7 Reasons Why You Should Invest In Real Estate
In The Dominican Republic
When we’re presenting our real estate products at conference events around the world, the one question that’s going to be asked is…
“Why should I invest in real estate in the Dominican Republic?”
Here’s the reasons why…
Reason #1: A Growing Economy
Since 2013, the Dominican Republic, one of the fastest growing economies in the Caribbean and Latin America, has been growing its GDP by an average of 6.14%. Economic growth is expected to continue given its policies that encourage foreign investment and the development of international trade relationships with the likes of China.
Last year, the governments of the Dominican Republic and China established new diplomatic relationships and bilateral trade agreements. Since then, China-based corporations, from several business sectors, have set up regional offices and factories here resulting in new local job opportunities and infrastructure investment.
Reason #2: Tourism Is Strong
According to the UN World Tourism Organization’s annual report, the Dominican Republic was the 7th most visited country in the Americas in 2017, with nearly 6.2 million visitors. It remains the top tourist market in the Caribbean, beating out popular island destinations like Jamaica, Puerto Rico, and Cuba.
What sets the DR apart from the other Caribbean destinations is it welcomes visitors from North America, South America, and Europe with direct flights coming from all three continents.
More, as reported by tourism officials at Dominican Annual Tourism Exchange (DATE) event, the country’s average hotel occupancy rate for 2017 was 77%, with Punta Cana leading the way with an 82.8%.
With these types of occupancy rates, the Dominican Republican should be on top of every real estate investor’s list of places to invest.
Reason #3: Political Stability
As a real estate investor investing in overseas property, it’s important that you evaluate the political risks in the country. A simple legislative change, a transfer of power from one political party to another, or a sudden overthrow of the current government can adversely affect your investments.
Fortunately, in the case of the Dominican Republic, the government is a stable democracy with a president and three branches of government.
In fact, the government has been passing legislation to make it easier for foreign investors to do business here in the Dominican Republic including tax incentives for homebuyers.
Reason #4: Financing For Foreigners
It possible for foreigners or non-residents to get bank financing for a condo or single-family home.
The banks will offer anything from 50% to 70% LTV financing for up to 25 years at interests rates from 9% to 14%. Financing can be provided in Dominican pesos or U.S. dollars.
This works to your advantage in two ways.
For one, if you needed to, you could finance your property purchase. Secondly, if you decided to exit your investment and resale, your potential buyer, whether he’s a Dominican or U.S. citizen, could close the deal with a local bank.
In other words, the “financing for foreigner” option gives you more liquidity in terms of your real estate investment.
Reason #5: Real Estate Prices
The real estate prices in the DR are a fraction of what you’d pay for comparable properties in, say, the Cayman Islands.
For example, we have one-bedroom units in our Paseo Playa Coral project in Punta Cana, starting at just US$189,000, just 80 meters from one of the best beaches in the world.
In our Coral Village project, also in Punta Cana, more inland, but still just minutes from the beach, we’ve got units starting at only US$119K.
You’d pay at least double for both of these products in similar locations in the Caymans.
Reason #6: Double-Digit Rental Yield Potential
Tourism here is strong and continues to grow.
As tourism grows so will the demand for rental accommodations. At the rate that tourism is growing, they’ll be times where there is more demand than supply, meaning that you’ll be able to command premium rental rates.
When you couple low minimum investment requirements (less than US$200K), high occupancy, and premium rental rates then you’ve got the potential for double-digit yields.
Reason #7: Capital Appreciation Upside
The secret is out about the DR.
More people, particularly from the United States, are beginning to buy real estate here for investment and lifestyle.
Further, you’ve got international businesses coming from places like China. Some of the company’s mid-level executives will relocate here and they’ll need a place to live.
Both of these factors drive up property values.
I believe it’s still a buyer’s market but I’m not sure how long that’s going to last.
My advice to you.
Get in now or risk having to pay a premium on the same real estate in the future.
The government of the Dominican Republic is welcoming of foreign retirees. If you can show proof of a monthly pension of $1,500 (plus $250 for each person you’ll be bringing with you), you can qualify for provisional residency in just 45 days. And, as with other retiree residency programs in other countries, qualifying comes with perks, benefits, and tax breaks.
NOT READY TO RETIRE? WHY IS THE DOMINICAN REPUBLIC A GREAT PLACE TO INVEST RIGHT NOW?
With its central location in the Americas, a fast-developing infrastructure, and a generous package of tax incentives, the Dominican Republic is one of the best places in the Caribbean and Central America region to do business. If you have a business to transplant or are looking to set up your own business in a tax-friendly, benefit-laden location, you owe it to yourself to investigate the opportunities here, especially if your work falls under any of the following categories: telecommunications, infrastructure, renewable energy, agribusiness, call centers, software development, manufacturing, or tourism.
Start up a business in a free trade zone and, thanks to Law 8-90, you’ll qualify for a 15-year exemption on all income taxes, corporate taxes, VAT, municipal taxes, export tax and duties, and incorporation and capitalization taxes.
You don’t have to be in big business to take advantage of the Dominican Republic’s tax incentives. The government is committed to tourism growth It recognizes the potential in its coastlines, its jungles, and its historic capital city Its big agenda is “sustainable tourism,” and it’s rolling out the red carpet to those willing to help boost its tourism efforts and accommodate visitors in town. Start a tourism business here — a boutique hotel, a tour business, or dive shop may qualify — and, under Law 158-01, you’ll receive tax breaks for the next 10 years on income taxes, VAT, real estate transfers, property tax, import duties, and more.
All while living in one of the world’s warmest, and friendliest havens.
On the investment side, certainly rental returns. Most developments usually average a 70 per cent occupancy rate over the course of a year. So for our clients, who are still working, they’re living in these properties for two weeks to a couple of months a year, and the rest of the time, they’re watching it earn some money.
WHAT ARE THE AVERAGE PROPERTY PRICES AND RENTS IN THE DOMINICAN REPUBLIC?
You can spend anywhere from $70,000 up to $10 million. Our buyers tend to be on the $200,000 to $400,000 range, and that will get you a very nice house in a gated subdivision. For rentals, most people rent on a short-term or nightly basis to vacationers. The rates range from $100 to $400 per night, depending on the location, type and size of property.
WHAT TYPES OF PROPERTIES ARE THE BEST BUYS?
Most of our buyers have been choosing single-family homes lately because they can get a great deal and they have great rental returns. In terms of condos, anything on the oceanfront attracts attention. If you can get it for a good price and it’s well-managed, that’s a great return and capital appreciation.