In our previous blogs we talk about a ‘learning curve’ and how we can help reduce that for you. In our effort to help reduce the learning curve for you we are going to discuss a few things you need to know, and some considerations, before you buy a vacation home.
We all know there are plenty of reasons as to why you should buy property in the Dominican Republic but today we are going to focus on some property tips if you decide to rent out your property. We don’t you to end up on this list of horror stories.
Before buying a vacation property we suggest visiting the area and spending some time there interacting with the locals and speaking with other home/condo owners in the area.
You are going to want to make sure that this is a place that not only YOU would want to visit and spend time there, but others as well. You are going to want to get a feel for the area, the good the bad and the ugly. There are lots of great economic opportunities around the DR that are worth exploring so be sure to do your homework. ‘Is the area growing or seem stagnant?’ is a question you need to ask yourself. You don’t want to buy in a dead end city.
Today we are going to examine 4 things you need to know before you buy a vacation home and rent it out, plus we have some tips at the end for you!
1. Is the property Tax Free?
You might be asking yourself, is this even possible? Yes, it is a REALITY in Punta Cana and other developments around the Dominican Republic. Make sure the property you are interested in falls under Tourism Incentive Law #158-0. We have properties in your budget, talk to us and let us know what you are in the market for!
2. What is the expected rental rate per month?
How much can your vacation home be rented for per month? How much money can you make during high season and expect during low season?
3. What are the annual expenses?
Fixed Expenses and Variable Expenses.
Fixed Expenses are something that is a recurring or annual expense such as property taxes, electric bill, property management services, water bill, cable and internet, etc…
Variable Expenses, or unexpected costs, are things that you should set money aside for like changing the air conditioner, or replacing the water heater or in case of a plumbing emergency.
Questions you need to ask:
Does the property management company set aside money for Variable Expenses? Or is this the owners responsibility? Now you may be saying “That’s ridiculous, of course the property management company would set money aside money for the variable expenses.” This is Latin America, and after living in 4 different countries in Latin America I can assure you not everything here makes sense and what you think would be ‘normal’ is a foreign concept to some people. So, I highly suggest you check, recheck, recheck again then get it written in email and in contract as to who takes care of the variable expenses. Check the contract as well.
What are the property taxes, insurance cost, routine maintenance costs per month/year? Who pays and how much of this affects my bottom line?
After everything is paid, how much money do I REALLY have at the end of the month?
Do I need a property management company or can I successfully rent the property out myself?
4. What risks are involved?
Property sitting empty? Hurricane Insurance?
High and low season rates need to be evaluated. Cost of monthly hurricane or flood insurance needs to be investigated. Fair warning, some people will say insurance is needed, others will say they don’t even bother with it…talk to us if you have any questions.
You don’t want to invest in a property in a low tourist sector unless you are going to be living there yourself. We suggest investing in a property in a high tourist sector in a good location in order to maximize your investment. You are going to want to keep your property rented and have regular residual income checks.
Anti-Fraud Tip: If you have a property manager make sure you have one you can TRUST. Sometimes the property manager will rent your property out on the side and never log anything in and never tell you, keeping the profits for themselves. Of course you want to avoid this situation at all costs so make sure the manager is someone you can trust.
Make sure your contract is in Spanish and in English. Half of each page should be in Spanish, the other half in English. Don’t hesitate to have a translator look it over for you. We suggest a 3rd party translator. You are going to want to make sure everything matches up.
Property Tip # um…the one nobody is telling you about
Working at a law firm that handles real estate transactions provides you with a lot of insight into all sorts of things. There are things real estate agents will tell you, lawyers will tell you and then when it comes down to it, the judges tell you the truth. There is a lot of ‘yeah but who cares because we don’t really do it that way’ that happens and you don’t want to end up in court and find out you got screwed by your property management company or lawyer or real estate agent.. It’s painful.
Make sure you have everything in a contract. Make sure a 3rd party translator looks over it. Make sure you perform ‘due diligence’ on the property management company, escrow service if used, real estate agent and lawyer. Lastly, make sure you speak to us if you have any questions at all. IT’S FREE.
Purchasing Tip: Make sure your contract is in Spanish and English. Don’t settle for “We only provide a Spanish contract.” It also helps to have a 3rd party lawyer review it.
Tip: If you haven’t already joined our growing community on Facebook then please do! We would love to answer your questions, interact, and share more knowledge and tips with you in our group ‘Relocate to the Dominican Republic’.
We are here to help you. We want YOU to succeed and be happy and fulfilled with your new life or your new rental property in the Dominican Republic. So, reach out to us if you have any questions at all concerning relocating to the Dominican Republic. Remember, the stupidest question is the one not asked.