Lubbock, TX · Member since 2017 · 4 posts · 5 votes
Hello, I am fairly new to bigger pockets and this is my first forum question. I was wondering if anyone has experience with traveling to the Caribbean or buying properties in the Caribbean.
I am wanting to purchase a vacation home, and also rent it out when we are not there. I have been to the Cayman Islands plenty of times, and love it, but I want to find somewhere else - a hidden gem maybe... that has yet to explode as a tourist destination, but close enough to a major town that airlines can fly into as I need to make it somewhat affordable and accessible to people who would like to rent it out. Of course we all want the best of both worlds; that is a hidden gem on a secluded/private beach, but close enough to a town to find good eats, drinks, and shopping. Not to mention interaction with the locals is awesome.
I am open to any and all suggestions! However, I would like to avoid Puerto Rico, Dominican Republic, and Mexico, but that doesn’t mean if presented with a fantastic opportunity, I wouldn’t look into it.
Puerto Rico is the place . Last year I was in Mexico( Cancun and Tulum area) , Dominican Republic ( Santo Domingo , Punta Cana , Semana ) and Puerto Rico. San Juan is a place to invest. Beautiful city. So clean . Even Santurce area is looking better and better. Police is very helpful and friendly. You will feel like you are in US. Most of the people speak English as a second language. Airbnb business is blooming there. Especially in hot neighborhoods. I am about to buy condo in Miramar.
I agree, Puerto Rico has amazing opportunities right now. We have a local REIA (REIA Rico) starting this month on the 4th Weds of each month. You can find the post in the announcements section of BP. There are tax incentives like Act 74, tax incentives for residents like Act 60, and virtually the entire island is opportunity zone. Plus much more. There are a lot of reasons I am very bullish on Puerto Rico.
I totally disagree about Puerto Rico being the better place. Many Americans don't have a passport. US citizens don't need a passport to travel to Puerto Rico but they need a passport to travel to Mexico and the Dominican Republic. In spite of that, the overwhelming majority of American, Canadian and other visitors traveling to the Caribbean region go to Mexico and the Dominican Republic rather than Puerto Rico. That's what the statistics overwhelmingly show. As well as empirical evidence. I don't know but I have plenty of Canadian and American friends and acquaintances who travel (regularly) to Mexico and the Dominican Republic but I don't actually know anybody who has vacation in Puerto Rico (unless they haven't told me of course).
As can be expected, the most profitable form of real estate investment in the region is short-term rentals. To get the most profitable short-term rental, you want low property prices and high rental income. That's what both Mexico and the Dominican Republic offer. And, to get high rental income, you generally need (mass) tourism.
Mexico and the Dominican Republic have been successful at bringing tourists through massive investments in infrastructure, marketing and bringing direct flights from across the world. The government of Puerto Rico is bankrupt and has no money to invest in any of that.
Finally, as one famous successful investor (I forgot the name) once said, tax incentives are great but you don't invest in anything just because of tax incentives; the investment has to be worth it without the tax incentive. It's easy to understand why. Tax rules can be changed at any time on a whim. Also, one needs to question why the tax incentives are there in the first place. And in this case, it's because the government is bankrupt and desperate to attract investment. Sadly for Puerto Rico, that's not a good thing.
I'm sure Puerto Rico is a beautiful place and that the Puerto Ricans are great people and I can't wait to visit. I'm also sure that there are great investment opportunities there and, if I was a local resident, I would try to take advantage of them. However, as an international investor, I have choices and I'll put my money where it's treated best. In the Caribbean region, you can't beat Mexico and the Dominican Republic when it comes to that.
Mike, great discussion! Yes, you make an excellent point about Puerto Rico not being as big of a vacation destination as some of the other areas nearby. I've heard it said that only 7% of Puerto Rico's economy is tourist based. Historically, Puerto Rico focused on pharmaceuticals and never got quite as dependent on tourism as places like Hawaii and some other parts of the Caribbean. That could be seen as a positive or negative. As an US based investor, I find certain comfort in investing in Puerto Rico, which is a US Territory, but obviously since you are comparing your investments to international investments, you may be looking at things that I am not. And while I am not against investing in Mexico, DR or Columbia (I've heard some great things...) there is a sweet spot as an American investing in an area that I don't need a passport to travel to, and that uses the same currency, and feels safer because it's part of the US. But that's not to say that higher return investments don't exist offshore. You have much more experience than I do in international investing.
I do think Puerto Rico should work a bit harder to build its reputation as a travel destination (which is probably why they have created incentives like act 74, which offers tax credits on tourist/hotel type of projects), and they do have other things in the works I've heard are coming. That said, there are tons of tourists here. Lots of folks from the east coast of US. And the cruise ships aren't even running right now. But there are loads of tourists here, I see them all day long. In fact, the busiest flight path in world is is between Orlando and San Juan, PR. (as reported 5 days ago News.com.au) https://www.news.com.au/travel...
As for tax incentives, you are absolutely right that they should not drive the decision but be a bonus if the deal works. That's spot on. I work with many investors like myself who have US tax liability - knowing I can create an act 74 project in PR where 30% of my investment is given back in tax credits makes it extremely desirable for someone like me, since running short term rentals is something I was doing for over 12 years in California with no tax benefit. Why not own short term rentals in beautiful Puerto Rico and get a tax advantage to boot? So for me it's comfortable and it's close. That might not work for everyone.
Yes, interesting discussion indeed. And, as you're rightfully suggesting, real estate isn't a one size fits all investing vehicle. Puerto Rico seems to be working for you and that's the most important as far as you are concerned.
And yes, you'd think Puerto Rico, being part of the US would do a better job attracting tourists. I don't think it's Puerto Rico's fault though. As I hinted in my previous reply, I believe it's just because Puerto Rico doesn't have the deep pockets to match Mexico's and the Dominican Republic's colossal investments in infrastructure and marketing.
As to the currency aspect, yes, Americans don't have any foreign currency risk when investing in Puerto Rico. But they don't have any foreign currency risk investing in Mexico or the Dominican Republic either because properties there are traded in US dollars as well.
Counterintuitively, this is another advantage for countries like Mexico and the Dominican Republic. In Puerto Rico, your rental income is in USD but your costs are in USD as well. Whereas, in Mexico and the Dominican Republic, your income is in USD but your costs are in pesos and these costs are very low to top it off.
Also, because real estate is traded in USD in their countries, the well-to-do Mexicans and Dominicans are using property as their store of value of choice against the devaluation of the peso. This acts as a huge support for real estate values in times good and bad.
One of the major things a person has to consider when investing in the Caribbean is liquidity. I can only speak of the Dominican Republic on this topic. The liquidity is brutal and what might be considered a 'hot market' down there is nothing like what you see here in Canada or the US.
Of course if you are going into it with a long time horizon that is great and you might think it may not matter, but you have to factor it in. What if you run into medical or financial trouble? What if you pass away and your estate is left with this property(s) to deal with? You might have an expectation of 30-90 DOM to sell a property in the US meanwhile you are realistically looking at 6-18+ months in DR. I suspect other islands are similar. This does not mean something can't or won't sell quickly.
That's not even to mention situations like this pandemic or the 08 financial crisis.
With that said, fortune favors the bold, and if you ever wanted a deal on property in the DR now is a great time to go shopping. Lots of desperate owners down there right now.
Just for the record I am not against owning property in the Caribbean. This is just one of the main things I see overlooked in every conversation about investing down there. Personally, I have been considering adding a property on the north coast of DR as its a fire sale down there right now.
I have never considered Puerto Rico. It sounds interesting I will have to do some DD on it.
Saying that there is a liquidity issue in a hot market and that it takes 6 to 18 months to sell is an oxymoron. A hot market is by definition a sellers market where liquidity is aplenty. If you try to sell a marketable property in The Dominican Republic and you ask for the market price, it won't take much less 6 to 18 months believe me. And, if you're a motivated seller offering your property at below market price, it will be even quicker. Some local owners will take 6 to 18 months or even years to sell because they don't have to as they're wealthy and don't have a mortgage. They don't want to sell their beloved property at a price below the sometimes inflated value they think it's worth. This is a cultural thing in Latin America. Every property has a price and will sell at the right price, whether in the Dominican Republic or anywhere else.
I'm not sure what desperate owners you're referring to. The popular belief is that many property owners must be desperate to sell because there are no renters too pay for their properties. This is totally wrong for several reasons:
1. After a short-lived panic last spring similar to what happened in North America, pretty much everybody has come back to their senses and realized that vaccination is coming and the pandemic is going to be short-lived. Then, the pre-existing travel boom is going to come back and accelerate, as most people can't wait to travel (overseas). So only forced sellers are going to sell, as everybody knows that tourists are going to be back with a vengeance.
2. I have had to travel to Mexico and the Dominican Republic during the pandemic and there were many more visitors than you'd think. So many properties haven't been sitting empty, as people deserted hotels with a higher risk of contamination and sanitary measures for short-term rentals in which they can control their environment.
3. The summer is usually the low tourist and real estate buying season in the Caribbean. Not last year. My contacts in the business have told me they've had their busiest summer season ever, as Americans scrambled to buy properties to go to in the winter to avoid the lockdowns at home. Rebates offered by developers were few and far between and quickly disappeared because of the demand.
4. Mexico and the Caribbean countries are going to be huge beneficiaries nit only of the post-pandemic travel boom but also from the work from home trend, as more people look for a better lifestyle at a much lower cost with beautiful weather and beaches to boot. Where your traditional renter was the tourist, you now have the retirees, digital nomads and other work from home crowd to boot.
5. Most importantly, countries like Mexico and the Dominican Republic are mostly cash markets. Property owners don't have a mortgage to pay and the other holding costs are generally very low. Moreover, property owners are generally well-to-do, whether locals or foreigners. So, they're generally never gonna sell in the middle of a crisis as they can wait for prices to recover after the crisis. So you won't have a property crash like in the US in 2008, except if a given market is completely dependent on US tourists. In this way, investing in Mexico or the Dominican Republic could be considered as less risky as in the US because, unlike in the US, prices aren't (artificially) propped up by cheap debt.
This is why you won't have many desperate sellers. You will have the odd desperate seller like an American who took a mortgage on his US home to buy a property in the Dominican Republic and was counting on the rental income in the Dominican Republic to pay off his mortgage. However, that's the exception rather than the rule.
If you know desperate sellers in the Dominican Republic, feel free to send them to me and feel free to take a wholesale commission. I'd love to buy from desperate sellers there.
I don't know where you get your information about the Dominican Republic but it has very little to do with the information that I get from some of the best real estate agents, developers and lawyers and government contacts.
Finally, my advice to everyone is to go beyond the trivial and do a proper due diligence, taking advice from the right sources. Indeed, things are often different that they seem. Take the example of Puerto Vallarta, where I'm currently looking at properties for myself and my investors and bargains aren't easy to find!
Puerto Vallarta is one of Mexico's main international tourist destinations so you'd think that its property market would have crashed as a result of the pandemic. Yet, nothing could be more further from the truth. Why? Because two thirds of the buyers are Mexicans, who were much less affected by travel and other restrictions. Like in most countries, the wealthy haven't been much negatively affected by the pandemic and those are the main buyers. The second biggest buyers pool is the Americans, who have had the lest travel restrictions when it comes to Mexico, resulting in a lot of them going there. Add the other positive trends mentioned above and the real estate market is pretty healthy there thank you very much.
What a great time I have had reading this thread! Great discussion! @Mike Lambert you have made me want to take a look at DR. I must admit, though I have never been there. I have been all over the Bahamas, all over Mexico, Turks and Caicos (favorite beach BTW), and St Thomas
Here’s what I’m trying to accomplish, but first a little context.
I own a townhome in Breckenridge Colorado, and I use it as a short term rental (property management company fully runs it) and I use it once a month or so because I live in Denver, so close proximity. I am pleased with the revenue that the property produces.
My kids are off to college and I will be selling my business soon and I will have a couple million USD to invest. I want to buy a property at or in proximity to a beach vacation destination. However, I want to live on the property most of the time. I might take a few months out of the year to live in Breckinridge. About a year ago I stayed in Saint Thomas at a short term rental and the property had a two car garage and an apartment below it that the “care taker” lived in. I discovered that it is not uncommon for Caribbean homes to have separate living quarters, which gave me an idea. I would like to buy a home that I could generate revenue as a short term rental that also has a separate living quarters. My thinking is my wife could decorate it real nice, we could live in the main house when it is not being rented, and when it is being rented and generating revenue we could live in the separate living quarters. I also want to buy a couple of jeeps to rent out to guest, and I also want to buy a nice boat to take guest out on day cruises/snorkeling trips, but have the boat be nice enough that I could sleep in overnight in case I don’t wanna sleep in the small, separate living quarters at the property when being rented.
I would like to pay cash for all these things. I am only 44 years old, so I’m too young to do nothing and I want to have stuff to do that generates income without necessarily having a job. I figured these three things could generate enough income to pay my living expenses and fly my kids down to visit
Foreign ownership is protected. According to the Dominican law/constitution, foreigners and locals are treated equally when it comes to real estate ownership. Moreover, the Dominican government encourages foreign ownership of property.
If you want a boat, you'll need a marina. I haven't looked at this aspect when researching the different locations. If you're interested in buying there, you might want to research when the marinas are and then I could give you my opinion on which areas are best.
If you's ask me until a few years ago, I'd definitely have replied that, yes, the DR would be a contender for something like that. I wouldn't reply the same today because the DR lies in the middle of the Caribbean and is therefore the victim of sargassum. That problem is getting worse and there is no solution in sight. Given the likely causes of the problem, it's difficult to imagine that there's going to be a solution to that problem anytime soon.
Thank you so much for your response. Interestingly I saw an article on the news today about sargassum. It said a massive amount thousands of miles wide is going land on Florida. It can be seen from space apparently! Also, people in Florida complaining about burning eyes and difficulty burning (not definitive if related). Is Sargassum pervasive in all of the carribean or certain areas more prone?
Just chiming in on the STR side of things. The demand for short term rentals in the USVI and Puerto Rico is fire. Among the top in the world. Mexico, DR, and other Caribbean countries will generally be a lot less profitable from the airbnb standpoint.
I have looked at and visited USVI. Love it. I can probably afford St. Thomas, St John will be a stretch for me. I am starting to look into Tortola and prices look less. Have you looked into BVI from an STR numbers standpoint?
I've never been to the BVIs. But I would suspect that it does well. AirDNA shows that it has lower demand, but AirDNA can be very inaccurate for small islands. Caribbean islands are notably more difficult to operate short term rentals because of the lack of resources (materials and labor). But it wouldn't be as hard if you lived there full-time. The big question is if you can handle living on such a small island full-time. My uncle lived on St Thomas for about 25 years and it seemed incredible from my perspective; but the day to day small town BS will wear on you quick.
Also the distance between Breck and the Caribbean is kinda tough. I lived in Vail for 10 years while owning and operating a STR in Puerto Rico. That flight is brutal because nothing is direct. 8 hours+ flight/layover + dealing with I70 is tough.
@Jared Beard Feel free to message me and Ill send my contact info.
@Kingsley Thomas Yes living and working in Paradise is different than vacationing and has its challenges, that's for sure. 25 plus years here. Lost 3 businesses and 5 properties in Hurricane Irma. Life is def not always easy as they want you to believe when you look at the island magazines. But I def live in one of the prettiest places in the world.It makes going on vacation hard because I can't find anywhere prettier. LOL
I would only do the trip 1-3 times per year. I lived in Hong Kong and traveled back and forth constantly for a decade so I am not bothered by long travel. Thank you so much for your valuable insight you have provided!
We have a place in Belize that gets rented via the resort. We fly direct from Denver now that Southwest is flying there. Lot's to see and do, but outside of the 2 hotspots, things move VERY slowly.
Different locations are affected differently but there's no guarantee that a place that isn't much affected today won't be tomorrow because the problem is getting worse. Florida is a good example, as it wasn't affected much at the beginning.
I'm not sure how STRs in the USVI and Puerto Rico could be more profitable than in Mexico. Do you have figures to back that up or are you assuming that because like you say the demand is "on fire"? The reason I'm asking because I'm not sure if you know but Mexico is shattering all records and properties are much less expensive there. I'm not familiar with the USVI and Puerto Rico markets but, based on the figures given by Rachelle Bisaillon, you can get a much higher gross return in many places in Mexico with the same figures. And, the difference would be even starker when you compare net returns, given that the costs are so much lower in Mexico.
What area of Mexico are you talking about? I had looked at Tulum but heard but heard there is an over saturation and they are not getting the occupancy and they are still building. Im concerned that the bad press they have been getting over last 5-8 years about killing Americans will make it worse. Ill be there in June so I will check it out again but open to looking at other areas while Im there but not convinced. Would love more details for further investigation.
1. Mexico is like the US; it's not a homogeneous market. It's not anywhere that you can get such returns but you're most likely to get them in beach resort areas and there are many. If I'm not mistaken, your market is more upscale than the Riviera Maya, where Tulum lies. More comparable markets would be Baja Sur or Puerto Vallarta - Riviera Nayarit and there are others.
2. You have some right concerns about Tulum, especially when it comes to potential overbuilding. There has been an enormous growth in tourism over the last decade, which has fuelled a lot of building activity. That's ok as long as the growth in visitors continue. However, there seems to have been a very large drop starting at the end of last year, that I have personally and anecdotally observed but I'm not alone. I'm waiting for the latest figures for confirmation but I wasn't referring to Tulum indeed. If you want to buy there, I suggest
3. There are several reasons for the recent drop in visitors and some drug-related violence might be one of them for a few people. However, there has been no widespread killing of Americans over the last 5 to 8 years so I'm not sure where that comes from. Think about it, that was the case, Mexico and the area wouldn't be breaking visitor records and people (the majority Americans) wouldn't be coming year after year.
4. It makes sense that you'd need more convincing given what you mentioned. Mind you, my comment was more about finding out about that affirmation that the USVI would be more profitable than Mexico because, if that was the case, I'd be interested in checking out the USVI market. This being said, both Tulum and the USVI share the sargassum issue. Not sure about the situation in the USVI but it's been hitting Tulum for years without really affecting tourism. The recent previsions for 2023 don't look good from what I've read and I'm concerned that would start to become a real problem.
My experience is not aligned with some of the post above. Puerto Rico is in the top 3 destinations by visitor count in the Caribbean. Many tourits go to Puerto Rico. It is a popular vacation spot. San Juan is a home port for several caribbean cruises. And someone said the infrastructure in DR is better? No way. I havent run the numbers so I cant speak on the real estate investment. However PR does follow US laws. Therefore you are protected in a way that you may not be in the DR, Mexico or Columbia.
1. Mexico is like the US; it's not a homogeneous market. It's not anywhere that you can get such returns but you're most likely to get them in beach resort areas and there are many. If I'm not mistaken, your market is more upscale than the Riviera Maya, where Tulum lies. More comparable markets would be Baja Sur or Puerto Vallarta - Riviera Nayarit and there are others.
2. You have some right concerns about Tulum, especially when it comes to potential overbuilding. There has been an enormous growth in tourism over the last decade, which has fuelled a lot of building activity. That's ok as long as the growth in visitors continue. However, there seems to have been a very large drop starting at the end of last year, that I have personally and anecdotally observed but I'm not alone. I'm waiting for the latest figures for confirmation but I wasn't referring to Tulum indeed. If you want to buy there, I suggest
3. There are several reasons for the recent drop in visitors and some drug-related violence might be one of them for a few people. However, there has been no widespread killing of Americans over the last 5 to 8 years so I'm not sure where that comes from. Think about it, that was the case, Mexico and the area wouldn't be breaking visitor records and people (the majority Americans) wouldn't be coming year after year.
4. It makes sense that you'd need more convincing given what you mentioned. Mind you, my comment was more about finding out about that affirmation that the USVI would be more profitable than Mexico because, if that was the case, I'd be interested in checking out the USVI market. This being said, both Tulum and the USVI share the sargassum issue. Not sure about the situation in the USVI but it's been hitting Tulum for years without really affecting tourism. The recent previsions for 2023 don't look good from what I've read and I'm concerned that would start to become a real problem.
I am in the USVI and yes Sargasm is an issue here. It has not affected the tourism tho. It seems to be getting worse every year
I'm not surprised the the USVI is being hit, as it's in the middle of the Caribbean and the effect on tourism hasn't been that much affected yet indeed. As the problem gets worse every year, I imagine it's only a matter of time that quantities become so big that it's going to become unmanageable. I hope that won't be the case as it would be an ecological and economical nightmare for the region but it's hard to see how that can be avoided, given that the root causes of the problem seem to be getting worse, not better.
@Dell J. I am in St John and haven't seen any issues with sarcasm. Lived here about 25plus years and can only remember a handful of times that it was any kind of issue at all, if that. What island are you referring to? St Thomas usually runs about the same as St John. Are you referring to St Croix maybe?