R E L I A B L E R E A L T Y SRL
Plaza Artistica, Local 2-2, El Cortecito/ Bavaro
Ofc: 809-­552-­0898/ Fax: 1-­810-­213-­1474 [email protected]/ www.reliablerealtydr.com
FAQ’S / FREQUENTLY ASKED QUESTIONS ABOUT CONSIDERING PUNTA CANA (BAVARO) AS YOUR REAL ESTATE INVESTMENT DESTINATION: What is the real estate market like ? According to the World Bank (Sept. 2015); for the past two decades, the Dominican Republic (DR) has been one of the fastest growing economies in the Latin America and Caribbean Region, with GDP growth averaging around 5.4 percent annually between 1992 and 2014. Since 2010 Punta Cana & Bavaro have consistently been leaders in popularity, growth, infrastructure and much of this growth go hand in hand with the healthy real estate market in the Dominican Republic,, especially those sectors supporting tourism… like Punta Cana (Bavaro), Samana, Las Terrenas, Santo Domingo, Puerta Plata (Sosua and Cabarete). Real estate sales specifically in Punta Cana (Bavaro) have tremendously contributed to this impressive country growth over just a short period of time (2009 to current). Post-­‐construction properties (resales) rates are appreciating better and faster than the average international market whereas, Pre-­‐construction purchases are appreciating at an even more impressive rate annually. As a Broker of one of the top real estate agencies here, we make it our mission to research developers who have followed the approved masterplans, following strict building codes; those who have applied for individual titles, and have a reputation for quality construction and on or near completion and delivery estimates… assuring real estate developments are truly qualified investments Can I hold title to property? Yes, indeed! Unlike other tropical or Caribbean destinations where buyers cannot secure title in their own names, or must put the title in a bank or other person’s name and/ or wait 50 or more years; here in the Dominican Republic all titled properties are “freehold” meaning they are easily transferable into the new owner’s names. Attorneys must be secured here for all real estate transactions, and it is advisable to seek out a reputable attorney who is well versed in real estate transactions from start to finish (or title transfer). Reliable Realty maintains the best and most qualified real estate attorneys, who not only speak, read and write English (and Spanish), but also understand the North American expectations when purchasing real estate abroad. The process for a cash sale can take as little as 2 weeks, to perhaps 30 days and our agency assist every step of the way… all the way to title, furnishings, accessorizing, remodeling, insurance, and full property management/ rental booking services. Should I be concerned about which agency I choose to work with? Absolutely! It is advisable to seek out a reputable agency with a good track record. Typically if the credentials of the agent, broker or agency are not included in their website or if they do not have qualified testimonials on their website… caution is highly advised. Anyone can throw together a fancy website with pretty pictures, but often they do not have an office, or sometime even legal listings… rather they are “borrowing” listings from other agencies, simply looking for a quick referral commission. This often leaves buyers out in the cold with no direct or personal guidance. The Dominican Republic does not require real estate licensing; therefore just about anybody can sell real estate… from the cook or maid at your resort, to your taxi cab driver. And trust me; they will try to introduce you to somebody who has a property to sell; even if it is not titled or even where or what you are looking for. Many people believe they are “safe” when securing real estate through an international brand name. Not always true as these franchise headquarters will admit there are jurisdictions they cannot cross in cases of complaints, misrepresentation, grievances or law suits. If you are North American it is advisable to also seek out North American brokers who understand the North American expectations and who actually have an office and legitimate Dominican corporation. What are the fees for buying property? There are very few fees involved with buying a property in the DR. The average estimate runs approximately 4% to 5% of the agreed purchase price and includes all the legal contracts, registering the sale with the register of deeds. The closing costs include the one-­‐time 3% transfer tax, based on the assessed value V.S. the market value, which can be around 1/3 to ½ of the purchase price (or market value). Condos in beachfront communities assessed values are much higher and may not qualify for the property tax exemption. Legal fees; Let’s use the example of a $150,000 condo (resale or 2nd buyer). The legal fees for both contracts (1st-­‐ called the Promise of Sale; and the final contract called the Definitive), as well as the English translation of the contracts, the Power of Attorney needed to record the sale and pay the transfer tax on your behalf (if you are not going to physically be here); the physical deposit of the sale documents with the register of deeds for the transfer of title, the paying of the onetime 3% transfer tax on your behalf (and properly registering the sale with the tax dept.) will cost around $1,500.00 U.S. CAUTION, if you are quoted lower, beware the attorney may not be well versed in all the real estate laws and taxes… the process may take much longer , the sale may not be fully executed… or the attorney may ask for more later. If you do not speak Spanish, and since all sales agreements are in Spanish, securing ethical and established attorneys who speak, read, and write fluent English is essential! Legal fees can be higher for more complex negotiations or higher sales amounts. Transfer tax Amount: If you are the 2nd or maybe even 3rd buyer, and buying a non-­‐ocean view property in a condo community by the beach; say in El Cortecito, assuming the registration of the former transfer taxes was done at the lower assessed value (not the higher appraised value), your one-­‐time 3% transfer tax rate could be around 40% of the market value (or appraised value); or based on around $60,000 (x 3) = $1,800.00 U.S. Property Tax: This $150,000 example would have a 10 year exemption from property tax as it is under the $6.5 million peso amount, which at the current (Sept. 2015) 45 peso (RD) to $ 1.00 U.S. Dollar exchange rate, $6.5 million pesos /divided by 45, equates to approximately $145,000 U.S. Remember the property tax and one time 3% transfer tax should be based on the Assessed value (not the market or Appraised value). So realistically you might be able to purchase a $300,000 newer condo or home, which still holds a lower assessed value, and still qualify for the 10 year property tax exemption. NOTE; often condos located in beachfront communities in these touristic zones, have a much higher assessed value often equaling the asking price (or market value), so it is highly unlikely buyers will qualify from this 10 year property tax exemption in a beachfront condo community. However, if they are the first buyers, they may still qualify. Insurance: Buying homeowners insurance as part of the closing is NOT a legal requirement here if you are purchasing with cash. However, homeowners insurance is always highly recommended, especially if you plan to leverage as a vacation rental to also cover your furnishings (contents) and to protect you from tenant liability by adding the tenant waiver of liability. For our $150,000 condo investment example, the cost would be around 0.8% of the market value or $1,200.000 annually. Many owners do not over-­‐insure, saving money because properties here are built of solid concrete with lots of rebar… so damage by fire or even flooding are drastically reduced. In almost all real estate transactions here, the sellers pay the real estate commissions. ESTIMATED TOTAL CLOSING COSTS for a $150,000 purchase = $4.500.00 U.S. What are the property taxes like if my purchase amount is over the exempted allowance? For properties where the assessed values are over the 6.5 million pesos (or around $145,000), your property tax rate will only be 1.1% of the assessed / or appraised value. What does the buying process look like? Well this depends on the Real Estate Agency or representative you decide to work with. Since Reliable Realty clients are primarily North American, and because the Broker (Maria) still holds in escrow a U.S. Real Estate License, Reliable Realty instills many of the processes North Americans are accustomed to, so as to eliminate the stress and anxiety of buying a property in a foreign country. We stand by our ethics and reputation in the market by assisting our valuable buying clients all the way from the initial Q&A (research) period, done typically via email and skype calls… to matching our clients criteria’s with the best titled properties. We work hard as your liaison between the sellers, the attorney’s and other needed 3rd parties in all aspects. We not only take the extra time to assure a title is free and clear on the front end, but we also estimate your closing costs, provide a list of estimated cost of ownership (so there are no surprises), and we make sure the sales process is fully executed so our clients can easily attain title. REMEMBER there are no real estate licensing mandates here, silver-­‐tonged agents or sales representatives may not be fully disclosing the full facts about the title situation, taxes, or perhaps even latent concerns (plumbing, electrical or other hidden defects). Credentials: Reliable Realty SRL satisfied OWNER clients have been using our services for several years. Our business comes primarily from our testimonials through word of mouth, repeat business, from our satisfied owners and vacation rental guests. Reliable Realty (as of mid 2015) manages over 70 properties and services over 4000 vacationers annually. Reliable Realty was busy before being selected to participate in 2 episodes of HGTV Caribbean Life, our invite to participate in the IREL podcast (for international real estate investors), or our other print and media exposure. However, these (non-­‐compensation) venues have indeed solidified our credentials. For sure we feel blessed and can sleep with a clear conscience! What are the costs of ownership here? Very affordable! It really depends on your purchase decision, but a $150,000 2BR / 2BA condo across the street from the beach in El Cortcito or Los Corales would look something like this: Homeowners Insurance (approx.0.8% of purchase price (or $150,000) = $ 1,200.00 yr. $ 100.00 mo For full coverage & includes furnishings and tenant liability. This amount can only be paid annually). Most owners prefer not to over-­‐insure and pay less than estimate here… . Condo Fees (includes 24/7 security, ground/ pool maint./ water/ gas/ trash removal exterior lighting/ maint. of other common areas (i.e. lobby) / sometimes internet $ 150.00 mo. Electric (Varies by owners comfort levels on A/C consumption and if the $ 92.50 mo condo is being rented or not) I.e. if rented tenants pay, if no tenants or vacant over 5-­‐6 mos. Of low season (May-­‐Oct) the minimum required to keep account open). If living in the condo full or part-­‐time is approx. $160.00 mo. The amount shown Assumes the condo is vacant 6 mos. out of the year and occupied 6 mos. a year by The owners themselves (not tenants). Cable TV (Silver Cable-­‐ 88 channels, including HBO, National Geographic, etc.) $ 27.00 mo. Cleaning fees (if rented tenants pay if no tenants or vacant over low season) $ 65.00 mo. Misc. repairs/ maint. / upgrades of interior / general wear and tear (estimated) $ 25.00 mo. Is financing available there? Yes, but to be honest, bank loans can be very challenging to secure here for foreigners. Additionally because Punta Cana / Bavaro are not depreciated markets, banks do not need to offer low bank mortgage rates as incentives. Although bank mortgage rates have gone down from 12% in 2007 to around 7% average in 2015, the process does take 4-­‐6 months with request for numerous financial documents and requirements, including a credit report via TransUnion. With this said, most investors purchase with cash… thus sustaining a stronger overall economy and real estate market. There are some owners who will offer private or direct financing with perhaps 40% to 60% down and offer this at lower interest rate; perhaps around 5-­‐6% for 4-­‐6 years. In this case, a “Conditional Sales Contract” would be secured, and the title would be held in escrow with an attorney in case of default. This “direct owner or private financing” works best if the seller is a reputable developer here, or if the purchasers and the sellers are both from the same country so other jurisdictions can be implemented in case of default from either party. Canada and the U.S. or North America do offer real estate investment jurisdiction rights established via the Free Trade Agreement signed in 1988. Can, or should I rent my property when I’m not there? For sure, in fact 7 of 10 Reliable Realty sales, the buyers were specifically looking at purchasing a property that would, in essence, “pay for itself“ via rental income; this one of their top priorities. And why not? It makes sense to purchase now (while prices are still affordable) and to leverage the property as a vacation rental. This income can easily cover the cost of ownership (electricity, cable TV, insurance, internet, condo fees, general repairs and maintenance as well as the Property Management fees. In fact, most owners do even better than that. Keep in mind, the rental income will not provide enough revenue to pay the cost of ownership AND a mortgage… if this were the case, Reliable Realty would just buy them all J ! Extra upfront costs can be saved for those purchasing “turn-­‐key” properties already furnished, accessorized and in our management and rental program. As a bonus, many of these new owners benefit from booked rental income at close. Renting your property is highly recommended not only in revenue, but to also assure your investment is looked after when you are not here. Even if you don’t want to rent it out, owners must realize this is the tropic’s; meaning sun, sand, salt, humidity and insects can cause great havoc to their properties if they are not maintained on a regular basis. Reputable Property Management makes sure the property is aired out and cleaned on a regular basis, the A/C’s and appliances are in good working order, that there are no plumbing issues or leaks (perhaps from a condo above). Additionally, the property is secured against theft and storms. The monthly fee is very affordable and a no brainer. However, most owners understand it is better to have a property occupied because it will get consistent and professional cleanings, that if anything breaks, it is attended to immediately, and A/C’s and appliances actually last longer when they are in use, rather than sitting for long periods of time, thus letting the natural environmental elements eat away at your investment. Of course, securing a reputable Property Manager is just as important as securing a reputable real estate agent (or agency). Some owners think they are saving money by having a “friend” watch or manage their property for them at a lower rate. The saying “you get what you pay for” certainly presents itself often in this scenario… too often “friends” think since the owners are not living here, it is easy for them to either live in the property (without paying), or rent it out without notifying the owner… thus giving them a nice income. Often these “friends” or unregistered managers do not have access to the resources needed in case of an emergency repair… they may not be paying your utilities as promised, causing electric and water shut-­‐off’s. Additionally if they are not a registered company, there is no recourse (insurance) should something serious happen with the property, nor are you protected from possible tax liability like you would be by securing services through a registered tax paying company. “Reliable Property Management Services” uses state of the art property management software, providing you with detailed invoicing statements. RPM can manage all the details of your rental on your behalf, including the payment of utilities, cleanings, repairs and maintenance issues. Property Management fees may vary (i.e. lower rates for owners with more than one property in our care and/ or owners who purchased the property through our agency), but our standard rate is 25% of the rental amount secured. And for those properties leveraged as vacation rentals, we are only paid if we can secure rentals for our clients. Other similar management companies may not offer the same full services and may charge up to 30% or 35%, plus an additional flat monthly rate and bill paying fees. SEE OUR FULL SERVICE OVERVIEW For more details about the buying process, taxes, our properties, and / or our Full Property Management/ Vacation Rental booking services, let’s talk, either by phone, or preferably face to face when you get here! What is a Real Estate Assessment Tour? See the detailed information here ON A PERSONAL NOTE: Although it is smart to do your research, our agency does not take kindly to those who attempt to capitalize from our kindness and knowledge, yet with no intention of buying a property through our agency. We consistently hear feedback about unsuspecting buyers who “think” they purchased a property at a great steal all on their own, or through an unregistered agent, agency, attorney or individual, yet find out later they were lied too and perhaps even ripped off. Not even knowing if they legally own the property they paid for. These self-­‐doers who do not understand the culture or how real estate works here could be in for a big shock! Besides, it is highly probable we can sell the same property they were considering, or a better one. One with a free and clear title too, thus saving them money on the front end, and perhaps the back-­‐end too. We also do not take kindly to unregistered “Get Rich Quick” Real Estate and/ or Property Management Companies who piggy-­‐back off our hard-­‐earned and learned wisdom and business practices. Only to leave the country once they either fall into short-­‐term financial success, or run into unexpected financial losses, thus leaving a messy trail behind them. Maintaining an ethical and Reliable Real Estate Agency and Management company isn’t easy. It takes time, patience, research, a strong presence in the market, solid relationships in the area, combined with good working capital and experience that can only be “earned” by actually living here and through hard-­‐work, sacrifices… then validated through a history of transparent business practices, a long list of testimonials, repeat business, and ongoing referrals. We are a very busy and sought after agency and prefer to spend our quality time and efforts with those clients who are serious and loyal. Therefore, if you are serious about purchasing, we will be happy to spend a half day, a full day, (or more time if needed) in really showing you properties that best meet your criteria’s, as well as the local areas (neighborhoods) and amenities at NO COST However, If you are in the researching stage (which is common), or working with multiple agencies, we do offer our comprehensive Real Estate Assessment Tour at a modest fee to simply cover our costs. The tour includes viewing 6-­‐8 matched properties, exploration of the supporting neighborhoods and amenities, lunch, drinks and a nice usable gift bag. This fee may be waived should you decide to purchase a property within one year after the tour date. A WIN-­‐WIN PROGRAM! For more resources, please see our page “HOW TO RETIRE OR RELOCATE HERE” Disclaimer: While every effort has been made to ensure the accuracy of this information his resource is not intended to provide legal advice due to changes in laws, regulations, prices, market conditions, and because individual situations will differ. If you are considering a real estate investment in the Dominican Republic, your questions / concerns should be discussed with a reputable agent, tax advisor and/or lawyer within the Dominican Republic. For specific advice on the information provided and related topics, please contact Reliable Realty for the most current information. If this information is seen on another agency or person’s website or promotional materials, please notify Reliable Realty to confirm the use was authorized.