How to buy an island? Consider Panama Real Estate

Have you ever dreamed of buying a property in the tropics to admire the beautiful scenery of your private sandy beach and exotic trees from the window of your home and office? You should consider real estate offered for sale in Central America. Our experts recommend small islands in Panama.

There is a wide choice of private islands available for purchase, ranging from tiny inexpensive islands to larger islands with well-established infrastructure. 

The Caribbean and Pacific Coasts of Panama impress each traveler with the enchanting beauty of untouched wild nature: the thinly populated and uninhabited islands with their lush rainforests and mangroves, pristine sandy beaches, crystal clear waters of the ocean, living coral reefs that are the most beautiful sights on the entire American continent, the amazing variety of exotic plants and rare marine animals. 

Panama Real Estate

No wonder that Panama’s islands have attracted much interest of foreign investors lately, especially after the procedures for buying real estate in this jurisdiction were simplified by the government’s decision and laws aimed at the local tourism industry development. 

However, there are some restrictions one should be aware of when buying real estate in Panama. They concern both local citizens and foreign individuals or corporations. 

First, there is a ban on buying real estate near Columbia and Costa Rica. In particular, it is not allowed to purchase any property located less than 6.2 miles (10 kilometers) from the borders. 

Second, there are some legal restrictions on the construction or real estate development in areas or islands located in the tourism zone. For example, if the purchased real estate is on the coast, the owner is obliged to ensure free public access to the waterfront. In case there are plans to build a bungalow or some other structure on the water, a special permit needs to be issued by the Ministry of Finance and Maritime Authorities. 

Experts say that the entire buying process in Panama is much easier than in other Central American countries. But there are more things to know before you sign a purchase contract.

Ownership Rights

Real estate in Panama can be purchased in two legal ways:

1. Titled Property

Your titled property is some personal private property that is purchased in your name, has your title, and is registered (along with the land) with the State Registry of Panama in your name.

You need to pay all taxes on your titled property and are entitled to the right to do whatever you think is right with the real estate because you are considered the owner of the land with formal legal title.

2. Rights of Possession (ROP) 

When buying a property owned by the Government of Panama, you will acquire the right to use it as you wish, although ownership of the land (on which this property is) will remain with the state. This means that you do not have to pay the property tax (it is payable by the land owner at the rate of up to 2% of the estimated value).

The concept of the ROP real estate purchase is similar to the model of the acquisition of real estate granted by the king, who will protect your rights to the land as long as you remain loyal and in good standing. In return, you will enjoy tax exemption and some other perks. 

Experts estimate that 90% of the land outside the capital in Panama belongs to the state, but this should not take you aback at all. Naturally, there may occur certain issues with some ROP land plots, but one should prepare such deals carefully and thoroughly in advance.

Qualified real estate professionals and legal experts properly selected by a buyer will sort out and resolve all the challenges of the property you have chosen. We invite you to refer to the InternationalWealth experts who have experience in such matters and know the current market in Panama.

You may have heard that many North American investors are negative towards buying ROP property, especially when it comes to Panama’s real estate on the coast. But if you approach this decision without haste and purposefully, the investment in ROP real estate can be quite successful and profitable.

The difficulty in understanding ROP deals is that there are no holistic guidelines or some unified approach to property valuation, and various local factors may interfere. In some cases, the land plot for sale is claimed by several applicants who currently reside in or are using some part of it. In principle, any family, even future generations, may claim their right to use the land where their kins once lived. In addition to all possible disagreements, the right to own the land may be registered with the regional agrarian reform office or the local mayor’s office, and sometimes with the local judge.

Let us analyze the possible risks and preventive measures.

Possible Risks 

Buyers have to be aware of the two categories of possible risks associated with real estate purchases in Panama.

1. By acquiring ROP’s private property, the buyer (an individual or a company), has no guarantees of its sole or actual ownership. This is because it can easily be challenged by possible claimants.

2. If the new owner of the purchased property has not resided in his property for a long time, he/she may lose the right to its possession.

At the beginning of the investment boom, a lot of investors made serious mistakes when buying private properties in Bocas del Toro, as they had not thoroughly researched all the legal conflicts over ROP property rights. ROP property rights are not registered in the Cadastro and are not registered in the State Registry of Panama, so the search for the true owner is a long and painstaking process. Property claims can only be contested in the presence of the owner, and this is one of the main risks of buying. Moreover, it is impossible to get a loan from a bank in Panama for the purpose of purchase or development of such property. That is why we recommend that the main requirements by which you assess the value of any property should confirm its integrity and utility. 

The best piece of property is the real estate which can be used both for residence and for a modern tourism resort development.

Having mentioned the two types of possible risks and conflicts, we have yet to agree, that there are ways to mitigate risks, and ROP property acquisition in Panama is one of the most attractive investment opportunities in the market. 

Risks Mitigation

How can you avoid unnecessary mishaps and mistakes? When buying real estate, you should hire a competent lawyer experienced in real estate deals and competent in all nuances of island purchases on ROP terms. While the seller provides documents issued for the unit offered for sale, you need to collect as much information and documents as possible on the property rights and location of the real estate. It is absolutely necessary to conduct such an investigation, as you have to obtain reliable proof of the authenticity of the seller’s property rights so that in the future to exclude all chances of any possible claims from other family members or neighbors. Therefore when preparing for the purchase, you need to collect exhaustive evidence, which should be carefully checked by your attorneys. 

Here is a list of useful documents that will help you avoid all kinds of risks:

1. The statement signed (under oath) by all family members of the seller confirming their consent with the property sale

2. The consent signed by the neighbors residing on the adjacent territory.

3. The Declaration on the inventory of all the property items included in the real estate unit for sale.

4. Documents from the local courts, the National Environmental Authority ANAM, and the National Department of Agrarian Reform in charge of land redistribution, issue of documents and mandates.

When you have received such documents and know all the relevant details, you may plan the purchase.

Buying Process

The process of buying an island is absolutely the same as any real estate purchase everywhere else in North America. You can start by sending an email message to the real estate agent informing about your interest in some specific property offered for purchase. Please note that there is no centralized system for real property sale in Panama. You can browse websites offering property for sale to choose what you want. Once you have made your choice, you need to sign a contract and deposit some funds required for a down payment.

* Given the corruption in Panama, the amount should be paid through a bank deposit, check or wire transfer, and in no case should you give cash in hand. If there occurs any misunderstanding in this matter, your lawyer should intervene. The contract of purchase should prescribe all the conditions of the transaction, as well as the conditions of contingencies, the agreed price of the real estate, the prepayment amount, and the terms of the payment settlement. The contract must be made in Spanish. Please note that if it is concluded in English, it will be null and void when you file a lawsuit in court. Moreover, as mentioned above, your attorneys will need to verify the authenticity and compliance of the documents submitted. This is the longest procedure in the entire purchase process, but it is critically important.

* While preparing the documents, it is necessary to find out the real estate’s status and type of registration: if it is private or certified as  ROP government property. The documents submitted by the seller should contain the full name of the owner and the property site map. The property boundaries and the land title should be marked. It is also necessary to check the data on the availability of paid collateral by possible potential buyers and whether the object is not under a court order mandating expropriation or transfer of ownership.

* The bill of sale needs to be filled out as a standard form specifying the bank account details, the name of the buyer, the seller’s details, and the amount of the prepayment (deposit) to be transferred. The document should be submitted for registration to a notary whose services can be also used in real estate valuation and taxation matters.

* The change of the name of the purchased property owner (title) can be done only by a notary, who has great powers in Panama. This is a high ranking official who registers the transfer of land or land title from one owner to another. His competence includes the provision of a new certificate of the property with the new name of the owner (title) of the property. The notary then registers the documents with a senior notary general.

* The full payment for the property is made to the seller upon completion of the entire registration process described above. You can choose any form of payment – it can be a bank or a company that will issue a payment confirmation check and other payment documents for commissions and other fees payable. The payment transfer is the concluding stage in the buying and selling process.

* The final touch is the registration of the official title at the State Register of Panama, after which the property documents enter into force, and you can enjoy the fact of the property acquisition.

Advice to Foreign Buyers 

The Panama courts are not exactly friendly towards foreigners, one should try to comply with the laws and avoid unnecessary accidents. All serious decisions must be coordinated with an attorney.

An Island in Panama

As for the beach property, please note that all beaches in Panama are state-owned. In case you have a property that is on the coastline and you want to build an over-water structure in the ocean or the sea (a pier, a deck, a stilt house, etc.), you should know that 20 m inland from the shoreline (mean high tide line) is the state property. Before you start the construction you need to obtain a permit from the local authorities to develop a certain plot of land. This process may take many years. But you can not start your construction without proper documents. So when you buy a property, you should consider such problems and pay attention to the exact boundaries of the property. Please make sure that the seller has stated in written the absence of any restrictions either within the property perimeter or in its immediate vicinity. You should never believe the fairytale promises. Always check whatever you may find doubtful. Whatever can be documented, needs to be certified.

Archipelagos Worth Your Attention 

There are a lot of exotic places in Panama, many islands that you will immediately fall in love with. Acquisition of an island is a serious and promising investment. Here are some of the most promising opportunities.

Veraguas Islands

The Veraguas Islands are scattered along the southwestern coast of Panama. Veraguas (with Santiago as its capital) is the third-largest province in Panama. It is the only province that has access both to the Caribbean and the Pacific Ocean. The archipelago consists of more than forty small islands. The islands are breathtakingly exciting with their thick rainforests and mountains, a lot of pristine sandy beaches, exotic marine life, over 200 varieties of orchids, many endemic plant species. They are part of the Coiba National Park, which is famous for many virtues, including the fact that Coiba is the largest evergreen uninhabited island in America. The Veraguas Islands are one of the most attractive areas for investment into eco-tourism development, which has recently considerably advanced here.

Boca Chica

Boca Chica can be called the emerald of Panama, it is located on the coast of the Pacific Ocean. Many people get away from the hustle and bustle of big cities to the islands of Boca Chica for fishing, diving, resting, and investing in their future. This archipelago is part of Panama’s ecosystem, which consists of more than 50 islands. Today, Boca Chica is a reliable springboard for the development of business activities. Over recent years, this region has seen the annual growth of inbound tourism from different countries. The tourism infrastructure is not sufficiently developed, though. Therefore, there is a huge potential for business ideas and projects. It is projected that the eco-tourism boom will be increasing even more in the post-pandemic years. So the Enrique Malek international airport in the city of David will soon accept flights from the U.S. and other countries that have not yet flown here. Many facilities are already under reconstruction and development in the region. Boca Chica with the adjacent islands covers an area of about 162 hectares (400 acres) and the entire area is rich in pristine nature spots, authentic traditions, and centuries-old history. 

Pearl Islands

The islands called Pearl are located near the capital of Panama City. They are easy to reach by air (the flight takes 15 minutes) or by sea (a ferry takes two hours). These islands are associated with the famous stories about pirates who sailed in the 17th century into these places and hid their loot here in trunks and chests full of treasures. This is how the Pearl Islands got their name.

Pearl Islands in Panama

Contadora, one of the most visited islands in the archipelago nowadays, was chosen by pirates as a hiding place for pearls. This island is a resort and home for many wealthy Panamanians, as well as wealthy foreigners. Travelers are attracted here by wild sandy beaches, many coral reefs, bird sanctuaries, lush tropical greenery, small villages of locals who have recently opened for tourists. Violent tropical storms never happen on these islands, so their quiet waters can be enjoyed all the year round for the opportunities to admire the breathtaking coral reefs and rare fish and enjoy scuba diving, snorkeling, or fishing in any season.

In 2008, the islands were the location for filming the “Survivor” TV series. The inbound tourism industry in this area is given priority, and the state promotes special incentives to attract foreign capital. So you can hardly find a better place than the Pearl Islands for investment.

Bocas del Toro

Another increasingly popular tourism destination in Panama is the Bocas del Toro archipelago. It is a perfect example of the relaxed Caribbean lifestyle. You will appreciate here the stunning landscapes and an impressive variety of real estate that can satisfy any taste. These islands are famous for the unsurpassed beauty of the coral reefs attracting divers from all over the world.  The islands are part of the picturesque La Amistad International Park.

Bocas del Toro

The Caribbean marine fauna features a lot of rare species. On the six large islands of the Bocas del Toro archipelago, as well as on many smaller ones, you will discover unique pristine beaches, thick tropical forests, and the atmosphere of serenity. Hospitality infrastructure in this area is rather developed, especially on Isla Colon Island, where there are many private villas, small hotels, and hostels. Colon hosts a regional airport connected with Panama City and David. Despite this, more distant islands are short of tourism infrastructure, so they can be an excellent choice for investors and developers.

For more information about investing, starting a business, and moving to Panama, please contact us directly at the e-mail address given at the top of this page.

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