Gross and net yield: what actually reaches you
The yields developers publish are gross. Between that number and what reaches your account sit four deductions, and every one of them can be worked out before you buy.
The gross figure and where it comes from
Gross yield is annual rent divided by purchase price. A US$300,000 apartment renting at US$2,000 a month produces US$24,000 a year, which is 8% gross.
That 8% assumes full occupancy and no costs. Neither of those happens.
The four deductions
Occupancy. For short-term rental, 65% to 75% occupancy is a realistic assumption in Panama City. For long-term rental the equivalent is the month or two of vacancy between tenants plus the cost of re-letting.
Building maintenance. The condo fee is charged per square meter and in new towers with generous amenities usually sits between US$2 and US$3.50 per m² per month. On 90 m², that is US$2,160 to US$3,780 a year.
Management. If you are not going to run the rental yourself, a short-term operator typically charges 18% to 25% of gross bookings; a long-term manager, around one month's rent per year.
Property tax. If the apartment is not your primary residence, the exempt band is B/.30,000 and the rate runs from 0.6% to 1% depending on registered value.
What is left
Taking that same US$300,000 apartment at US$2,000 a month: at 70% occupancy the annual rent falls to US$16,800. Subtracting a US$2,700 condo fee, 20% management on gross bookings and the property tax, the net lands near US$10,700, roughly 3.6% on the purchase price.
That is not the 8% on the brochure, and it does not mean the investment is bad: it means the number to compare across projects is the net, not the gross. Two projects with identical gross yields can end a full point apart on net, depending on the condo fee and the management model.
None of this subtracts financing or adds capital appreciation, which in pre-construction is usually the larger part of the return.
What to ask before buying
The estimated condo fee per square meter, in writing.
If the building runs a hotel rental pool, what percentage the operator keeps and which costs stay with the owner.
What monthly rent comparable units in the same district are actually achieving today, not the brochure projection.
The full payment plan through to delivery.
Frequently asked questions
What is the difference between gross and net yield?
Gross is annual rent divided by price, with nothing deducted. Net subtracts vacancy, condo fees, management and property tax. The gap between the two is usually several percentage points.
What does short-term rental management cost in Panama?
A short-term operator typically charges 18% to 25% of gross bookings. In a hotel rental pool the percentage is set by the building's operator and is worth requesting in writing along with the split of costs.
What is the condo fee in a new tower?
It is charged per square meter and in new towers with generous amenities usually runs US$2 to US$3.50 per m² per month. It is one of the two variables that most separate the net yields of two projects with the same gross.
Sources
- Law 66 of October 17, 2017, on real property tax.
- Occupancy, condo fee and management ranges: Panama City market references, not contractual figures.
This guide is informational and is not legal, tax or investment advice. The laws and rates cited can change. Confirm with an attorney licensed in the Republic of Panama before making a decision.
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