Is Lease-To-Own Right For You?

Is Lease-To-Own Right For You?

More and more companies are electing to set up regional headquarters in Costa del Este and there is no indication that is going to slow down. There are great tax incentives for companies to choose Panama, the proximity to the Panama Canal and logistic solutions make it easy to distribute goods and the new economic zones enhance light manufacturing operations. Plus, Tocumen International Airport is the hub of the Americas with great international connectivity.

When a company moves into an area it needs to bring talent and that often comes in the form of an executive with a trailing spouse and family along with single employees. Assignments can last from a couple of years to a lifetime. With companies willing to craft “expat packages” which oftentimes include housing, a golden opportunity may present itself in the form of a “Lease-To-Own” option with local developers. If well managed, this can turn into the company contributing to an eventual down payment on a luxurious residence.

Capitalizing On The Housing Allowence

“When my employer, Procter & Gamble, told me my next big opportunity was going to be in Panama, I actually had to go to a map and make sure it was that last country in the Central American chain,” said a transfer, who has now been in Panama for just over seven years. “I thought to myself, I can do anything for two years and then I began to wonder about schools and decent restaurants. Boy, was I surprised in Panama!”

When the P&G executive looked for a residence she was not only thrilled about all the new construction and amenities, she was also happy that her employer was willing to provide a housing allowance for the first three years of her assignment. Initially she was convinced she wouldn’t want to own a property in Panama, but when her children flourished at an international school, picked up Spanish with ease and loved all the outdoor activities, she began to think she might just be exactly where she wanted to be long term. She was also thrilled she had opted for the “Lease-To-Own” offering the developer arranged when she signed the lease at the beginning of her move. The rent, paid for by her employer, amassed a nice portion of her eventual downpayment.

Check All The Fine Print

Lease-To-Own sounds pretty straightforward and it is a great way to jump start a down payment, but it’s important to check all the details. Empresas Bern for example will count 100% of rent payments made the first year toward a down payment, 75% of the second year and 65% of the third year on certain properties. 

The new concept and private community of Casa Bianca offers three bedrooms, a long list of amenities, 3,000 square feet and the option to Lease-To-Own. With rent coming in at almost $3,000 a month, the total credit for the first three years comes to around $80,000 which is often paid by the employer. For the P&G executive, who decided to stay long-term in Panama, it was a nice bonus.

Not A Single Document

Reputable developers will offer a concise document, or actually documents, which will serve as the guiding rules of your property agreement. The first document should be a lease agreement, separate from the document establishing the details of how the money will be considered for a down payment. The second document will be for the “Option To Purchase” portion of the agreement.

The lease document should be similar to any rental agreement. How much rent is to be paid monthly, will HOAs be covered, maintenance, common areas, insurance, late fees and community rules among other details. Most of the time, the rent being charged will be higher-than-market, but not so much as to offset the benefits.

The second document should be much more complex. It should spell out the specific period of time the individual/s leasing the property have to convert the agreement into a sale, the specific agreed purchase price and any additional fees associated with the agreement. Normally there is a fee, to be paid up front, which covers setting up the agreement. It is also wise to have a real estate attorney look over the paperwork prior to signing.

No Refunds; No Binding Terms

Individuals who decide against purchasing the property are usually not entitled to any refunds. It is also important to make sure that the final document allows for an “out” clause and that the agreement is not binding in terms of absolutely having to purchase the property after the initial period. Such, no-out agreements are generally not used by reputable developers.

In Panama, with the option of being able to gain “rapid residency” with a real estate purchase of $300,000, the Lease-To-Own program does not qualify since the actual purchase will not be final until the option has been exercised. Normal residency can be obtained for the whole family.

The Lease-To-Own option has been popular with younger transferred executives who were unsure about living long-term in Panama. “I just didn’t know enough” said the P&G employee. “But, having the incentive to apply $80,000 to the purchase price was wonderful. The arrangement also gave me time to sell my home in the United States, solidify the down payment and secure a traditional mortgage. Once the children started telling me they absolutely didn’t want to move, having the housing established was a big plus!”