Off-Plan Investments: Securing Residency Before the Building is Finished

Introduction to Off-Plan Real Estate Investments

In today's real estate market, preconstruction deals are gaining strength. They are not only more cost-effective when buying a main residence but also for building a real estate investment portfolio. 

When it comes to buying preconstruction, Panama offers a wide range of projects and the possibility of obtaining a visa. Today, we analyze off-plan investments from the Panama residency and investor point of view.

What Does "Off-Plan" Mean in Modern Real Estate?

Off-plan real estate consists of buying a property directly from the developer at the earliest stages of the process. It can be during construction or even before it starts. This is when the investor can get the best deals.

This tendency is gaining popularity in our decade thanks to the advances of technology that allow us to create highly realistic renders and virtual tours. The investor is not entering blindly into the deal anymore. They can see what the apartment will look like, the disposition of the rooms, the apartments, the floor plans, and the social areas with their amenities. 

Besides, they obtain a much better price and convenient payment plans because they're helping fund the project.

Preconstruction – vs - New Property – vs- Resale

Let's analyze preconstruction against the two other main real estate strategies: buying a new property or a resale home. A careful assessment of the pros and cons and a careful alignment with the objectives are what's needed to make a wise decision.

Buy a real estate in Panama: new property

Advantages

Buying a new property has the unique advantage of being able to visit the place and inspect it with your own eyes. Even though renders are currently very realistic, nothing can replace the in-person experience.

Disadvantages

There are rarely any disadvantages when buying a new property from a reliable developer or agent. At the risk of sounding obvious, this is the option that anyone would prefer if it weren’t the costliest.

Buy real estate in Panama: resale

Advantages

Besides the possibility of visiting the apartment in person, the investor can learn from the experience of those who lived there before. Faucets have been used, cabinets have been opened several times, and appliances have been used for months or years. This gives the buyer a chance to see the endurance of the materials over time. 

This is an excellent opportunity to find out the details that you only know when you live in a home, such as whether it has good water pressure, how well the central heating works, or if this is an area prone to power cuts.

More information

Disadvantages

Resale houses can have structural issues that might go unnoticed or be deliberately concealed. Furthermore, fixing other issues like uneven coatings, worn-out colors, or loose tiles requires time and money.

Another major concern is the unit's legal status. A buyer, together with his/her team, must research the legal aspects of the property: if it has a proper title deed, if it is under the name of the person they claim to be the owner, and if it has liens or encumbrances.

Buy real estate in Panama: preconstruction deals

Advantages

The main advantage of preconstruction is price. The developer offers units at a much lower cost as the buyer helps fund the construction. These are often combined with payment plans, so the property can end up paying for itself. 

Once the unit is delivered, it can be rented out, and the money can be used to pay for the remaining installments.

Disadvantages

The buyer will have to wait until construction is over to use the apartment. This is highly inconvenient for those who need a place of residence. Besides, there is always a risk of delays or failure to deliver. 

Mundo lawyer's opinion: "At Mundo, we strongly recommend Qualified Investor over Friendly Nations. If you value convenience, you wouldn’t think twice. With Qualified Investor, you have to add only 100,000 dollars more to get immediate permanent residency and forget about lengthy renewals in the future. Applicants who qualify for Friendly Nations and are focused on real estate should definitely consider Qualified Investor as a top choice".

Why Global Investors Are Prioritizing Pre-Construction Assets

Preconstruction has a unique advantage for investors who want to build a solid real estate portfolio for rental activity. Such a method allows them to buy more units at the same time so that they can collect benefits from all of them in the future. It makes sense to spend the capital investing in three preconstruction units rather than one spectacular new home, that is, if the main goal is to live off rental income. 

How Off-Plan Purchases Unlock Residency Status

The Mechanics of Residency-by-Investment and Golden Visa Programs

Residency and citizenship by investment have historically been linked to real estate. Even though this is only one of the possible pathways, it is undoubtedly one of the most chosen ones. It can be found in most of the countries that offer residency or citizenship.

In Panama, programs like the Qualified Investor Visa, Friendly Nations, and Pensionado are closely linked to real estate.

Obtain permanent residency through a real estate investment: what is the Qualified Investor Visa

This is Panama's version of the European golden visas, offering a direct path to residency in the country of the canal. However, unlike the European counterparts,

QI offers an immediate path to permanent residency. In our view, this makes it the best program not only in Panama but in the global arena.

Quite often, this is considered a real estate-only approach, yet it has different layers and investment possibilities. Real estate is the most cost-effective (300,000), followed by an investment in the stock market (500,000) and a fixed term deposit (750,000).

All of these investments must be made in the Republic of Panama with money from abroad and maintained for five years. 

A window open to citizens of certain countries: real estate and Friendly Nations

Rather than an investment-based program, Friendly Nations is a program oriented towards citizens of countries considered to have friendly relationships with Panama.

Their nationalities make them eligible. Besides, they must prove to have financial connections to the country. Two options are open: a 200,000-dollar investment in real estate or a fixed-term deposit, or the incorporation of a company with self-hiring, or signing a job contract with a Panamanian company.

Retire in Panama with a monthly income of $750 and invest in real estate: Pensionado

Pensionado (Spanish for “pensioner”) is a visa designed for those who want to retire in the country of the canal. This is why its main requirement is having a lifetime pension from any source. 

Since it doesn't have any age restrictions, it offers a safe and straightforward way to permanent residency for anyone with the above-mentioned pension. All in all, this makes it the simplest and most cost-effective entry to Panama, as we can see in the table below.

Panama residency thresholds through real estate and other investments 

Can You Qualify for Residency Before Construction is Finished?

The qualified investor visa is regulated by Executive Decree 193, which stipulates that the applicant must submit proof of owning real estate in Panama. This can be done by submitting a copy of the title deed in which the main applicant is the owner or the UBO of the owning company. 

Luckily, the program maintains a certain level of flexibility, allowing other options, like purchases through preconstruction deals, which Friendly Nations doesn’t allow.

In simple terms, the applicant pays $300,000 up front and submits a copy of a signed purchase agreement with a guarantee that the developer will deliver as promised. If the building is never completed, the applicant can allocate the funds to any other property of their choice. 

To qualify for Friendly Nations, applicants need a registered title deed, which they won’t get until the building is constructed. Bank loans, on the other hand, are allowed.

Top Destinations Offering Off-Plan Residency Pathways

United Arab Emirates 

The UAE is currently a serious competitor to Panama through its golden visa program. They offer more alternatives besides real estate, like residency for specialized scientists, pioneers of humanitarian work, top students, or talented geniuses.

The country is home to one of the most exciting Emirates and cities: Dubai, the Pearl of the Middle East, and a thriving city with a strategic location between Asia and Europe.

Moreover, at the time of writing, it is widely appearing in the news for having eliminated the minimum real estate threshold. Even with this, the Qualified Investor Visa is better in many ways. In Dubai, residency is granted for only 10 years, and the investor can't sell the property

Disclaimer: this article doesn't constitute legal or migration advice. The article intends to provide a general picture of migration in Panama; therefore, all the details described here, and the programs' requirements, may be inaccurate or outdated at the time of reading. Always consult with a professional before taking important steps regarding migration or investment. 

Southern Europe: Portugal, Spain, and Greece

These countries offer lovely Mediterranean weather, unmatched historic landmarks, stable economies, and a unique cultural offer. Nonetheless, when it comes to residency, costs start at €500,000. 

This was the case of the Spanish golden visa program, which ended last year. Still, we can compare the thresholds and instantly understand Panama’s competitiveness.  Options started at €500,000 in real estate and escalated to €2 million in public debt securities, all this for a residency of just a year. 

Advantages of Panama residency by investment

By taking a quick glance at other programs, the advantages of Panama become clearer to our eyes. They can be summarized, but not limited to, the following:

• Immediate permanent residency
• Competitive costs, especially when compared to similar programs in other nations
• Convenient threshold of only $300,000 in real estate
• Other investments available for those who prefer other paths
• Allow to include spouse, children, and parents
• Allow to obtain a work permit and work and invest in Panama
• Possibility to sell the property after five years and maintain residency
• Flexible minimum
• stay requirements 
• Straightforward processes
• Possibility to minimize bureaucracy thanks to Mundo experts and the expertise of our lawyer
• Possibility to apply by buying an apartment/house in preconstruction. 
• Access to a flourishing real estate market
• Ample benefits accompany residency, like the possibility of renting out the property to short-term visitors
• Ample array of options both in Panama City and the provinces
• Projects carried out by highly reputable developers with a long-standing reputation

 Key Advantages of Securing Residency Through Off-Plan Deals

Lower Initial Capital Requirements and Flexible Payment Structures

In this section, we include general information, as the conditions will change according to the developer and the agreement. In general, properties are booked with a minimum payment of $5000, and, at the time of signing the agreement, the buyer must pay a percentage of the total value, usually 10%.

Before construction begins, other payments are due within the first two years, which can be 10%, 15%, or 20%.  When construction begins, payments must be made more frequently, and when the apartment is delivered, they turn into monthly installments until the full amount of the property is paid off. 

Besides the convenience of the payment plan in and of itself, the full amount is usually lower as well.

Construction Delays, Developer Insolvency, and Project Cancellations

For obvious reasons, entering these kinds of deals is not totally free of risks. Construction delays can affect an investor's plan and project cancellations even more so. This is why it's vital to conduct thorough research on the developer, starting with finding out their history of deliveries, failure to deliver, and sticking to the previously agreed conditions regarding quality, time frames, etc.

Conclusion on combining Panama residency with preconstruction real estate

Final Recommendations for Prospective Investor-Residents

Applying for Panama residency with a preconstruction deal is totally viable through the qualified investor visa. This is another factor that positions this program among the best in the country and the world. 

Buying a home at its early stages gives you the benefit of choosing the characteristics that you prefer, and that can be most useful, like the establishment of a short-term rental license.

Even with its risks, this is the ideal approach for those who are not planning to relocate immediately, or those who see Panama as part of a wider rental strategy.

Who we are and how we can help

Mundo is a specialized team of experts dedicated to corporate, trusts, investment migration, and real estate. We are proud of the connections we have with some of the best and longest-standing players in the country, and to be master brokers in Panama for a major development firm. 

Contact us today and ask us about any of our projects or services. Your Mundo expert will be happy to walk you through the process and help you attain your goals. 

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