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.
@Joel F. This has been a great thread to follow and I enjoyed learning about your experience building in the DR. I was born and raised in Santo Domingo and learning about the process of investing in the DR as a foreigner is very interesting. Thank you for sharing your journey with us.
@lillie manon
The Dominican Republic is a great place to invest, provided that you know what you're doing. I'm working on a condo development there with local partners who have lots of experience so, as always, I'm happy to share my knowledge about the subject here.
First of all, the odds that your property would be confiscated by the government is close to zero. The whole world has seen what socialism has done to the poor and rich alike in countries like Cuba and Venezuela. Most importantly, the Dominican Republic has had a stable government for the last two years and have been very welcoming to foreign investment. As a result, the Dominican Republic and Panama have had the strongest economic growth in the whole Americas over the last 20 years, at times surpassing that of China. So this is unlikely to change. Crazy things have happened but you could as well get run over by a car if you get out of bed.
The Dominican Republic is one of the friendliest countries for international real estate investors. They have the exact same rights as the Dominicans and this is enshrined into the country's legal system. This is very rare, Even countries like Australia, Canada or New Zealand discriminate against foreigners. On top of that, foreign investors can get generous tax advantages. And the Dominican Republic is a tax haven (except for Americans) like Panama but without the bad reputation so it flies under the radar so to speak.
One important thing about investing internationally is to understand that a lot of the techniques that work in North America and that are talked about on BiggerPockets don't work. Forget about multiplexes, BRRR or buying value-add apartments and refinance them. That generally doesn't exist or doesn't work. Building can be a great strategy but good luck to get something done on your own and compete with the local builders, especially if you build for the local market. The rental income is going to be very low and you have to build and manage locally. I have associated with local partners that I know personally (I'd never do it alone and I'd never associated with anybody I don't personally know over there) and the plan is to build condos to sell to foreigners and wealthy Dominicans. By renting these short term, you can make more money in one night than the long term renter makes over a whole month.
There are three strategies that work great, depending on your situation:
1. You're planning to retire there one day. You buy today to pay much less than you'll do in the future. In the meantime, you rent your property short term and you can even use it for your holidays. So, instead of having to buy a property at a much higher price in the future, not only you buy the property for a fraction of the price today but you have it paid for itself (several times over) by the time you retire. This is a no-brainer.
2. You want to buy a property for your own use as a vacation property or as a snowbird home. You rent it short term while you're not using it. So, not only the property pays for itself but you can make some nice profits year after year.
3. You are a pure investor and you want to buy a property to rent short-term because the revenue should be much higher and the costs and taxes are much lower than at home. Moreover, while more and more North American cities heavily restrict or completely forbid short-term rentals, the Dominican Republic encourages short term rentals for obvious reasons. They bring money, tourism, investments and renting those properties short term doesn't prevent the local renters to rent because they couldn't afford this type of property. For these reasons, it's safe to say that short-term rentals are neither gonna be banned nor heavily regulated.
When it comes to the decision between buying new build and resales, it is important to understand that properties that are considered too old are much less popular in Latin America. They will sell and rent for much less and rent less often. Of course, you can always renovate (except the outside) but renovating there if you're not on the ground isn't easy. For those reasons, I'd personally only buy pre-construction so that I'd get a brand new property at a discount. By the time the property is considered old, you could have repaid yourself many times over and it's much easier to manage. Of course, you have the developer / pre-construction risk. I'm very risk averse so I'd only buy from developers I personally own but you'd still be fine if you do a thorough due diligence.
Speaking of which, @Lillie MAnon, the deal you mentioned sound like a scam. I don't know of any reputable builder in the country that's give anyone outside of friends and family any post-construction financing. It makes no sense for them to do that. It sounds like a scam.
The Dominican Republic is essentially a cash market. Wealthy Dominicans don't need credit. For foreigners, credit isn't easy to get and, more often than not, interest rate is prohibitive. For the projects from the best developers, you oftentimes have to pay a downpayment and then you pay at each step of the construction, provided that the developer can prove that each milestone for payment has been reached.
This is oftentimes as, oftentimes, the return on a 100% cash deal in the Dominican Republic is higher than the return of an equivalent leveraged deal in North America and you don't have to take on debt. Yet, some people don't have the cash and some people who have the cash might want to use as less of it as possible. There is therefore a huge gap in the market, which creates an opportunity.
To fill that gap, we're planning to offer financing to the buyers as part of our development project. While this will make our project less profitable, the profitability is still gonna be great. This will be compensated by the fact that we should sell much quicker, since we'll be having a unique selling proposition and we'll serve an untapped market. More buyers will be able to buy and all the profitability of all buyers will be even higher than if they paid cash, since they'll be using leverage. Therefore, this will be a win-win with all parties involved. Of course, doing something like this is complicated and you need the right knowledge and people but the three strategies that I have mentioned above are definitely doable for anyone (who obviously has some funds to invest).
Feel free to reach out if you have any questions or of I can help in any other way.
@joel
Big moves brother keep up the good work!
Hi BP family if you are looking to invest in the Dominican Republic you can make it I live in DR and I invest in PUNTA CANA the best place in the Caribbean.
if you need contacts let me know I have multiple rental properties there and are good for Airbnb or regular rent.
DM me if you need more information