Puerto Rico Investing

[Steven Segal]

I have been interested in Puerto Rico for awhile, but I would like to get some people's insight to what is going on there with real estate prices.

1. As there isn't a good MLS or records search to comp, how do you go about making sure there is good pricing? It seems pretty risky to just find a realtor and expect good results as they obviously get paid on sales.

2. Where are prices at for homes compared to a year ago? five years ago?

3. For commercial, what cap rates is the island running at?

4. For debt, are people looking at PR banks? What are standard interest rates?

5. What do you see as the opportunity right now?

[Lawrence Johnson]

Hi @Steven Segal, I am a local lender here in Puerto Rico and can address some of your questions. 

Finding data for comps online can be difficult. The MLS is here and continues to improve, but as you have seen it isn't a good resource to utilize especially outside of the metro area. I think here it is very important to select a specific area of the island to concentrate on. PR has a vast array of opportunities but presently I think to make a sound investment decision it requires boots on ground to get a feel for the specific town or area you find most appealing and marketable and do your own research there with professionals in the area ( real estate agents, attorneys, property managers etc). It takes a little more leg work and more patience than you would possibly ever image ( as overall true customer service is a bit difficult to find......but is here) however there are multiple deals to be found.

Prices vary depending on location. I basically cover the entire main island including our two main neighboring islands of Vieques and Culebra. Property Values as a whole I feel have stayed steady over the past 12 months even with the storm. In the immediate aftermath of the hurricane there were a number of very motivated sellers ( and there still are many today) that unloaded their properties at superior discounts, you also have a wide range of bank owned properties here that are also available at a supreme discount, but again these deals aren't easy to uncover. Some tourist areas I feel have seen an increase in value over the past year, but with a lack of a strong MLS its basically a matter of "how much are you willing to pay"....name your price and see what the seller will accept regardless of the list price.

Banks do lend here, there is not a wide range of products to offer such as in the states but many of the same basic loan programs ( 30,15,10 YR FIXED Conventional , FHA, VA,) exist. Rates are a bit higher than you would see in the states, and depending on the state you are coming from closing costs may be a bit higher than what you would see stateside.

I'll end with this though, from an investor stand point I feel short term rentals are dominating the market here. AirBnb and other similar options are basically what all of my clientele  are purchasing properties to utilize  these days. Typically multi-units in close proximity to the beach or condos on the beach have been the most popular. Its becoming easier now to get the rental data on specific areas and the tourists are coming back. There are also a number of tax incentives that are bringing more small business owners to actually consider relocating to  the island ( and they all need to rent prior to finding the place they want to  permanently reside in and a number of people that left immediately after the storm are returning as well. 

All in all I feel the current opportunities as well as the future potential far outweigh the risks of re investing here. 

I wish you much success if you do end up pursing something here and know you have a resource to turn to .