We currently own several rental properties in Florida (Miami, Jacksonville, and Tampa). We are looking to refi a few of our properties and to invest in building and operating an apartment building in the Dominican Republic (tourist area). We have great contacts in the country with builders, lawyers, and realtors to make the process easy. I am planning to retire in DR. I was offered to buy 500 m2 (5381 sqft) lot three blocks away from the beach for USD$65000 where we can build 12 apartments each apartment would be 90m2 for a total of 1080m2. Cost to build apartment building will be roughly (USD $300 per m2) for a grand total of USD 390000 "llave en mano" keys in your hand contract. Monthly rent per unit would be USD $500 a month. Property taxes will be 1% (not sure) of the value of the property and insurance should be USD 2k per year. Is it worth investing or we should just continue investing in the States.
Hi @Joel F.
I don't know tons about foreign investments but I travel to the Dominican several times a year and build houses/ churches in several villages so I figured I would throw my opinion out there.
My immediate concern with this project is the construction phase. As I am sure you know, construction in the DR is almost never completed haha (think re-bar sticking out of the roofs EVERYWHERE). Business is just so lax there so a project that would take a few months here can easily take over a year in the DR. The fact that it is in a tourist area may encourage things to move a little fast but still the holding costs and assurance of completion would worry me.
The second thing that worries me about out of country investing is you must accept the fact that your property can be taken overnight and there is nothing you can do about it. Just ask all of the American companies and property owners who had investments in Cuba pre Castro. They lost everything. Yes this is unlikely but there is 0 recourse if this should occur so the question becomes; If this were to happen could I handle the loss financially?
In the end, if you trust your contacts and the numbers work the reward sounds like its there. I love the DR and the people there. Even though I have spent months there I have never actually seen the beaches but I hear they are phenomenal. It will be a great place to retire.
We have a reputable attorneys that advised us to use surety bonds as a form of insurance to guarantee default from contractors, architects, and engineers. The project will take less than 6 months since funds will be paid in full or by phases. When purchasing a property all properties should have "certificado de titulo." this is a form of guarantee the property is your property. Many unfinished homes or apartment building to my knowledge is lack of funding, improper building procedures, and bad investments. In our case we will have funds in full and base on our contract with the builder we do not pay a penny more. i been traveling to the country for over 12 years and have a lot of knowledge of what is going on in the country. The offer to purchase the land is great. I am 34, by the time I am retired rent will be much higher, cost of living will be much higher, the apartment building will worth more money, and i will be able to live off the income of the apartment building while our properties here in the USA are being manage. It sounds great to us maybe from the rental revenue we can purchase a ocean front property or property near the area and live while collecting rental income from our apartment complex. Also the cost of living in the country is affordable.
Awesome sounds great! Please keep me posted with this project as I would be very interested in the progress/ outcome.
Also, the unfinished projects are due to two main reasons that I know of. First if lack of funding to complete as you said. The second is a tax evasion strategy. Taxes on buildings that are in the construction phase are cheaper so a lot of times people down there will build homes and then leave re-bar sticking out claiming they are still "working on the home" and will be adding more later. This allows the house to remain in the construction phase longer and thus saves them on tax money.
Different culture and mentality down there. You got to love it!
I am considering purchasing a condo in Punta Cana for personal use and investment purposes there. I'm a little nervous because it's pre-construction. It would be builder financing with 20% down upfront, 20% down on delivery and then a 72 mo loan for the remaining balance at 7.5%. I've been told I could potentially take out a conventional loan once the property Is complete but that i shouldn't Count on it and should be prepared to pay the builder financing in case that's my only option. I was told they would use my American credit. But curious, If I were able to get financing, would a mortgage there show up on my American credit report?
I wonder if the builders don't get enough financing, could they abandon the project and run with my money?
And I'm not sure how worth it it would be as purely investment because it seems it would only fetch about $500/mo. I would like to think it would fetch more as a short term vacation rental for tourists but these units seem to be a dime a dozen and possibly wouldn't be rented regularly.
I would probably only get there once every 3-4 months for a week at most. Obviously during retirement much more often, but that's a long ways away and in the meantime I would be paying for an apartment that may get minimal use.
Just curious, if you don't mind me asking, are you paying for this project cash out of your own savings or...? Do you have information about financing options there or have you found any American lenders willing to lend for the purchase of property there?
Also, it's not something I could do at this moment but In the near future, I had the same idea that I would build an apartment building near the beach. Would you mind sharing your contacts for the builder, engineer, lawyer, etc.?
Any insight you can offer is greatly appreciated.
Also, not sure what the possibility/procedure would be. But another option would be to build 2, keep one for long term rentals and then turn one into condos and sell them back individually.
Hey @Joel F. Extremely interesting post...awesome investing somewhere else as a form of retirement (im looking at costa rica)...IF you invest as a foreign investor does the country give you any perks such as residency or a DR passport
As for the post....would it be rented out to international travellers/vacationers or would it be rented by long term DR residents? Another of the concerns is what @Andrew Michael about the country being able to seize your assets over night, does you owning the property like you mentioned mean that there is no way they can take it from you...because they could not allow you to rent it out if you get to keep it virtually making it worthless right, its crazy how things like this work in less developed countries (had a country without naming hold a family friends 6 million dollar mansion and not allow them to sell to international buyers over night)
Also whats the management costs like there is it the same 10/15%?
Love to hear what happens in the future or be perhaps involved, love DR but haven't had the chance to go yet
@Lillie MAnon I would highly advise against financing a condo in another country that is a 3rd world because yes 100 percent it is a possibility that the builders take your money and leave mid construction those countries are all about short term hustle, grab what you can and run type of thing (just a different mentality/culture)
Happened to someone i know in costa rica
Another major problem is that usually the whole building isn't bought out and the builder has some units....You then end up competing against the builder for rent and when you try to sell, and as you can probably figure you wont beat the builder.
Also yes if they are able to open up your american credit and cross reference it with your ID and finance you it based on that then it will show up on your american credit, I cant tell you 100% for DR but i know that for other central american countries that offer that
@Bishoy Girgis as far as residency is concerned to become a DR residence is not a complicated process and you will be able to gain residency with less than USD 5k in a two year period I believe not accurate. Investor residency "I think" you would have to deposit USD 200k in a DR bank then you will be able to get an investor residency or visa. Please consult with an attorney. Since my wife and kids are Dominican citizens I am able to become a residence much quicker.
I do not believe in DR that they will seize land etc. unless the political situation change. The economy is growing, the realestate market is booming, and more tourist are moving and visiting the country on a daily basis, so where the economy is growing as an investor I am trying to get a piece of the action. But if something like that happened I will quick claim the property under my kids names since they were born in DR and hold dual citizenship and they will pay my wife and I monthly salary.
Cost of management is 10% and they normally take one of the two-three deposits as form of finding the tenants. Because in DR some apartment complexes take first, last, security, so if you are renting the units for RD20 thousand the property manager will collect RD 60 thousand pesos and give you RD40 thousand pesos because their fees are your fist month rent. Some areas you must pay 4 deposits.
At this point we are looking to build four floors we would separate tenants where the long term monthly tenants will live on the fourth floor and third floor and they will have ocean views and views of the pool. Short term renters and daily renters will stay on the second and first floor. We will provide cable, wifi, and maybe electricity sevices to our tenants depending the situation, because it is not easy for foreigners to gain access to those amenities if they do not have a Dominican cedula. It is a challenge and we are working and planning to make our investments a profitable investment in the island and growing our rental portfolio overseas.
@Lillie MAnon in a Dominican bank you can finance a property with 30% down payment for max of 20 years with the current interest rate of 13%-16%. Developer asking you to put down 40% on a pre-construction is a little scary to me. I would not do it because if the developer defaults or walk away then you lose your 40% down payment. With one of the big bank chains in the island your funds will be held in escrow until title transaction is complete and your money is secured. You must open an account with one of the banks and show transaction for about a year to ask for a loan. With your 40% down payment will prove your a serious buyer and the bank will have enough equity on the property to resale if you default on your loan.
Short term rent many people doing it in the island and you will have to advertise at a competitive daily rate so you can at least rent it 60% or more through out the year. Hire a local rental firm that will assist you in the booking process and the cleaning process after the customers leave your apartment.
When I opened one of my accounts in the island they pulled my TransUnion credit report to view my credit. If you get a loan in the Dominican bank I do not believe it will show on your credit report (please see Fair Credit Reporting Act (FCRA) ) they will pull your credit report but it will not count against you but they will look for bankruptcy, defaults, and or bad collection to determine if you qualify for a loan to my opinion.
We are cashing out two of our properties here in the USA and take advantage of the low interest rate. If we were to get a loan in the country the interest rate are very high for commercial loan and that will eat up our profit margins for many years.
Inbox me regarding contacts.
Our apartment complex will be condos and we will have title for each apartment. This will be an option in the future if one of our tenants would ask if we want to buy one of our units. If you do go that route your attorney will provide steps to making sure you have clear title and transferable title. (But make sure your builder submit all drawings to necessary government agencies and all permits are pulled and fees are paid. Please do not cut any corners the officials in the country will stop construction and you will get fined.) A condominium complex has more value than an apartment complex because you will hold titles for each apartments that can be resold to the public or you can cash out on one apartment, purchase land in the nearby area or different area in the island and build another complex and so on.....
Joel not sure why I can't seem to message you. Seems your info is hidden. Anyway, please pm
Me and once we are linked, I can send you my questions. Sorry, I'm new to bigger pockets 🙈
@Joel F. How did the investment in the Dominican Republic go? I am thinking about investing there; my wife is Dominican and has great contacts there.
@Oscar Jacome it has been challenging. We purchased 500m2 of land to build our apartment building for long term investing, but the papers was not "titulo deslinde" which means "Register and Marketable Title" but my wife knows the owners so I accepted to take on the risk. We had to wait about 9 months so our lawyers can get us marketable title. Why it takes 9 months? "I do not know" All I know there was a sign with our names on the land stating that we are the owners and I guess if there are any others that have rights to the land to show proof etc. to resolve any land dispute in order to get marketable title. This is somewhat the process for "Tax Deeds" when one is "Quieting the Title" which takes from 3 months up to a year to quiet title. We purchase this property sort of as a Quick Claim Deed.
We are working with the architect now to living space and parking space. Our goal is to have 4 units per floor 3 bedroom 2 bathrooms 90m2 each apartment. We also working with our attorneys to draft contracts for our architect and contractors to follow the rules and regulations of MOPC " Ministerio de Obras Publicas y Communicaciones" so the drawings can be approved, taxes are paid, and constructions process to run smoothly. They will also analyze and review of documents; draft of the constitution declaration; draft of the condominium regulation bylaws; submitting necessary paperwork to the Land Registry and provide the issuance of the new title for each unit.
We have chose to go through this process because in the future if we decided to sell the whole complex it will be difficults vs selling each apartment which will be a lot easier to sell. Also having title for each apartment will give us leverage with the banks to purchase more land and use one apartment as collateral and to build more units if need being.
Do not trust anyone in this process. My advice to you is to use reputable attorneys to do your legal work keep everyone in check, no your cost to buy land, to build your building, and know your rental market area and how much they are paying for rent.
I have seen a lot of building that are "White Elephants" because of mismanagement, poor budgeting, lack of funds, or just gave up on the project. All in all they are investments that have fell. Investing in foreign countries will always be a challenge but read, read, and read. Gain the knowledge where you will invest and enjoy your investment and live healthy. RD is an excellent country to invest they regulate a lot of things to protect the investor for this I have decided to go all in with my building.
Good Luck Bro!
@Joel F. Thanks for all the info.
We have traveled to the country like 20 times and we have seen the white elephants ourselves. We also understand that you have to find reputable attorneys and people to work with because there are a lot crooks down there. That being said, my wife grew up there and has trusted attorneys and a surveyor.
We also know the seller who is planning to sell the land, he wants to do so when the surveyor has finished with the " deslinde". We are planning to go see the land in July to see if it would worth it. It seems like is an a desirable place : "Bayahibe in La Romana" with access to the beach. Where is you project located at?
By the way, I see that you are in Florida; we just moved to West Palm Beach FL couple months ago.
@Oscar Jacome I live in Miami Shores we can link up anytime.
The floor plan for my apartment building
@Joel F. just found the thread, I am glad to see that your project is moving well. I am also thinking of investing in the DR. My project is a little bit similar to yours, I'd like to move to the DR in 10 or 15 years from now and would like to start investing in Real Estate there before. My goal is to buy properties that can be rented to foreigners, and eventually move there and manage several properties. I am focusing on the north coast, Sosua, Cabarete, Las Terrenas and Las Galeras.
Before deciding to buy land and building a condo, did you think about buying resale properties that you would rent out? I would appreciate if you could share what you know about this kind of investment. Is it possible to have a decent cash flow when paying a property management company? How long resale properties usually stay on the market in the areas I mentionned? What are the traps to avoid when buying resale properties in the DR? Do you have good contacts in the DR (lawyers) ? I'll spend a couple of weeks there in December to look for properties and make contacts. It won't be my first time in the DR and I am fluent in Spanish.
@Vincent Muller . Property Managers are great they will promote the property and get it rented but it all depends on who you choose. My advice to you is to start an SRL (Sociedad de responsabilidad limitada) work your way up with the SRL the cost varies if you have contact in RD directly it can cost about $500USD but if you have to go through lawyers it will cost you $3kUSD. Properties can be sold while you are building them if you advertise correctly and at an affordable price and some properties will be considered "white elephants" if you have a builder over price you. For example the average rate of building low to moderate apartments will be about 13500 pesos per m2 (2018 prices at 1USD for 49 pesos) with average apartments 3 bedroom 2 bathroom 90m2 with balcony without community pool with basic finishes and some areas in sosua it can be rented for $200USD per month or sold at 45kUSD. And some apartments can be built with more more per m2 and sold or rent for more per m2. So my advice to you is when you buy always buy land or property with "titulo deslinde", try to stay away from land selling with "act de venta" also always get anything appraised "tasacion" with reputable bank appraisers to get the true value of the property because some properties be over price to leave room for negotiating but without an appraisal you might still loose. Try to build 1/1 bedroom apartments because these cities you mentioned will sell fast and rent fast with community pools. inbox me for references you mentioned, I know the best and they will charge you an arm and a leg but you will have piece of mine at the end.
the picture you see is 70 m2 apartment which can rent for $250 a month and resell at $30-40kUSD per door in low to moderate areas. High class apartments selling at 250kUSD per door it all depends who you want to attract as a landlord. My opinion is to build for middle class and rent for $250-350 per door and less units for high class to rent at $1200-2500USD per door. Also remember DGII (country tax collection agency) charges 27% on your profit so if you not recording expenses under IFRS rule then you will have a lot of problems.
as you can see the margins are low if you build but me I started my SRL and hire in house Engineers/ Architects and build at cost, prices I am giving you if you hire outside contractors.
|Techo Ha, pisos cerámica, ventanas celosías cristal bronce, muros block, pañete liso, baños sencillos, puertas pino/pvc, gabinetes caoba, pintura acrílica||1n||Sala-comedor, cocina, 1 baño, 3 habitaciones, área de lavado||Media/Baja||BUENA, MUROS DE 6", HA 210KG/CM2, CEMENTO BUENA CALIDAD, VARILLAS 3/8||RD$13,950.00|
|Techo Ha, Tejas, pisos mármol ó tabloncillo, ventanas corredizas ó batientes p90 cristal bronce, muros block, revestimientos en pared, plafones, luces florecientes, baños de lujo, puertas cedro, gabinetes cedro, pintura superior, techo y cornisa yeso||2n||Lobby, sala, estar, comedor, 2 cocina, 4 1/2 baño, 4 habitaciones, terraza, área de lavado, cuarto de servicio, marquesina 4 veh||Alta/Alta||BUENA, MUROS DE 8", HA 210KG/CM2, CEMENTO BUENA CALIDAD, VARILLAS 1/2||RD$25,500.00|
cost difference between low and high end construction. these prices are quoted in 2017 may increase or decrease depending on cost and exchange rate.
Very interesting. We visited DR earlier this year and loved it. We rented tru airbnb 2br/2ba in very nice gated community. Of course first thing was how much does it cost. After doing some research we decided we are not ready to move forward lol.
We have very unpleasant out of state RE investment to my home country. Very reputable builder but he end up double selling some of the apartments, stealing the money and never finished the building. He is now serving 9 years, but its no reliefe for me lol.
@Joël F. Thank you for all the info Joel! I'll inbox you for the references.
Have you ever considered buying buildings or houses there before deciding to have something build?