With hotel occupancy rates in Panama at above 90%, this may be a good time to put your property on the short-term rental market

So you’ve closed on your new house or condo in Panama and can’t wait for next winter. But, what do you do with your property when you’re not there yourself? It would be great to have someone come in and clean, do regular maintenance, and maybe even rent in Panama to generate some extra income. With hotel occupancy rates in Panama at above 90%, this may be a good time to put your condo or home on the short-term rental market.

To date the property management sector in Panama has been rather non-existent. Homeowners have had to manage property themselves or really pound the pavement to find someone willing and capable of administrating. Many of the expats I know have a lawyer, a friend, or in one case a cleaning lady who helps with property management.

Rent in Panama With a Property Management Company

This works for some, but ideally, you want someone whose sole focus is the management of your property. A company that specializes in this and can really take care of your place while generating the best possible income. With a good property manager, rental income can even offset mortgage payments so your property pays for itself.

Thankfully, there are now a few property management companies starting up around Panama City. Here’s some advice from Panama Casa, one of the city’s growing property management companies:

Short-term versus long-term rent in Panama:

There is demand for both, but short-term rentals may be more in demand right now, particularly one- and two- bedroom apartments. Many short-term clients rent for six to eight months. When it comes to long-term rentals, newspapers are full of apartments for rent and there is a lot of competition.

If you rent out your one-bedroom apartment for $550 to $600 per month long-term, companies like Panama Casa will charge you a condo administration fee of about $100, plus the management fee for long-term rentals, which is 10%. After factoring in the occupancy rate, maintenance, taxes, etc., your income for a long-term rental would be $230 to $280 a month.

For a short-term rental, however, the demand is higher and you can charge more—$525 to $575 a week for a one-bedroom apartment. Expenses are slightly higher for short-term rentals than for long-term rentals, but net monthly income is higher (in this example, around $500 a month would go to you).

Panama Casa provides full service management for short-term rental properties with a management fee of 20% of gross rent. Net figures above include this.

On full-service, long-term rentals, Panama Casa’s management fee is 10% of gross rent. For standard long-term rentals the management fee is 50% of the first month’s rent plus 7% of the gross rent administration fee.

Popular places to rent condos in Panama:

For high occupancy, the downtown area is best. This is particularly true in the short-term market. You want to consider the size of your potential market…if your apartment is too high-end, the clientele available to rent is lower and vacancy is higher. Also, the risk over time goes up because during any slowdowns the upper end market always gets hit the hardest.

Outfitting your Panama apartment:

Apartments need to be in top condition, fully-furnished, and with all the amenities: a business area with computer and printer and high-speed Internet is key. Quality furnishings and appliances are necessary, too—if you go too cheap, things will start to fall apart and you will spend much of your rental income on repairs and replacements. The size of the apartment should be adequate—in bedrooms, you want enough room to fit a queen bed and dresser with room to walk around the bed.

Here are some approximate sizes to aim for:

One-bedroom apartment: 750 to 1,075 square feet Two- or three-bedroom apartment: 1,185 to 1,935 square feet. Anything bigger than the above will cost more to buy and maintain, without much increase in rental return. Any smaller, and you won’t meet the expectations of the international market.

Cheap rent? Don’t price your rental out of the market

There is a lot of inventory coming online, and many of the new buildings are overpriced for the rental market. With prices for certain luxury digs going as high as $370 per square foot, there is an increased risk of high vacancy. Older buildings where you can still buy for $65 to $90 or $95 a square foot are a better bet. These often need some remodeling, but if you spend, say, $28 per square foot on this (including new air conditioners, double-pane sound-blocking windows, new tiles, etc.) you can rent for nearly the same as the new buildings…with a total investment of just $90 to $112 per square foot.

If you are dead-set on buying a new apartment, be careful to check the room sizes, and don’t assume you won’t need to invest anything above the purchase price. Ask whether windows are double paned, check for pre-wiring for Internet, and request air conditioning units so you don’t have to invest as much on top of the apartment price.

Finding a good resale does take a bit more work, as there is no MLS (Multiple Real Estate Listing) in Panama. Realtors prefer to sell new constructions as these are easier to find and keep track of, and developers pay commission on time and are generally easier to work with than individual owners. If you’re after a resale, you’ll need to insist that this is what you want realtors to show you.

Quality furniture will run about $6,000 for a one-bedroom apartment (this includes appliances) and about $2,000 per additional bedroom. Quality furnishings in Panama cost about the same as in the U.S.