When we bought our contract to build at Red Frog Beach 3 years ago, we were on the cutting edge of US citizens who were beginning to buy property in Panama and retiring there. There were many articles about it being the next craze, similar to what happened in Costa Rica. Check the Internet and Google Panama and retirement you get about 201,000 results.

Not long ago, I got an e-mail from a woman from my high school graduating class who found me by searching on my name, and Panama kept coming up. There just are no secrets on the Internet, I guess. Turns out she is buying in a development near Panama City and wanted to hear about our investment.

Anyway, our project in Bocas del Toro looked like a dream come true. We could buy our beach front villa at the price of a small condo in San Francisco. The cost of living down there is practically nothing compared to the cost of living in the United States.

So we eagerly put our money down and got into contract. Several months into the building phase, the workers went on strike. In that time (over a year now) we learned a lot about buying property in other countries! Here are some things you might want to think about:

1)       Get an “in country” representative that knows the country and local laws regarding owning real estate like an attorney or Realtor. The worst thing we did was buy in Panama without representation or an understanding of the local laws and customs.

2)       Depending on the country, it might be best to own the property in an entity like an IBC (International Business Corporation) to protect yourselves from lawsuits. But that is for your legal person to clarify.

3)       Check into financing options. They are probably different from buying in the US; unless you are paying cash, then it’s a moot point. But if you want to get out, it will affect your ability to sell.

4)       Be aware of rights of possession land versus titled land. Sometimes they are not treated the same. Find out the difference in the country you are buying.

5)       Is it a home, condo or in a planned development? Find out the tax situation for that country. For example, in Panama, they keep changing the laws. What was once a tax haven has now changed and property taxes will be due on all titled properties. This all happened within 3 years.

6)       Safety – pick a country with a safe government. Not all countries are created equal. Some of these island possessions change government by coups and in those turnovers, people lose property rights. Check what the history is for that country.

7)       Property management – see if the representative knows anything about managing rental properties and see if they can give you information or point you to someone who does rentals so you know what to expect. We found that handling our own rentals is a pain, especially the tax reporting (Hawaii). We prefer letting a professional company do it, and they file all the taxes.

       It’s only money. As long as you know it’s a risk, you’ll be in good shape if anything bad happens.

We have had an education from the school of hard knocks. Fortunately, we were able to restructure our deal and are now in a pretty good equity position once the construction starts back up.

Happy investing!

- Mick Orton
Marketing Director