Dominican Republic: Punta Cana Yes or No?
Member since 2018 · 3 posts · 1 vote
With the Unites States market being so high and the fact that I travel to the Dominican Republic often a thought came to my head. What if I invested in the DR?? I live in Miami and everything here is out of this world expensive. Would love to here any stories from anyone if they have any experience in investing in the DR. Punta Cana appears to be booming and a good option. Thoughts?
Banks will never finance a property in a foreign country because they don't have the necessary means, knowledge and willingness to go through a foreign legal system to repossess the property should the borrower default on his mortgage.
If you hear or read that somebody got a property financed by a local bank in a foreign country, this is because that bank took some local assets as collateral or gave an unsecured loan. Obviously, this is not a financing specifically for the overseas property and the borrower could use the money to do anything they want.
I'm into doing joint ventures with local partners and I use to lend big money to Latin American banks in my previous corporate career so I get access to the local banking system and so the investors who invest with me can benefit from the leverage that goes with it.
So what can you do if you want to invest by yourself? Seller financing if you can find any. An alternative would be to invest in pre-development properties if you can get developer financing. I've done it elsewhere in Latin America through my connections but I don't know if you can get it in the Dominican Republic. I'm actually working on a beachfront condo project where my local partners and I are actually going to be the developers and sellers and our plan is to include financing as part of the package, which I think would be a first in the Dominican Republic.
Regarding locations:
Las Terrenas: big yes; that's where I'm the most active in the country
Cabarete: yes but less potential than Las Terrenas I think
Sosua: no because of the sex tourism
@James Knecht This makes total sense! I'm currently arranging deals to invest with investors in Las Terrenas. While I'm doing that because I have the necessary connections and access to special deals, the Dominican Republic is an awesome place to invest in real estate for anyone and the returns can be much higher than Miami. More and more Americans tourists visit the country as its 8 international airports have direct flights to cities like New York, Atlanta or Miami. If you invest in the Dominican Republic, it's better that you have the right contacts and know what you do or that you know people who do.
We're about to invest in the Samana province. Arguably, it's the most beautiful part of the country and it has more potential than Punta Cana, as it is much earlier in terms of development stage. Punta Cana represents two thirds of the tourism in the country and is already very developed. The Dominican government has been awesome at promoting Punta Cana. I know they are going to push more the other destinations going forward. When I was visiting the Ministry of Tourism a few weeks ago, one of my inside contacts told me "you can make more money investing in other parts of the country".
Many people go to Punta Cana for the all-inclusive experience so you have a competitive disadvantage if you own and rent short-term rentals. Most of the people who dislike the all-inclusive concept and rather have their own place go to other parts of the country like the Samana peninsula. So, if you own short-term rentals there, you own what visitors want. Moreover, there aren't that many hotels there so you have much less competition from hotels there.
@Mike Lambert Terrenas definitely has potential. I have been there before. It’s in a much earlier stage then punta cana I agree. I think for me I want to start with punta cana and my next place would actually be in Terrenas. My girlfriends family is from the DR and does some real estate themselves. I think I need a few more connections and I am in the earlier stages of investing. How does investing in the DR affect taxes?
Yes Las Terrenas has plenty of potential and that's where we're investing and it's earlier on. However, like everywhere else, it's does who are early who will make most of the money. Through direct personal connections I know that Luxury Retreats, the luxury division of Airbnb is about to open the Las Terrenas market. Knowing that the area is supported by dollars for the government and the biggest short-term rental company in the world, the risk/reward for going in now is perfect. But I don't want to convince anyone here since I want the price to stay low until I'm fully invested :)
For the taxes, there is a 3% transfer tax upon purchase. The annual property tax is 1% but it is charge only on the value of the property above $144,000. If the project you're buying into has been approved under the a special law designed to encourage foreign investment, the transfer tax will be waived and the property tax will be waived for 15 years. The tax rate for both income and capital gains will be between 0% and 25%, depending on the amount. However, if you reside overseas your income, the tax will be withheld at a rate of 27% flat (it's only 18% for us Canadians).
Interesting. I LOVED Terrenas when I visited. Definitely something to look into. I could see that place exploding. Punta Cana has a lot of different projects and is growing as well. I see Torrenas is in the early stages and could be a nice value add market.
I've been in contact with a realtor down there with good reviews. He has some VERY nice properties and has provided me with numbers that seem good (not awesome) but I'm just as much interested in appreciation and just the fact of having an oceanfront property I OWN! However, I've talked to my local lender who handles some of our duplexes now and she said she has no contacts that will finance outside of the US. I'd done some research and from what I've read, financing through DR takes about 6 months. One site recommended just doing a HELOC and using that money.
What are thoughts? What financing options are you looking at?
I'm also looking at Las Terennas, Sosua, Cabarete areas.
Banks will never finance a property in a foreign country because they don't have the necessary means, knowledge and willingness to go through a foreign legal system to repossess the property should the borrower default on his mortgage.
If you hear or read that somebody got a property financed by a local bank in a foreign country, this is because that bank took some local assets as collateral or gave an unsecured loan. Obviously, this is not a financing specifically for the overseas property and the borrower could use the money to do anything they want.
I'm into doing joint ventures with local partners and I use to lend big money to Latin American banks in my previous corporate career so I get access to the local banking system and so the investors who invest with me can benefit from the leverage that goes with it.
So what can you do if you want to invest by yourself? Seller financing if you can find any. An alternative would be to invest in pre-development properties if you can get developer financing. I've done it elsewhere in Latin America through my connections but I don't know if you can get it in the Dominican Republic. I'm actually working on a beachfront condo project where my local partners and I are actually going to be the developers and sellers and our plan is to include financing as part of the package, which I think would be a first in the Dominican Republic.
Regarding locations:
Las Terrenas: big yes; that's where I'm the most active in the country
Cabarete: yes but less potential than Las Terrenas I think
Sosua: no because of the sex tourism
@James Knecht Hi James! I’m from Dominican Republic raised and born there, just been living here in the USA about 1 year. Definitely is a good market even a lot of people say it’s dangerous. In the tourist areas you have potential with short-term rentals, but Samaná and Las Terrenas is a little far away from the closest airport. So a lot of people wants something close to the airports.
I know really well my country, so if you have any questions about the market or the cities I’m open to answer it.
@Mike Lambert Well you can also open a bank account in DR and build your “credit” (we do not have uses a measure like “credit scores”) and with your SSN, your W2 or 1099, passports and a bill you can go to any bank and try to apply for a “mortgage” or a Loan. Banks in DR runs different so, it would be great if you can talk with one Loan Generator and see how much they can lend you or what are the previous steps to make that happens.
@James Knecht I am from MIA as well. I have my SRL company in DR which is similar to LLC in the States. We are currently building single family homes in Bavaro area about 5 minutes away from Downtown Bavaro. If you need assistance with anything feel free to PM. Our firm can help you with plans, permits, and building anything you want in the island. I have Arq and Engineers who are affordable. My expertise areas in Punta Cana/Bavaro, Santo Domingo, Santiago, and Jarabacoa in the future we will go to Sosua. But for now these are the cities that is booming to my opinion in rentals and sales.
@James Knecht As Far as financing is concerned. When I first went to DR to build I went to the banks and they denied me because I am not in they credit system which is called "Datos De Creditos." So what I did was cash out one of my rental properties here in the states and started to buy land and invest in the country.
In order for you to build credit in the country is simple open an account in Dollars or Pesos. Tell the banker you want a CD for example of 100 thousand pesos or in dollars about $1900.00. After a month or two come back to the bank and tell them you want to borrow $1000.00 from the bank and use the $1900 CD as collateral and you want to repay it within 6 months.
They will automatically approve you and they will register your passport number in there credit system and when you pay them on time you will have establish credit. This is what I did and the whole process took a year. But I must remind you the interest rate in the banks are really high. Best to cash out on one of your rentals and invest in the country only for emergency purposes you borrow. You can PM if you want to know some of the banks interest rate.
Start a SRL will cost you about USD 500.00 if you do it on your own. Reputable lawyer will charge you USD 2000-3000. Because they are so much departments you have to get approvals and documents.
Pay your taxes don't mess with DGII (Dirección General De Impuestos General) get a good accountant to maintain your books and report to DGII monthly, file your annual taxes on time, and stay in good standings!
You think that Las Terrenas and Samana are too far from an airport. Are you serious?
Are you aware of the existence of the new Samana El-Catey international airport which opened in 2006 and is 15 - 30 minutes away from Las Terrenas and that has direct flights to North American cities and even Russia. Is that too far for you? You don’t get closer to that in the Dominican Republic or elsewhere for that matter.
Moreover, it takes only a few minutes to get out of the airport once you land I’ve never been that quick to my final destination.
And I forgot to mention in my previous post that, for those who aren’t lucky to have a direct flights to the Samana El-Catey airport, there is a new toll road between Las Terrenas and Santo Domingo which put Las Terrenas at just 90 minutes from Santo Domingo’s Las Americas international airport.
Las Terrenas and Samana used to be hard to access and so are much earlier in their growth and development trajectory but this new infrastructure (new airport and toll road) is a game changer. This is what makes the area such a compelling investment opportunity.
Thankfully, the local authorities have put the necessary building restrictions in place so that the area stays the most beautiful part of the Dominican Republic and doesn’t become another Punta Cana.
So you have increasing demand and a future cap on short-term rental properties. This is the best recipe for higher nightly rates and property values in the future.
@Mike Lambert well, most of direct flights goes to Punta Caña, SDQ, STI and Puerto Plata. For you to get to El Catey Airport you will have to take a one stop flight or drive. So for me that I am Native Dominican I know everything from my country, and for us drive more than one hour is a lot, because we are not use to drive hundreds of miles like here. So that being said Punta Cana is still in its growing stage, because there is a lot of land to be developed.
Also Las Terrenas is beautiful and the most common Real Estate investment you see there are like what we call “AirBnB” is a good market, but not still strong enough like Puerto Plata and Punta Cana.
It needs more advertisement so people can know it better.
You are right about airport traffic. You make money money investing in this kind of environment when you invest ahead of the path of progress, not when the area is already developed and everybody knows about it. The easy money has already been made in Punta Cana and Puerto Plata.
One of my contacts is a head honchos of the Dominican Ministry of Tourism. When I met him earlier this year and we were talking about where to invest in the country, he advised me not to invest in Punta Cana for the exact reason I just gave.
As you mentioned, Las Terrenas is great for Airbnbs and there are hardly any all-inclusive resorts to compete with because the visitors are precisely those that don't want to stay in all-inclusive resorts. Most people who go to Punta Cana go for the all-inclusive experience. If you have an Airbnb there, you won't have the amenities top compete with the all-inclusive resorts and I don't think money people who are on BiggerPockets have enough money to buy an all-inclusive resort.
Most successful investors I know focus on what the situation will be instead of what the situation is now or what the situation has been.
@Mike Lambert yes I understand that. And most of the people that use those services (Airbnb) are us, the Dominicans...
There’s only one company in the world that track those statistics, AirDNA. According to them, the international clients way outnumber the domestic clients when it comes to Airbnb. Now the international clients include Dominican nationals living abroad and visiting their homeland. Buy if you look at official statistics from the Dominican central bank, the non-Dominican visitors far outweigh the Dominican ones. So, clearly, the numbers show that the main clientele for Airbnb is by far international.
Now you’re Dominican and so maybe you have Airbnbs there or you know people who have some. They might have told you that they mostly rent to Dominicans. Most of us would generalize and conclude from that that the Dominicans are the main clients in the absence of additional information.
I thoroughly research markets when I’m considering an investment and oftentimes I find the statistics and numbers than most people don’t know about, with or without the help of my local contacts. This is very important because figures never lie. So I hope this helps
You obviously already know a lot about the Dominican Republic. Kudos to you for sharing your knowledge on this forum and also broadening your knowledge here. By doing so, you add even more value to all of us.
Since you are Dominican, let me end this post by saying that, contrary to what some people might be saying, the Dominican Republic is a beautiful country and one of the reasons is because the Dominicans are very nice people :)
All - I have two lots (titled and cleared) in Ciudad Las Canas, Cap Cana. I am looking for an investor, developer or firm to partner with something similar to what Mike Lambert has in Las Terrenas; developer/seller including financing as part of the package. I am open to other ideas as well.
I'm also looking to invest in Las Terrenas, headed down next week to look at some vacation/investment rentals. I strongly believe this area will be the next big draw for the DR. The government does however, want to limit growth to preserve the nature, and maintain it quaintness. This is a good thing for smaller investors; we wont be competing against large hotel chains and resorts. It's also good for tourist who don't want to be in over crowed resorts. At the moment there are no direct flights to Samana Intl airport from the US, only EU and Canada. Beginning June 6th flights to Samana from Charlotte will begin, I believe this will be the start of the boom for Las Terrenas and the Samana peninsula.
Your analysis is spot on and is in line of what I've already mentioned in a few previous threads. I've already laid the groundwork for a future development there. The place was discovered long ago by the Europeans. Then, the Canadians came and the Americans have started to discover it too, hence the flight. Could be the first of many. You could do well buying the right property in the right location and hopefully enjoy it for yourself too! The Samana peninsula is the most beautiful part of the country.
Thanks Mike,
I'm optimistic; I believe the area will boom soon with Americans tourists.
For investment purpose and personal enjoyment I plan to look at town houses or gated developments by the beach in playa punto popy. Would love a dream house on the hills but I hear those don't rent as easily as the properties by the beaches. May not be wise to buy a hilltop house unless I plan to spend a lot of time there.
Other options I considering is a beach front lot or close to beach to build a house. What's your recommendation to maximize value?
I live in South Florida .. I'm going to Las terranes on June 2 to look at properties there.. I'm also going to the town of samana.. the capitol of the samana peninsula.. they have a new condo development being built there over looking the samana Bay... It's pre sale.. almost all units are already bought .. it will have an onsite restaurant, onsite shopping area.. pools.. vacation rental management If desired... Good for an Airbnb .
real estate is selling like crazy in las terrenas area.. samana is being eyed by the government for development .. it's a little less built up than las terrenas but as I said.. up and coming .
Absolutely. I've been mentioning the potential of the area over the last couple of years, including in the BiggerPockets forums. In these kind of situations, it pays to be early.
@Mike Lambert I’m interested in investing in Las Terrenas as well, looking for pre construction inside financing. If you can put me in contact with developers or direct me with someone that can o will appreciate the insight.