Should I Invest in Dominican Republic?
Member since 2021 · 10 posts · 8 votes
Hello!
I'm a new investor and I have some to little experience in real estate. I've a few properties in the US I'm currently managing and I'm thinking about purchasing my next property in Punta Cana, Dominican Republic to put it on Airbnb. This will be a brand new property, I have plans to hire an interior designer to make it irresistible for tourism. It's very close to the beach/airport and I am getting a great price for it. However, I have a concern; I don't live there, I will be managing it from Texas. My parents live in Punta Cana so that will make things a bit easier.
I'd like to get some input from experienced investors. Any advise on long-distance real estate investing? Anyone that has invested in Dominican Republic that may have some info/lessons learnt/experiences to share?
Thank you!
Fernando
The Dominican Republic can be a great place to invest but, personally, I'd avoid Punta Cana.
Two years ago, during a meeting I had at the Ministry of Tourism in Santo Domingo, one of the head honchos there clearly told me "If I were you, I wouldn't invest in Punta Cana". Now, he's responsible to bring tourism and investment into the country so why would he say that? Punta Cana accounts for 66% of the country's tourism. This is very unhealthy so the government is now investing elsewhere now and Punta Cana is pretty much done anyway, as the path of progress pretty much has run its course there.
That's not my main problem with Punta Cana though. Punta Cana is first and foremost an all-inclusive destination and there's no way an Airbnb can compete against those. There is nothing much to do in there apart from the beach and partying and therefore there's no drawbacks to be in an all-inclusive and no advantages to be in an Airbnb. Many people go there in (large) groups, which most short-term rentals can't accommodate. Finally, most people I've met in the country (and elsewhere) who love to stay in short-term rentals and dislike all-inclusive generally dislike Punta Cana.
If you buy an expensive luxury villa, it's another ballgame as you might escape the competition from the resorts. In such a villa, a nice interior design could make a difference. But in a condo, unless it's a very expensive luxury condo, I doubt that your typical renter would care too much about and pay a large premium for a beautiful design. In that category, a "special" design might be counter-productive as some people might like it. Moreover, many people say that a more neutral design is appropriate.
I'm not so sure the location is such a great deal, wherever it is. Any property in Punta Cana is close enough to the airport and when it comes to the beach, what makes the most difference is whether it's beachfront or not. Yes, barring being beachfront, being close to the beach is great but Punta Cana isn't a big city and most short-term rentals are close to the beach too. Whether you're one block away rather than two blocks away won't make much of a difference and won't justify a significant premium.
If you want to go ahead, having your parents on the ground is definite a positive if they can help with the management.
The Dominican Republic can be a great place to invest but, personally, I'd avoid Punta Cana.
Two years ago, during a meeting I had at the Ministry of Tourism in Santo Domingo, one of the head honchos there clearly told me "If I were you, I wouldn't invest in Punta Cana". Now, he's responsible to bring tourism and investment into the country so why would he say that? Punta Cana accounts for 66% of the country's tourism. This is very unhealthy so the government is now investing elsewhere now and Punta Cana is pretty much done anyway, as the path of progress pretty much has run its course there.
That's not my main problem with Punta Cana though. Punta Cana is first and foremost an all-inclusive destination and there's no way an Airbnb can compete against those. There is nothing much to do in there apart from the beach and partying and therefore there's no drawbacks to be in an all-inclusive and no advantages to be in an Airbnb. Many people go there in (large) groups, which most short-term rentals can't accommodate. Finally, most people I've met in the country (and elsewhere) who love to stay in short-term rentals and dislike all-inclusive generally dislike Punta Cana.
If you buy an expensive luxury villa, it's another ballgame as you might escape the competition from the resorts. In such a villa, a nice interior design could make a difference. But in a condo, unless it's a very expensive luxury condo, I doubt that your typical renter would care too much about and pay a large premium for a beautiful design. In that category, a "special" design might be counter-productive as some people might like it. Moreover, many people say that a more neutral design is appropriate.
I'm not so sure the location is such a great deal, wherever it is. Any property in Punta Cana is close enough to the airport and when it comes to the beach, what makes the most difference is whether it's beachfront or not. Yes, barring being beachfront, being close to the beach is great but Punta Cana isn't a big city and most short-term rentals are close to the beach too. Whether you're one block away rather than two blocks away won't make much of a difference and won't justify a significant premium.
If you want to go ahead, having your parents on the ground is definite a positive if they can help with the management.
@Mike Lambert did the Minister mention where the government might be investing instead?
We really liked the Las Terrenas area.
Pretty much everywhere else because they have to reduce their dependency on Punta Cana.
Las Terrenas is my favorite area and I've been working on a project there. They built a new airport close by a few years ago. There are direct flights from Canada and Europe. Jet Blue was going to start direct flights from the US but that might have been put on hold because of the pandemic. They also built a motorway with the Colombians that connect the town with the capital Santo Domingo and its international airport. This gives easy access to the (wealthy) people from Santo Domingo for their weekend and holiday outings and to the foreigners landing in Santo Domingo. Once the government invests, the private money follows and that's happening.
Just to set the record straight, I didn't meet with the Minister himself. While I have strategic connections and had the privilege to get a one-on-one meeting with one of the head honchos at the ministry, I'm not important enough (yet) to warrant a one-on-one meeting with the Minister. :)
When I lived in Santo Domingo I liked to rent vacation homes in Casa del Campo, and I think Casa del Campo is almost all vacation rental homes. When going to Punta Cana I would always stay in resorts. I agree that a STR in Punta Cana would not be desirable to most folks and that would be a tough investment.
You are 100% right with everything you mention. The thing is Casa del Campo is a totally different market and properties are much more expensive there. You'll make much more money there renting but, given the property prices, I doubt it'd be very profitable investment either. Most owners there are wealthy Dominicans, who don't really care about the rental yields of their properties, let alone renting them at all.
I just purchased an oceanfront penthouse in Guayacanes (not exclusively as an investment property, but also for enjoyment). They are improving the highway from the airport along the southern coast, so hopefully more building and investment along there will continue to come. It's very convenient for Santo Domingo and the airport (SDQ).
Congrats for taking action. In the region, I'm more concentrated on Mexico, which I believe has even more potential, as confirmed with my pals who work at Airbnb. Yet, the Dominican Republic is a great place to invest and visit and I'll be back soon. Also, combining investment with lifestyle is awesome!
Enjoy your property and don't forget to send us a house-warming party invitation! ;-)
"I'm more concentrated on Mexico, which I believe has even more potential, as confirmed with my pals who work at Airbnb."
Thanks Mike. Working on getting it all buttoned up asap. :)
The Mexican government, through its national fund for the promotion of tourism (Fonatur) has been the master at creating trillions of dollars of real estate value out of thin air, in the good sense. The best example is Cancun and the Riviera Maya. Back in 1969, Cancun was just a coconut plantation. Since then, the Riviera Maya has become one of the world's most visited tourist destinations.
Front-running Fonatur has been a hugely successful investment strategy. We know that they're still investing and planning to invest billions of dollars in Mexico's well-established destinations: the Riviera Maya, Puerto Vallarta - Riviera Nayarit and Los Cabos areas so one of the strategies is to invest in one of those areas. They seem to plan to make the Riviera Nayarit one of the world's main tourist destinations. All these areas have a well-established short-term rental industry so you can get great cashflows while you wait for your properties to appreciate in value. Obviously, this assumes that you buy the right properties at the right prices, as properties won't necessary go up in value indiscriminately.
Fonatur's strategy is so successful that they're clearly gonna keep ringing and repeating it in new locations. So an alternative strategy would be to invest in one of those destinations ahead of Fonatur and you could strike it rich. Mexico has very long coastlines though so you can't just bet but you could strike gold if you get it righted we're making best use of our local connections to find out before the word gets out. However, that strategy tough necessitates a (much) longer time horizon and is obviously riskier and you won't generally great rental income while you wait, if any.
The Mexican government, through its national fund for the promotion of tourism (Fonatur) has been the master at creating trillions of dollars of real estate value out of thin air, in the good sense. The best example is Cancun and the Riviera Maya. Back in 1969, Cancun was just a coconut plantation. Since then, the Riviera Maya has become one of the world's most visited tourist destinations.
Front-running Fonatur has been a hugely successful investment strategy. We know that they're still investing and planning to invest billions of dollars in Mexico's well-established destinations: the Riviera Maya, Puerto Vallarta - Riviera Nayarit and Los Cabos areas so one of the strategies is to invest in one of those areas. They seem to plan to make the Riviera Nayarit one of the world's main tourist destinations. All these areas have a well-established short-term rental industry so you can get great cashflows while you wait for your properties to appreciate in value. Obviously, this assumes that you buy the right properties at the right prices, as properties won't necessary go up in value indiscriminately.
Fonatur's strategy is so successful that they're clearly gonna keep ringing and repeating it in new locations. So an alternative strategy would be to invest in one of those destinations ahead of Fonatur and you could strike it rich. Mexico has very long coastlines though so you can't just bet but you could strike gold if you get it righted we're making best use of our local connections to find out before the word gets out. However, that strategy tough necessitates a (much) longer time horizon and is obviously riskier and you won't generally great rental income while you wait, if any.
You're welcome. And yes, nothing replaces boots on the ground. One of the things I learned from my first trips years ago is to make sure that I'm well prepared in advance and have done my homework to make the most of it. Alternatively, your first trip could be a nice holiday in which you could include a real estate component and later take it off your tax bill. In any case, I'm happy to point you in the right directions if it helps so feel free to reach out to me in private.
Owning land in Mexico is basically the same as in the US. However, as a foreigner, you aren't allowed to own any real estate under your own name in the so-called forbidden/restricted zone, which covers all areas within 31 miles of the coasts and 62 miles of the international borders. You can go around that restriction legally by investing through a Mexican corporation or a bank trust (fideicomiso). The latter is more cost effective if you buy only one property. Basically, you'll pay a small fee for a bank of your choice to hold the property title in their name for you. Aside from that, you'll have all the rights and obligations of owning the property and the bank has none. The trust is for a period of 50 years renewable. In very unlikely case of the bankruptcy of your chosen bank, your property is protected as the bank doesn't. You'd just need to go to another bank.
Some people don't like the bank trust but that's only because they don't understand it. Owning through a bank trust is actually better than owning in your own name because it provides you with asset protection included. Indeed, if you don't tell anybody you own the property, they can't find out because it's under the name of the bank in the property registry.
@Mike Lambert
Forgive me if you have alreay answered this question. I read in the comments about STR in Punta Cana. I am interested in investing in a STR as well, but I am having trouble deciding where. I totally agree that Punta Cana is done and there is too much competition. I was actually looking at: Puerto Plata or Santo Domingo. What is your opinion on investing in these cities?
The fact that Punta Cana is "done", meaning that's a mature market, is not the main reason why I'm not a big fan of it as a location for short-term rentals. It's because foreign visitors mainly go there for the all-inclusive resorts and it's therefore difficult to compete with them.
Puerto Plata and Santo Domingo could work. On the one hand, Santo Domingo is great because it has a mix of business and tourism but, on the other hand, I'm not sure tourists spend entire weeks there so, personally, I prefer the beach destinations.
Competition is a good thing. It confirms what’s in demand.
Punta Cana and Santo Domingo is great but the next best wave will be in Puerto Plata.
Always go with a property that’s within walking distance of the beaches. If you need boots on the ground, I can help.
The best place to invest is PUNTA CANA
I have properties in punta cana which is the best place in the Caribbean where you can build good equity and has the best return on the investment.
I invest and I live in DR, PUNTA CANA
if anybody need information, need contacts, need a good realtor or would like to share information pls let me know
The fact that Punta Cana is "done", meaning that's a mature market, is not the main reason why I'm not a big fan of it as a location for short-term rentals. It's because foreign visitors mainly go there for the all-inclusive resorts and it's therefore difficult to compete with them.
Puerto Plata and Santo Domingo could work. On the one hand, Santo Domingo is great because it has a mix of business and tourism but, on the other hand, I'm not sure tourists spend entire weeks there so, personally, I prefer the beach destinations.
I live in DR and I do investments in the USA and DR. In punta cana, there are 103 all-inclusive resorts but remember there is a market for everybody there are people who don't like it and just preferred an Airbnb and that's a good income everything depends on your cristal clear criteria.
You have different methods to invest, you could invest in houses, apartments, commercial, and industrial. everything depends on your pocket and what you want.
I build apartments to rent and I build houses to sell which I get my capital to re-invest my goal is to commercial properties to rent cause only to get an idea for a 150ft commercial you can get a payment for 2k and so on
as I told you before everything depends but being honest punta cana is the best place to invest in the Caribbean
By the way i am open to partnering
Any recommendations for realtors near Puerto Plata? Looking to potentially build a spec house and /or buy villa for air bnb