The Rental Market Reality: Managing Short-Term vs. Long-Term Leases as a Foreigner

Introduction: Navigating the Rental Market as a Foreigner

The real estate sector is often seen as a vehicle to obtain passive income. One of the advantages of this sector is its variety, offering different approaches that range from buying distressed assets to properties for refurbishment. Others choose to buy an apartment while still in preconstruction and build a real estate ladder that ends up paying for itself.

Today, we delve into the world of short-term rental laws, Panama, and 2026 as the ideal year to invest in the country of the canal. 

Why Lease Structure Matters for International Renters and Landlords

The real estate market is finally bouncing back from the COVID-19 crisis after six long years. The market is so strong that it covers an important percentage of the world's finance, and it's expected to expand even more in the following years.

Many are buying properties for rental, focusing on short-term stays. Such activity is primarily oriented towards tourists who are willing to pay higher fees for extra comfort, hotel-like facilities, and location.

Yet the investor must consider that short-term rentals are specifically regulated, often in a different way than regular tenancy contracts.

For foreigners entering a new market, this should be properly researched and considered from the very start.

Key Legal, Financial, and Cultural Factors to Consider Upfront

In countries like the United States, catering to short-term tenants isn't regulated at a federal level. This means that each state establishes its own framework. It's not surprising to find that in more touristic cities like Honolulu or New York, this sector is heavily restricted, whereas in Milwaukee or Gatlinburg, it remains largely unregulated.

Something similar occurs in Panama, where vacation rental or overnight stays are forbidden unless there's a specific license in place. A homeowner renting long-term can't just change the approach without the required permit; otherwise, they can face fines and penalties.

Even so, most countries, roughly 84%, don't require any specific license for this activity. Either way, the investor must factor this in before even considering investing. 

Short-Term Leases: Flexibility Meets Operational Complexity

Ideal Use Cases and Target Tenant Profiles

Although it's not its main economic drive, tourism is important in Panama. The country attracts foreigners for its tropical beaches, rich culture, and historic places. Furthermore, a large number of visitors come to conferences, events, exhibits, meetings, and similar activities related to work or business.

This creates fertile soil for those who want to leverage the trend and have tenants for a couple of nights or just a few days.

Local Regulations, Licensing, and Platform Compliance

If you choose Panama, there's something you must understand from day one: every tenancy under 45 days requires a special license. Furthermore, it demands a specific approach. 

Acquiring this license is not that simple: it takes a long time and requires specific conditions for approval.

This is what drives investors to buy units in complexes that already have such a license. Knowing this, developers are increasingly establishing licenses since the very conception of the project and from the planning stages. 

If a building needs specific features to qualify, why not build them from scratch? For investors, this is nothing but convenient: they know they are putting their money on something that will serve their purposes, and they don’t have to undergo lengthy legal procedures.

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Managing Income, Maintenance, and Apartment Services

One downside of short-term rentals is the constant necessity of maintenance, cleaning, laundry, housekeeping, and dealing with check-ins and checkouts. This can be handled by the investor or delegated to a management company.

It's interesting to see how developers consider this a priority, to the extent that many buildings have rental management services integrated. Naturally, the terms vary. In some projects, rental management is mandatory, and it comes with specific rules and usability restrictions, while in others, it’s optional and quite flexible.

At Mundo, we have projects that adapt to every need. One of our partners offers flexible management services, allowing you to choose exactly when to rent out the apartment. You can live in your apartment for 300 days a year and rent it out for the remaining 5. Others are the exact opposite. The Pullman suites, for instance, are sold with a management service that allows owners to use the suite for only one month a year.

Long-Term Leases: Stability Versus Legal Commitment

Predictable Revenue Streams and Reduced Turnover Costs

Long-term rental is more predictable and brings more stable income. On the other hand, the challenge of vacation rentals is keeping the vacancy at its minimum, while on the opposite side, you secure a contract of at least two years.

The returns are, of course, lower as this niche caters to residents rather than travelers, who are willing to spend more for extra comfort and proximity to the main landmarks. 

Cross-Cultural Tenant Screening and Lease Drafting

Even if you're not involved in vacation rentals in Panama, you're very likely to rent out to foreigners, as most of the country's population is from abroad. Expats, students, immigrants, digital nomads, perpetual travelers, or temporary employers may be spending extended periods in the country.

In such a diverse cultural pool, it's important to understand the tenant's background and culture. To avoid issues, landlords should carefully draft the lease agreement, ideally with the help of an expert. A lawyer can help you draft an agreement that is convenient to you and that helps you protect your property.

Security deposits, regular visits, and other safety clauses will come in handy. If you use your property as an Airbnb, you can check out the conditions every couple of days, but with a long-term lease, the space is inhabited for a longer time. In that time, irresponsible tenants can cause damage and leave you with costly repairs to make.

This is why security deposits should be clearly established in the agreements. If possible, the landlords should have the right to check in every couple of months. 

Mundo’s best projects for short-term and long-term rentals

We can't really say which one is better for long- or short-term rental. As long as they have the corresponding license, all of the following can be excellent vehicles for Airbnb or for accommodating tenants in the long term. 

In the table below, we take a stand on each option; however, this doesn't mean that it has to work the same way for each investor. 

Westin Residences

Very few projects can compete with a building that's designed under the standards of a world-class hospitality brand. This is exactly what Westin Residences is. Being part of a very specific niche, branded residences, this initiative promises to bring excellent living for residents and guests and great opportunities for investors.

Located in Playa Bonita, one of the closest beaches to Panama City, it will have direct access to the Pacific coastal charm a few feet from the entrance, and top amenities to enjoy inside the premises. Being still in its pre-sale stage, it constitutes an advantageous way to optimize the investment.

The tides

Away from Panama City, lies “The Tides”. The project is nestled in a community called Playa Caracol, in the town of Punta Chame (56 miles from Panama City). People who visit feel relieved and safe from the skyscrapers that are overtaking the capital. Here, the main amenities are as simple as a large park, 2 pools, BBQ areas, and the echoes of the ocean nearby. 

The buildings are short and purely residential with comfortable units and quality furnishing, appliances, and finishes. Due to its secluded location, Mundo considers it best for short-term stays. 

Pullman suites

At the moment, this is one of the strongest investments for those interested in short-term tenancy. The Pullman and casino project is being built on the premises of an old hotel and promises to bring sophistication and comfort to the heart of the city. Located in Via España, close to the Iglesia del Carmen metro station, Pullman will be strategically located.

For many, this neighborhood is even better than Marbella or Avenida Balboa. It provides faster access to Albrook and Clayton through Via España, and to El Dorado through Ricardo Alfaro Avenue (playfully dubbed “Tumba Muerto” by Panamanians). 

In this case, rental is not optional: the units come with an agreement in which the company manages all bookings, and the family gets to use the unit for a limited time a year.

Although the company takes a larger percentage than the average (40%), the project's potential is well worth it. The brightest side is that this is a full-titled ownership. Finally, the Pullman initiative offers another investment in hotel shares; however, this one doesn't bring returns.

Armonia

At Mundo, we believe Armonia to be ideal for long-term rental, although it suits the other option just as well. Our favorite features about this project are its fresh style, flexible layout, and modern design.

It will stand in one of the most coveted areas in Panama City, Avenida Balboa, close to arguably the most beautiful areas in town: Calle Uruguay, Cinta Costera, and Calle 50. The neighborhood is famous for its premium vibe, nightlife, expat communities, and excellent location close to the university.

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Generation Tower 

Away from the city center, in Costa del Este, you’ll find Generation Tower. This is a thriving neighborhood, almost like a self-supporting city. Residents enjoy all the advantages they find downtown: schools, restaurants, stores, and clinics, but without the heavy traffic and with walkable areas.

As for the project, it's an innovative development focusing on quality lifestyle, and programs specially geared for seniors. Its various units work perfectly well for both short-term and long-term tenancy strategies.

Pinoalto

Pinoalto is one of those projects that you wouldn't expect to find in Panama. It’s very close to Boquete, a lovely mountain town famous for its coffee and green slopes, and David, one of the major urban centers after Panama City.

These wonders are in the province of Chiriqui, bordering Costa Rica, and constitute one of the country's many rich and varied sceneries.

The project is going to be in a gated community surrounded by a hilly landscape inherent to the Chiriqui highlands. The apartment complexes will be surrounded by manicured gardens, a small water feature, and several fire pits. One of the buildings is already under construction, and the following is on pre-sale.

Comparing Mundo’s projects for rental activities

Comparing Short-Term and Long-Term: A Strategic Decision Framework

Aligning Lease Type with Personal Relocation or Investment Goals

When deciding between short-term and long-term, the investor should consider both financial goals and lifestyle. 

Less aggressive investors might find that long-term tenants are more convenient. Given the high number of expats seeking luxury accommodation and willingness to pay well for it, this constitutes a viable niche. 

When it comes to lifestyle, those who travel often will probably choose to delegate the management of their properties to a third party, in many cases, those proposed by the developers themselves. 

Disclaimer: This article doesn't constitute investment, legal, or migration advice. The information in this article may be inaccurate or outdated at the time of reading. Updated and case-by-case information will be provided only through formal consultations. Before investing in real estate or applying for residency, always consult with certified professionals. 

Conclusion: Making an Informed Lease Choice in a Globalized Market

Currently, Panama is stepping into the real estate sector. It provides a unique combination of cost-effectiveness, high quality, and style. With many residency programs including real estate in their path, the country of the canal offers more than an investment: it offers a lifestyle.

When deciding between short-term and long-term rentals, the decision mainly lies with the investor’s preferences. Both approaches work well, the former for vacation rentals and business trips, and the latter for the many expats who are increasingly choosing Panama to spend an extended period or simply move here for life.

Who we are

Mundo is a Master broker for Mercan Group's projects and has tight connections with the best developers in the country. Since we are a team specializing in various financial tools for the global investor, we can combine real estate with a variety of options.

Contact us to find the apartment of your dreams, to protect your assets under a trust, or to incorporate a company in a friendly jurisdiction. Our experts are already waiting for your message and ready to assist you. 

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