Whether it’s a luxury beachfront condo, a secluded mountain getaway, or an inner city historical building, there is something for everyone in Panama.

There are also plenty of opportunities to lose your shirt, and yes, we’re talking about that Hawaiian-style shirt with a palm leaf print that you bought especially for your new Panama lifestyle.

With the construction crane considered to be Panama’s new national bird, it’s getting more and more difficult
to separate the good eggs from the bad ones… the solid investments from the bottomless pits.

Artistic renderings, slick web sites, and chatty sales reps make the allure of buying property in Panama all the more enticing.

But how can you be sure the “artistic rendering” will resemble “reality” at some point in the not too distant future?

How do you know that the land the cousin of the taxi’s driver’s brother-in-law pointed out to you from
the motorboat is really yours now, or that it was even his to sell in the first place?

With so many people looking to cash in on Panama’s real estate boom, a few poor souls are bound to get the “yucca”, Panama’s slang term for getting ripped off.  And in Panama, one who delivers the “yucca” is actually considered by his or her peers with a touch of envy if not full blown heroism.

For your Spanish lesson of the day, a yucca is a starchy root vegetable grown in Panama and other tropical nations which may be distantly related to the turnip or potato.

Above: Construction cranes abound in Panama City as thousands of new condos go up to meet the frenzied pace of demand from buyers around the world.

Above: A fixer-upper in Casco Viejo, Panama’s historical district, begs for TLC… diamond in the ruff or rotten apple?

In Panama, don’t look to the consumer protection agencies, the justice department, or your government’s embassy for help. Chances are, if there is a problem with your investment, you’ll have very little recourse. Your best bet is to properly research your property beforehand and get some reliable and impartial legal advice to represent your interests.

And therein lies one of the biggest challenges for doing business in Panama, securing reliable and impartial legal advice. Not all attorneys in Panama were created equal… far from it.

Finding a good attorney in Panama is like looking for a mango under a mango tree, most of them are rotten, and you have to turn the good looking ones over a couple of times to see if any bugs got inside. What makes things even more challenging is that the honest and trustworthy attorneys are not necessarily the most effective.

The best way to secure a good law firm in Panama is to go with a recommendation from someone you know and trust. Larger firms are not necessarily to be preferred over small ones, but “discount shopping” when searching for legal advice is highly discouraged. This is not an area of your life where you want to be cutting corners.

Referrals from established organizations like the Pan-American Chamber of Commerce (PanAmCham) can be a good starting place, and talking to other expats can be another good reference as long as they are not somehow expecting to gain from the transaction.

Panama is a small place and bad news travels fast… if an attorney has taken advantage of an expat, chances are the whole community knows about it. In the full version of the Panama 101 E-Book, we identify a couple solid law firms with excellent reputations.

Above: Panama’s Pacific coast attracts ambitious residential projects in a stunning natural setting.

Assuming you do have a good attorney, there are a few other pitfalls to look out for. There are several
different types of property ownership in Panama, not all of them are “titled ownership” which is the safest form of ownership in Panama.

A few types of property ownership are riddled with risks and uncertainties and should probably be avoided. Foreigners often get roped in to this type of ownership because the price is so much lower than a comparable titled property.

Panamanians tend to be smart business people; if a price seems too low, there is a reason for it. In Panama 101 we offer a breakdown of all the different types of ownership and restricted ownership zones within Panama to help you distinguish between them all.

In Panama’s current pre-construction bonanza amid tightening global credit and rising inflation, we wouldn’t be surprised if some 20% of projects currently pitched on the market never get built. If we’re right, a lot of deposit money will be at risk in the next few years and you don’t want your investment to be among the pile of losers.

While there is no sure fire way to guarantee your builder will deliver, the best way to guard against construction risk is to buy something finished. In this way, you know exactly how much the bank
will finance and you know with more certainty what it is that you are buying.

If you must buy pre-construction, ask to see previous projects completed by the developer and ask to see their building permit. A solid track record is worth paying a per-square-foot premium over a start-up company with little or no development experience.

One of the biggest mistakes a foreigner can make is to jump in head first for what appears to be an outstanding, below market deal. While these deals do exist, they are usually found by someone in the know and not advertised blatantly hoping for a sucker to take the bate.  As any experienced real estate investor knows, the source of the information leading to a good deal is an excellent indicator as to the validity of the opportunity.

Good opportunities can take time to uncover. Be patient, talk around, build relationships, and always do your due diligence before signing any contracts or handing over deposit money.

Above: A dramatic sunset evokes wonder along one of Panama’s many undeveloped coastal hideaways.

There are different practices and procedures for conducting due diligence for different types of properties. Condos require a different form of investigation than raw land. Beachfront property has unique risks that must be considered and island property in Panama is the most challenging of all
from a legal standpoint.

While your attorney should be able to do the appropriate investigations, our experience has been that attorneys can make mistakes, overlook questions, or simply not know what to look for (or not care). At the end of the day, you are responsible for the security of your investment and that means going in armed with as much knowledge and information as possible.

We hope you’ve enjoyed this preview of Chapter 6 – Buying Real Estate in Panama the Smart Way. Chapter 6 is designed to provide an overview of common mistakes made by foreign real estate investors, a detailed review of the various types of property ownership, and to provide contact information for reliable attorneys to assist with your property purchase.

Michael Manville – Copyright 2008

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