Rental Property Investor · Arecibo, PR · Member since 2016 · 32 posts · 12 votes
Hello BP members,
Trying to get some advice on a vacation property for the Isabela, Puerto Rico area that is being offered to me at appraissal value. This property is 3 mins from the beach (15mins from airport) and has 2 separate houses in 1 with big lot and pool which I can VRBO and/ or BRnB. Nonetheless, it makes me uneasy to buy it (with Puerto Rico's economic crisis) at appraisal value. What do you think?
First of all, check the numbers at https://www.airdna.co/ to see estimated occupancy. Did you run the numbers? Does the property cash flow? Do you need to fix anything? Do you have someone to run the vacation rental?
I love Isabela. The whole west side (Isabela, Aguadilla, Rincon) of the Island is being discovered by tourism. If this were a property that I wanted and would cash flow even if I bought at appraisal value, I would buy it. I would because I live in Puerto Rico and I could go down to the property whenever it's vacant to enjoy it with my family. I was going to do this last month (in another town), but the deal fell through.
However, if this were merely an investment, I would be more careful. Run your numbers and see if it makes sense. Property values are low right now, but stable. I don't think values will nose dive like they did around 2008, but that is always a possibility.
First of all, check the numbers at https://www.airdna.co/ to see estimated occupancy. Did you run the numbers? Does the property cash flow? Do you need to fix anything? Do you have someone to run the vacation rental?
I love Isabela. The whole west side (Isabela, Aguadilla, Rincon) of the Island is being discovered by tourism. If this were a property that I wanted and would cash flow even if I bought at appraisal value, I would buy it. I would because I live in Puerto Rico and I could go down to the property whenever it's vacant to enjoy it with my family. I was going to do this last month (in another town), but the deal fell through.
However, if this were merely an investment, I would be more careful. Run your numbers and see if it makes sense. Property values are low right now, but stable. I don't think values will nose dive like they did around 2008, but that is always a possibility.
First off, don't do it!
As you suggested, you already have the geographical risk where PR is already defaulting on their municipal debt. If they aren't bailed out, they would need to reconfigure their property and income tax structure to pay off further debts. This will likely mean rising property taxes.
Moreover, I don't know too many people who would go to PR and rent a vacation home given the numerous hotel options. Seems like the demand is low and rental rates would be questionable?
Good luck!
Gracias @Victor Chico! As always, your 2 cents are very valuable! I have not run numbers through AirDNA but will be doing that homework this week. I will not be able to directly manage the property but have family and friends that would do that for me. Nonetheless, it's a love/hate situation because it is a great house but I have set a rule to myself of not pursuing anything higher than 25% appraisal value. So far I'm awaiting appraisal results and will be crunching numbers to see if it's worth... I'll keep y'all posted in case anybody runs with a similar dilema.
@Franco Li I understand that the debt situation is affecting locals and not tourism. However, I'm curious on what is your base about vacation home rentals vs. hotel options. I thought that vacation home rentals was blooming in the western part of Puerto Rico from what I hear. Do you have data to back up your opinion on vacation rentals?
If the area is a good area, and your ROI is acceptable after you factor in property management fees (from a RELIABLE property manager) then I don't see why you wouldn't.
My advice never buy at appraised or over market price. There are deals all over Puerto Rico in prime beach areas where foreigners and locals vacation. I just bought a 2 bedroom furnished condo in Cabo Rojo on the beach with a pool in a gated community. Priced at 89k appraised at 95k got it down to 66k with only 15% down 4% interest 30 yr fixed using a local credit union (Cooperativa) $450 property taxes (CRIM) annually. $110 HOA monthly fee. Currently Im not interested in renting it out however I may in the future partner with a local vacation rental company that handles all bookings, cleaning and marketing to local and foreign tourist for a cut of the proceeds. The best deals are found in down markets. Good luck.