Understanding monthly fees of your Real Estate in Panama

In order to maintain a property in good condition in Panama, both in its quality and in the financial part, it is important to always be prepared and have provisions based on the monthly expenses that the apartment or house entails.

Understanding the monthly expenses is something important if it is a property in which the owner plans to live, since having all the cost provisioned will allow you to live calmly and also, prepared for any unforeseen event.

However, the monthly expenses are more important when an owner considers renting out the property, as there is a lot of misinformation online regarding the annual returns on an investment.

To determine the real returns of real estate in Panama, or if there is any profit on the rental, several types of recurring expenses must be considered, including monthly HOA, insurance, taxes, water and trash colleciton fee and provisions for repairs.

1. HOA

The monthly fees (or HOA) are those that the owner must pay for the proper functioning of the building (in the case of apartments in Panama) or of the common areas of a closed community (in the case of houses).

Generally these fees cover the costs of electricity, cleaning, repairs and administrative expenses of the common areas. The rate can vary, since in Panama it is charged per square meter, but a normal range in most buildings in the capital is from $120 to $300 or more, if there are social areas with amenities that require high maintenance.

In addition to this, most of the apartments must cover their monthly fee for water and municipal cleaning (garbage collection). The sum of both installments in 2022 is around $22 per month.

2. Insurance

If the property was acquired through a mortgage, the bank requires a life insurance policy that covers the total amount financed, it generally covers death by accident, as well as total or partial disability. These insurances generally have the owner of the apartment as beneficiary, so that if he passes away the debt is covered by the bank.

The amount of these insurances also vary depending on the amount financed and the general conditions of the insured. It is normal to see monthly rates from $50 to $100 that cover amounts of up to $200,000, but it also depends on what additional services the insurance company provides.

3. Taxes

It is important not to forget that there are taxes levied on real estate that must be paid annually to comply with its tax obligations.

At present, the value to be paid for taxes will depend on whether the home is classified as Tax Family Patrimony/Main Residence (if the owner plans to live in it) or if it is a secondary or commercial residence.

In the case of real estate as Tax Family Patrimony or Main Residence, the annual payment distribution is as follows: exempt from taxes between $0 and $120,000, 0.5% of the value between $120,001 and $700,000, and 0.7% of the value greater than $700,000.

In the case of real estate considered as a secondary or commercial residence, the annual payment distribution is as follows: exempt from $0 and $30,000, 0.6% of the value between $30,001 and $250,000, 0.8% of the value between $250,001 and $500,000, 1% in value greater than $500,000.

These payments can be made annually or by installments at the DGI office in Panama (Dirección General de Ingresos).

4. Provisions for repairs

Regardless of whether the owner lives in the property, or rents the property, it is crucial to have a monthly allowance to keep the property in good living or rental condition.

It is recommended that this provision is calculated based on the value or size of the apartment, or even if there are specific prices for repairs, painting or annual maintenance in general, a more specific value can be established. It is worth mentioning that if you have the property furnished, you can even consider a monthly provision for the maintenance of the furniture and appliances.