7 Hacks to Maximize Your Dominican Investment
Although most of what is written here is common sense, and would be applied with almost any kind of significant purchase through life, sometimes we forget the basics. So use them as reminders on how your investment can be better and in the end do more for you. Our team at DR Property Guys swear by these pointers and will guide you through these steps personally.
Create solid value in your assessment
A property is ultimately worth what the next person is willing to pay for it. That being said there are some properties listed at inflated asking prices, there are also some real deals (almost steals), and then those that are priced just about right. For most non-native buyers, it’s their first experience at buying real estate in The Dominican Republic, and things here can sometimes be quite different to “back home”. Ultimately it’s up to you, the buyer to put a number out there that you are willing to pay, but here are some quick examples of added value that you may not be aware of.
Property Hack # 1.
Elements such as, Mature fruit trees, which instantly provide you with fruit, new ones take time. Views of the ocean or mountains, you would be surprised how much you may end up enjoying them when sitting down on your terrace enjoying a quiet drink. Privacy, can your neighbor see into your yard or is the property located next to a walking path? Does the property come with an energy saving product such as pre-installed solar power or a solar powered water heater? The air conditioners, are they energy efficient or do they pull lots of kws? You get the point, there’s lots to be seen when considering the value of a property.
Property Hack #2.
Property replacement cost comparison. Quite simple to do within a gated development for example, as most properties are built around set models or floor plans. They normally come with a standard sizes lot, and anything above that is paid for extra, in the case of an apartment or condo, it’s almost always the case of 2, 3 or 4 different floor plans within the building. Some properties will have had upgrades made to them, which should be taken into consideration. For property outside of a gated community, it’s good to know the average price per m2 to build new, there are generally 3 quality standards to chose from, all three offer different types of wood finish, ceramics, kitchen/counter tops etc. Add in the cost of plans and permits. It is common that builders deliver new properties after the deadline, take that into consideration too, as a new build will not start making rental income until it’s finished, furnished and road tested.
Property Hack # 3.
Rental Income history. If part of a rental program or privately rented or managed, it shouldn’t be too hard to see what kind of rental history a property has. Take into consideration that a successfully rented property with high occupancy, track record and existing client base, should command a higher asking price for sale. Expect different rates for daily, weekly and monthly rentals. Also expenses or outgoings may change according to the rental periods. It is not possible to ascertain a rental income history of a property where the owner has lived there full time.
Property Hack #4.
Growth potential. It is safe to say, a good % of buyers are looking for “deals” but they aren’t as readily available as some may think. The real estate market in The Dominican Republic can be considered a very safe one, due to the lack of financing provided to foreigners by local banks, it is slim to none. Therefore without the pressure of a bank foreclosing on the property, the need to drop price drastically is avoided. Are you looking at a new build on the last available lot in the community? Are new phases being planned? Is this property being sold under market value due to the owners health, personal or financial situation? Is the purchase you are going to make be affected in a positive manner by these plans? In the end, good, intelligent local knowledge is priceless.
Property Hack #5.
Property inspection. It is not unheard of for buyers to hire private contractors or even handymen to do inspections on properties to see if there are any hidden issues that perhaps you cannot see immediately. Hiring a local trades person to check the roof, sewer lines or electrical for a small fee may well prepare you for the necessary investment to fix any issues, ahead of time. Also, hiring a surveyor to check the property lines or boundaries (not necessary in the case of an apartment/condo) is the most surefire way of making sure there will be no arguments with your neighbor over who’s mango tree that is!
Property Hack #6.
Legal fees and taxes. Be sure to know what you will be liable for in the realm of legal fees and property taxes at the time of making a real estate purchase. Sometimes referred to as closing costs, these will largely include the lawyers fee for doing a title search, contract(s), handling of funds etc and property transfer tax. Although some properties enjoy a tax free title transfer (due to tourism certificate law), this is not the norm. Why you may ask? Well the law regarding this covers only the first initial transfer and the permit for the developers to obtain was costly and time consuming, so although it exists, is in few and far between places. All other real estate transactions are subject to a 3% appraised value 1 time tax, the appraised value may be higher or lower than the actual paid value, but generally is 50% of the real paid value. There is yearly property tax to consider, depending on the value of the property, currently anything registered under 7,710,158.20 DOP (about $150,000) is exempt of annual taxes. There are several ways to avoid this yearly tax altogether, buying as a couple is one way and corporate ownership is another.
Property Hack # 7.
Owner finance – As of 3rd quarter 2018, an extremely popular way to finance your real estate purchase. The average owner finance offering is 50% down, balance payable over 2-5 years at between 6 and 10% interest, 20 year amortization with balloon payment may apply. Find out from your agent if the owner is willing to hold a mortgage for you. Certainly in the higher priced properties, it is more and more common. It is worth mentioning though that the interest rates will always be higher than if you re-financed your existing property back home, and purchased here outright in cash.
BONUS Property Hacks:
How to add value to your property after purchase – 3 quick hacks to instantly add value after the purchase.
1 – Sprucing the place up – you would be surprised at how much a change of paint color can make a difference to the feel of a property, and the price to do so here in The DR is considerably less than in the USA, CAN or UK. Modernizing the drapery, installing new pictures in the living room, adding little bits “here and there” are economical and fast ways to immediately add value to your new property. It is fair to say, that you may be shown places that are almost perfect as they are and may not require such efforts.
2 – Lower monthly running costs – adding a timer to your pool pump, changing old air conditioners to new “inverter” style units, changing out the old fridge/freezer for a more energy efficient model, setting up a sprinkler system, installing an on demand water heater, or just throwing out that old heirloom electric water cooler are just some ways of lowering your monthly running costs. Do you really need 6 day per week maid service or would 3 days per week be sufficient? Same for pool and garden service, does the property merit a full time gardener or could it all be done with 2-3 days per week service?
3 – Increase rental returns through niche markets – catering for certain groups or individuals can have positive effects in the long term. Specially when these people tell their friends with the same interests that your property was perfect for them! It has proven to work time and time again, word of mouth referral among niche markets is probably the most cost effective and powerful way to increase your rental occupancy.
Ultimately, trust and confidence in your broker and legal team are of utmost importance when either buying or selling a property in The Dominican Republic. Rest assured Dr Property Guys are here to steer you in the right direction and to make the whole process as painless and as seamless as possible.