (1BR or 3BR apartment, furnished).
- Occupancy: 75% to 85%.
- Tenant Type: Primarily US and Canadian retirees.
Why it works: Consistent demand from foreign residents who aren’t interested in city life or beach heat.
- El Cangrejo (Panama City Metro)
A dense, walkable neighborhood in the heart of Panama City. Popular with professionals, students, and expats who want to live without a car.
- Typical Monthly Rent: $1,500–$2,450 for 1BR, 2BR, or 3BR units.
- Occupancy: Averages 70% to 90% for mid-range and luxury properties.
- Tenant Type: Middle- to upper-middle class locals, expats on work contracts or renting before purchasing a property.
Why it works: Strong local demand and good proximity to hospitals, universities, and public transit hubs.
- David (Chiriquí Province)
David is Panama’s third largest city and a regional economic hub with a growing domestic rental market popular with professionals and retirees.
- Typical Monthly Rent: $350–$650 (depending on neighborhood and finishes).
- Occupancy: Stable year-round demand, driven by a strong middle-class population and tourism.
- Tenant Type: Panamanian professionals, some expats, regional retirees.
Why it works: Lower property prices and a rising middle class make David an underappreciated LTR play. It’s also close enough to Boquete for spillover interest but more affordable and less seasonal.
What About Personal Use Properties?
If you’re buying for personal use—whether as a Plan B, vacation base, or eventual move—your decision-making hinges on different factors.
Unlike rentals, where ROI and occupancy matter most, personal-use decisions are more subjective. You’re buying a place to live in, not just invest in. That means you need to focus on the things that make day-to-day life comfortable, sustainable, and safe.
Here’s a checklist of what many of our clients—typically upper middle class or wealthier Americans—tend to value most when evaluating a personal-use property in Panama:
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Reliable healthcare within 30 minutes.
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Access to high-speed internet.
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International airport access within a few hours.
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Proximity to English-speaking professionals (e.g., doctors, attorneys).
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Clean, walkable neighborhoods.
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Availability of private schools (for those with kids or grandkids).
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Access to international grocery brands and specialty foods.
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Availability of gyms, golf, yoga, or tennis.
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Low crime or secure gated communities.
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Access to domestic help (cleaning, gardening, nursing).
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Quiet surroundings, or soundproofing if in the city.
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Views—either of the mountains, ocean, or skyline.
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Air conditioning in the humid, coastal regions.
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Ability to “lock and leave” (for seasonal residents).
Among our clients, four areas consistently come up in conversations around personal use:
Panama City
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Top-tier private hospitals (Punta Pacífica, Pacifica Salud).
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International schools and universities.
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American-style malls and dining (Multiplaza, Soho Mall).
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Fastest internet in the country.
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Direct flights to the US, Europe, and South America.
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More noise and congestion, but easier for business or part-time living.
Boquete
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Cooler mountain climate (high 60s to low 80s °F).
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Tight-knit expat community.
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Access to good clinics; major hospitals 40 mins away in David.
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Slower pace, good walking infrastructure.
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Cafés, hiking, music festivals, and cultural events.
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Popular for retirees and nature-oriented couples.
David
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Growing infrastructure and housing stock.
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Several private clinics, with larger hospitals opening nearby.
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Malls, restaurants, and commercial services.
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Cheaper than Panama City, but more “urban” than Boquete.
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Ideal for those who want convenience without capital-city density.
Coronado
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Full-service expat community: grocery stores, clinics, restaurants.
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Several golf course developments and gated communities.
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90-minute drive to Panama City.
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Beachfront options and seasonal community feel.
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Very popular among snowbirds and seasonal residents.
But all that said, in the end, the property is only part of the equation—the routines, services, and community around it are what make it work.
Personal-use properties require on-the-ground evaluation, and the checklist above gives you a good framework to filter through locations and lifestyle fit before you ever call a real estate agent.
How to Find Your Perfect Overseas Home
For as long as I’ve been with the Nestmann Group (12 years and counting), people have been asking for help selecting the “best” place to relocate. Trouble is, there is no “best”; there’s only what’s “best for you”.
So when we help clients with this sort of engagement, we start with discussion and research. Then, we encourage them to follow a well-worn and well-proven process to help them determine if a place is the right one for them. It goes as follows:
Step #1: Take a Vacation There
The first step is to vacation where you plan to buy – see what it’s like to live as a tourist for a couple of weeks. Have a look around, eat at different restaurants, and just generally absorb the feel of the place.
Step #2: Rent There for at Least a Month
If all goes well in the first phase, the second phase is to rent there for one to three months and see what life is like as a local. Unless your long-term plan is to live in a hotel suite, try to avoid one. Instead, rent an Airbnb or VRBO that conforms roughly with how you can imagine living (i.e. rent a house if you want a house, an apartment if you want an apartment).
Get used to local shopping, get to know local expats and get their perspective, try to get to know some of the locals around you.
Focus on what’s important to you. We often find it’s the little things that cause the most irritation over time. Some examples from our files:
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One client liked to drop by the local coffeehouse in the morning. That was his ritual. Part of his planning was to make sure wherever he located had that place.
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Another client was a bit of a gym nut. So part of our planning for him was to identify a neighborhood in his chosen city that has such amenities.
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A third liked to go hiking and wasn’t a fan of the heat. He also wasn’t a morning person. So a hot humid climate where one stayed inside during the heat of the day wasn’t the right fit.
Write down what you like and dislike. And if you’re bringing a spouse or other family, it’s important they do this field trip too.
Step #3: Plan Your Path to Residency
If you’ve enjoyed your time living like a local, the final step in the process is to do the formal planning. That means:
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Getting a proper residency permit
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Having a sense of how to structure your planning to legally minimize Panama tax.
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Understanding and having advisors on board who can deal with the US side of things.
Structure Considerations: SRLs, SAs, PIFs & Fideicomisos
For US taxpayers, buying property in Panama isn’t just about finding the right location—it’s also about how you hold it. The structure you choose can affect US reporting requirements, how your estate is treated in Panama, and how easy it is to manage or transfer the property later.
Here are some of the options.
Sociedad de Responsabilidad Limitada (SRL)
An SRL is like a Panamanian version of a US LLC, broadly speaking.
Best for: Holding rental property (STRs and LTRs).
Why it matters for Americans: The IRS may treat an SRL as a foreign corporation or a “pass-through” entity depending on certain conditions and filings.
One regulatory regime is easy to comply with; the other not at all. One is best from a US tax perspective; the other is something of a beast that can lock in double-taxation issues.
Also, it doesn’t automatically offer any estate planning benefits without extra planning.
Sociedad Anónima (SA)
This is the classic Panamanian corporation, much like a US C-Corp.
Best for: Joint ventures, developments, or situations with multiple shareholders.
Why it matters for Americans: Always treated as a foreign corporation for US purposes. That adds an element of tax and regulatory complexity that isn’t needed for most investors.
Private Interest Foundation (PIF)
Panama’s civil-law equivalent of a US (living) trust, used mainly for succession planning.
Best for: Estate planning and probate avoidance.
Why it matters for Americans: Unlike SRLs or SAs, a PIF is generally not classified as a corporation for US tax purposes. That makes it a cleaner tool for inheritance planning.
You still need to report it if you’re considered the grantor (i.e. the person who sets it up and puts the property into it). When structured correctly, it can hold property and avoid Panama’s lengthy and expensive probate while not generating extra US tax burdens.
However, it’s not allowed to hold active businesses, which includes STRs. Advanced planning is needed.
Fideicomiso (Trust Agreement)
A legal trust under Panamanian law where a licensed trustee manages assets for the beneficiaries.
Best for: Specialized estate planning.
Why it matters for Americans: Like the PIF, the IRS will usually treat a Panama fideicomiso like a foreign trust. That means annual trust reporting like a Private Interest Foundation.
However, a Panama fideicomiso is a lot more complicated and costly to set up and maintain. There are times when it makes sense, but rarely for US clients.
I mention it because it happens to US investors looking at different jurisdictions – a Panama fideicomiso is a very different thing than a Mexico fideicomiso.
Practical Takeaway for US Clients
- If you’re buying for rental income, an SRL is usually the cleanest—but you’ll still need extra planning if avoiding probate is important to you.
- If you’re focused on estate planning, a PIF is the go-to and easier to manage from a compliance standpoint. But you can’t run an active (STR) business through it.
- Always coordinate with your US tax advisor before setting up the structure. It’s much easier to get it right at the start than to try and unwind it later.
Important: You can’t do both commercial activity and inheritance planning in one structure. If you’re an American considering buying a property in Panama to list on Airbnb, there are some important considerations. Feel free to get in touch to discuss further.
Common Mistakes American Buyers Make
Over the years, we’ve seen buyers repeat the same avoidable errors. Here are the top ones:
- Buying Before Clarifying Goals
Many people buy, then realize the property doesn’t suit their intended use. Or worse—they buy in a place where STRs are restricted, or where they don’t want to live.
- Holding Title Personally
Holding title in your own name exposes your estate to Panama’s multi-year probate process, which can eat up a good chunk of your asset’s value in legal and related fees. Use a structure.
- Believing Developer Projections
Sellers often inflate ROI by using unrealistic rental rates or ignoring expenses. Always verify with third-party data. In the case of existing rentals, insist on seeing the financials.
- Ignoring US Tax & Compliance
Foreign property isn’t reportable in itself, but bank accounts or rental activity can trigger FATCA, FBAR, and other reporting requirements. It’s not terribly complicated, but it’s still important. Work with an advisor with experience helping clients maintain the tax and compliance issues with overseas property.
- Skipping Residency Planning
You can’t legally live in Panama long-term without a residency permit. Thankfully, Panama offers a lot of options with low presence requirements.
Unless you only plan to visit for short vacations, consider getting residency.
Ready to Buy in Panama — Without Mistakes?
If you’re actively planning a purchase — or want to avoid costly mistakes — you need to go deeper. Our full Panama Property Report, part of the Nestmann Inner Circle, covers:
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How to structure ownership to protect assets and maintain privacy.
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Hidden tax traps most buyers miss.
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Real case studies from our clients.
Should You Hold Panama Property in an IRA?
Some US investors ask whether it makes sense to hold foreign real estate—including property in Panama—inside a self-directed IRA (SDIRA). On paper, the idea is appealing: tax-deferred or tax-free growth on rental income and appreciation. In practice, though, it’s rarely the right move.
Why it looks attractive:
- Theoretically, income and gains inside the IRA aren’t taxed immediately.
- You can sell the property and defer (or entirely avoid) capital gains tax in the US.
- Using retirement funds lets you invest without dipping into personal cash.
The problems in reality:
- Strict compliance: The IRS has detailed rules about prohibited transactions. Something as simple as staying in the property for a week, hiring a family member to do repairs, or paying expenses personally can disqualify the IRA and trigger tax penalties.
- UBIT exposure: Short-term rental income from foreign property inside an IRA can trigger Unrelated Business Income Tax (UBIT), which is taxed much worse than regular ordinary income.
- Limited financing options: Mortgages are harder to obtain in Panama, and if used within an IRA, they can create taxable income.
- Administrative complexity: With a standard foreign real estate holding IRA, the custodian must be involved in every transaction—buying, paying bills, collecting rent. That slows things down and adds cost. And it’s very difficult to find a custodian to take on such a mandate.
- Loss of better structures: Holding through an IRA means you usually can’t pair the property with local planning structures (like an SRL or PIF), which are often more practical for probate and asset protection.
- Double-Tax issues: Using an IRA can lock-in certain double taxation problems, which hurts your overall return.
So yes, while it’s technically possible to hold Panama property in a self-directed IRA, the tax traps and compliance burdens usually outweigh the benefits. For most, it’s better to use retirement funds for more IRA-friendly assets and hold Panama property directly—through an SRL, PIF, or other entity.
The “Secret” to Buying Well: Understanding Panama
Okay, it’s not so much a “secret” as just a good idea we see missing in many Panama real estate investment conversations.
Arguably one proven way to get an edge as a buyer is to understand the “intangibles” of the place – things like general culture, language considerations, climate issues and more.
This is one area most investors skip—and it’s one where successful investors consistently get it right. Here are a few things to consider:
Time & Culture
Broadly speaking, Panamanians operate on “Panama time.” Punctuality is more fluid, and lifestyle is less hurried.
A contractor may tell you a project is done “mañana” (tomorrow) when in reality it could mean next week. Banking and government processes can also take longer than you expect compared to US standards.
You’ll avoid frustration if you plan ahead and build in time buffers.
Language
Spanish is the official language. English is common in Panama City and tourist-heavy areas, but outside of expat communities, you’ll need at least basic Spanish.
Even in the capital, contracts, property documents, and court filings are all in Spanish. Buyers who assume they can get by with English-only often hit walls when it comes to legal or banking matters.
Climate
Panama has two main seasons that should factor in to any short-term rental projections.
- Dry Season (December–May): Mid-90s °F, lots of sunshine, peak tourist demand, and peak rental rates. Great if you’re renting to foreigners, but also the time when property prices and demand tend to rise.
- Rainy Season (May–December): Frequent afternoon showers, heavier rainfall in October/November. This is when local demand tends to dominate, STR occupancy drops, and flooding in some neighborhoods can highlight infrastructure weaknesses.
(This is important as many “projections” assume higher occupancy in the rainy season than the numbers actually bear out.)
Of course, this only scratches the surface. To best understand the place, you’ll want to visit. Read blogs from expats living there. Or join relevant Facebook groups. You can also:
- Follow local news outlets (in English and Spanish) to get a feel for current issues.
- Watch YouTube channels and vlogs that show day-to-day life in different regions.
- Attend expat meet-ups or local clubs to hear unfiltered experiences.
- Join WhatsApp or community groups in the towns you’re considering.
- Talk directly with locals—from taxi drivers to shop owners—to understand the local mindset.
- Visit during both rainy and dry seasons to see how climate impacts daily routines.
Making Informed & Guided Buying Decisions
Buying property in Panama isn’t a plug-and-play process. You need to understand the market, choose the right structure, and factor in the local realities that can trip up foreign buyers.
Done the wrong way, it can be expensive and frustrating. Done right, it can give you a tax-smart, reliable property—whether that’s a short-term rental, a long-term rental, or your own home away from home.
If Panama is on your radar, reach out. We can help you find the right property, avoid costly mistakes, and set things up correctly from the start.
How We Can Help
We don’t sell property. And we have no vested interest in convincing you to buy one. Rather, we help Americans buy foreign property the right way.
That means:
- Identifying markets where STRs are legal, profitable, and sustainable.
- Structuring ownership to minimize taxes, protect your estate, and simplify future sales or inheritance.
- Integrating the property into your broader financial, tax, and internationalization plans.
We’ve spent more than four decades helping Americans move assets — and sometimes themselves — across borders. Today, that experience allows us to help clients buy properties that don’t just look good on Instagram but actually work for their financial and lifestyle goals.
New Service: We’ll Help You Find Your Best Foreign Real Estate
Over the years, our private clients have often turned to us for help in identifying international properties that align with their goals—whether it’s to:
Maximize returns from a short-term rental business.
Qualify for a Golden Visa or other Residency-by-Investment (RBI) programs.
Find a place to enjoy for extended stays or retirement.
We’re now rolling it out to the general public on a limited basis.
Whatever sort of property you’re looking for, we can help you find one that best meets your needs.
Interested in learning more? Feel free to enter your email address below, and we’ll send you a sample of pre-vetted properties.
The Nestmann Group does not sell, rent or otherwise share your private details with third parties. Learn more about our privacy policy here.
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