If you’re interested in purchasing real estate in this undervalued island market, here’s how to do it step by step.
There’s no way around it: The last decade hasn’t been easy on the Puerto Rican real estate market.
Even before the island was devastated by Hurricane Maria, Puerto Rico had been struggling with an economic downturn since the real estate bubble burst in 2008. The storm, which generated an estimated $90 billion in damages, caused home prices to drop 15%. On average properties were now valued at 48% of what they were worth before the 2007-2008 recession. One could conclude the timing today may be excellent to find a bargain deal in one of the Caribbean’s most beautiful and diverse islands.
But in the face of hardship, Puerto Rico seized the opportunity to rebuild its infrastructure with stronger, permitted, and modernized real estate. In the two years after the hurricane, the island’s housing market saw a 78 percent increase in new home sales and a 17 percent increase in the sale of existing properties.
Real estate investment interest in Puerto Rico continues to increase—and it’s easy to see why. In addition to consistent 80-degree weather, glimmering white sand beaches, and surf-able waves, Puerto Rico appeals to investors with a number of logistical perks.
For starters, Puerto Rico is a U.S. territory, meaning U.S. travelers can visit freely without needing to obtain a visa or even having a passport. U.S. visitors will find that their cell phones even work upon arrival so no SIM card is needed. The country has also stimulated demand with a series of housing stimulus measures and tax incentives—like Act 22, which grants individuals who gain Puerto Rican residency a 100% tax exemption on Puerto Rico-sourced dividends, interest, and certain capital gains.
As the island prepares to reopen after COVID-19, real estate investors have a unique opportunity to capitalize on the island’s relatively untapped short-term vacation-rental market as the local economy and real estate market regain momentum. If you’re interested in purchasing real estate in this undervalued island market, here’s a step-by step guide for how to do it:
Step 1: Choose your location
Amid warm white sands and thick green rainforests, Puerto Rico is home to lively cities, sleepy beach towns, and everything in between. To help you find the right area to purchase property, take a look at some of our favorite spots:
- San Juan. Settled a century before the colonists landed on the Mayflower, San Juan blends rich history with cosmopolitan energy. The city is a network of vibrant neighborhoods with world-class restaurants, trendy nightlife, and sleek shopping plazas. To the north of the city, you’ll find luxury resorts overlooking pristine beaches.
- Rincón. On Puerto Rico’s west coast sits Rincón, a laid-back beach town popular among surfers. In addition to trendy local restaurants, the shore is lined with elegant beach houses. Rincón is also served by the Rafael Hernández Airport (BQN) which has direct flights to and from the US with American and Delta airlines.
- Humacao. Humacao is where you’ll find the famous Palmas del Mar, the island’s largest luxury resort. Palmas del Mar features two golf courses, a marina, a spa, and a casino, in addition to an array of restaurants. Investors can purchase villas within the resort or branch out to the many other housing options in the surrounding Humacao area.
Before choosing a location we recommend you spend a week or two exploring the island. Visiting the different areas lets you discover the best neighborhoods and get a feel for things like walkability, safety, beaches, and vibe.
Step 2: Find a local real estate agent
Once you have a location in mind, research real estate brokers who are familiar with your chosen area. A local agent will counsel you on local lifestyle and cultural concerns—such as whether the neighborhood is family- or vacation-rental friendly.
Make sure you work with a reputable real estate agent who speaks fluent Spanish and English. Keep in mind that buyers’ agents are rare in Puerto Rico, so your broker will likely represent both you and the seller. And because real estate agents typically work from their own portfolio of exclusive property listings, you may have to meet with several different real estate agents until you find a property you like. Let us know if you need some help in finding a qualified realtor.
Step 3: Inspect the property
In Puerto Rico, properties typically sell as-is. While you can request disclosure from the seller about repairs or issues, it’s a good idea to have the property inspected. In addition to personally touring the property and its facilities, we recommend hiring a licensed professional to do a complete inspection.
Step 4: Make a Downpayment
Once you have decided to purchase a property, you will need to put down a non-refundable deposit. Expect to pay a downpayment of 5% of the purchase price, which your broker will deposit in a trust account.
Step 5: Close
The closing transaction can be complicated and time-consuming, so we suggest hiring a reliable bilingual lawyer to help you navigate the process. In the absence of a buyer’s agent, a lawyer can be extremely valuable when it comes time to review purchasing contracts and explaining different fees.
In Puerto Rico, the buyer’s journey may take a little longer than you are used to, so be prepared to go into the process with plenty of patience. The reward—a luxury property on an incredible island—makes the experience more than worth it.
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