How to buy a house in the Dominican Republic
Procedures regarding purchasing a real estate property in the Dominican Republic can be pretty complicated, especially for someone new to the country and not fluent in Spanish. In this article, you will find out how to go about finding a property, what to be aware of, and how to buy property.
Being one of the most visited places in the Caribbean, it is no wonder that the Dominican Republic has recently seen an increased interest from foreigners wanting to buy property in the country. Loved for its pristine beaches and the joyful lifestyle of the Dominican people, it is also the perfect spot for retirees and active folks, as the Northern coast offers some of the world's best kitesurfing spots. More than 10% of the Dominican Republic territory is marked as a national park or protected reserve; not only can you find world-class beaches but also mountains that offer some hiking fun and jungle adventures.
Why should you invest in a property in the Dominican Republic?
It is a perfect tourist destination with access to some of the world's most beautiful beaches. Visitors find plenty of attractions, hotels, restaurants with high-class facilities, golf courses, etc.
The destination itself is easily accessible from all over the world. US citizens and Canadians will find more than 40 available direct flight options to the Dominican Republic.
The economy is steadily growing; in 2023, its GDP rose 21.7%, and it accounts for the fastest-growing economy in Latin America. As an international investor, you can find many attractive tax incentives in the DR in a country that is so far politically and economically very stable – the Dominican Republic is a pretty safe bet if you want to invest your money.
Can foreigners buy property in the Dominican Republic?
There are no restrictions on foreign ownership of property. Residents and non-residents enjoy the same rights as citizens of the Dominican Republic when it comes to buying property.
In this case, all real estate transactions are determined by law, the Property Registration Law No. 108-05, and its regulations, which have been in force since April 4, 2007.
We have mentioned above that there are some tax incentives for foreign investors. Let's take a closer look at what goodies you get when buying property in the Dominican Republic:
- No income tax on pensions and social security payments from outside the country, thanks to Law 171-07;
- As an international investor, you'll get 50% off the property tax;
- Foreign investors are exempted from dividend taxes and interest income;
- 50% reduction on mortgage taxes if you get a loan from a Dominican financial institution or at least regulated by their national financial and monetary law;
- No tax payment for household and personal items;
- No taxes for property transfers;
- Partial exclusion on payments for motor vehicle taxes;
- No national or municipal taxes for a period of 10 years for developers (Law 158-01).
What is the average price of a property in the Dominican Republic?
One reason to buy property in the DR is the possibly much lower price than you'd have to pay in California, for example.
Back in CA, the average price per square meter was around $315 in 2019 (with a 20% increase from the year before), and you can find properties in the lower luxury range here in the DR for $100 per square meter. Obviously, there are no upper limits when it comes to pricing, and you can also find high-end villas for 9 million USD if that is within your range.
The top three places to buy property in the DR
Depending on what your expectations or reason are to buy or build property in the Dominican Republic, upon your search, you should definitely check out these places:
Santo Domingo
The capital of the Dominican Republic offers a steadily growing infrastructure and the best development in the country. If you are a developer or looking to build condominiums, this will definitely be an interesting zone for you. The combination of new developments with old culture provides the perfect mix for short-term rentals in the tourism sector.
Cabarete/Puerto Plata
The northern coast of the DR is known worldwide for being one of the best tourist areas of the country. This is not surprising at all, as it has been the first zone that established tourism in the DR. You will find all sorts of water activities like kitesurfing up there, which definitely attracts a lot of visitors and, therefore, possible candidates to rent a vacation home. It is also a perfect spot if you are considering moving to the DR yourself and might consider opening up a business in this area.
Samana
This part is definitely up-and-coming as it is still less developed and not as touristy as other parts of the country. If you want to build your personal hideout place, look no further. It is laid back, perfect for a little getaway from your busy life and to enjoy your vacations.
What is the first step towards your dream home?
The first thing to realize is that buying property in the Dominican Republic might be very different from purchasing property in your home country. For example, there is no concept of a written offer. Instead, you find the property you like, and the first thing you have to do is check out the legal situation of the property, as it is not uncommon for people to sell a property that is not theirs to sell.
There are two primary checks to carry out. The first one is to head to the local title's office, check that the person selling the property is the actual owner, and see if there is a mortgage or liens on the property. It will be recorded on the back of the title deed if there is one.
The second check is to go to the taxation office, Impuestos Internos, and check that all taxes relating to the property have been paid. While you can, of course, do this on your own, most people appoint a lawyer to carry out this task.
You also need to verify if an official government demarcation survey has been carried out, known as a “deslinde”.
Agreeing on the price
The price is agreed on verbally between the buyer and seller, which may be affected by any unpaid taxes or liens, and then a Promise of Sale Contract is drawn up by the seller's attorney, and signatures are witnessed by a notary public. It is usual for a 10% deposit to be paid at this stage. Please note that the buyer usually will cover the costs of the seller's attorney.
Other costs to be aware of
Like in any other country, when you are thinking about buying property, the actual costs will be higher than only the property's price.
We've gathered the essential costs that you have to consider as well when purchasing property in the Dominican Republic:
- Fee for the notary (usually between 0.25% to 1% of the property price and paid by the buyer);
- Stamp for documentary (marks 1.30% and is paid by the buyer);
- Fee for the real estate agent (between 5 to 10% of the property price and paid by the seller).
The extra costs that the buyer has to consider sum up to around 4.55 to 5.30% of the property's price, and the seller should expect to pay about 5 to 10% on their end.
The promise of a sale contract
- Full name and particulars of all parties. If the seller is married, the spouse also must sign;
- The complete legal description of the property to be purchased;
- Purchase price and payment terms. Note: Often, the payment terms can be flexible, so there can be some form of owner financing;
- Default clause;
- Date of handing over of the property;
- Due diligence is still required to be done in the case that the checks of title and taxation have not yet been carried out;
- Remedies in the case of misrepresentation;
- Obligation by the seller to sign the Deed of Sale upon receipt of final payment.
Deed of sale
This is called the “Contrato de Venta” and is signed by both parties in front of a notary public and is used to convey the property from the buyer to the seller. In some cases, the Promise of the sale contract does not happen, and the parties move directly to the sale deed.
Appraisal for taxes
The authenticated Deed of sale is then taken to the nearest taxation office, where a request is made for the appraisal of the property. This is necessary to determine if the new owner will need to pay what we call the annual rich tax. If the home is worth above RD 6.5 million (around USD 135,000), the property tax of 1% of the value has to be paid each year. In addition, there is a one-time fee of 3% of the value of the property, known as the property transfer tax. The amount of tax to be paid is determined by an inspector, and the time taken to do the inspection depends on the inspector's workload, which can take a few weeks.
Filing the title deed
Once the tax has been paid, the title deed is filed, changed into the new owner's name, and the new certificate is issued. This will generally take a few months, although you can pay an additional amount for the VIP service, which is faster. However, from the day the title is filed, the property is said to have transferred ownership.
What is a “deslinde”?
Under the new Property Registration Law, the sale of properties without a government-approved boundary, known as a “deslinde”, cannot be recorded at the Title Registry, except in the following cases:
- Sales that happened before April 4, 2007, may be recorded during a two-year period ending on April 4, 2009;
- Sales of the entire property happened after April 4, 2007 (sales of portions are not allowed) just once.
This means that if the property has been sold on more than one occasion since April 4, 2007, there will have to be a “deslinde” done before title registration can take place. This costs around USD 1500 or more, depending on the size of the plot.
Important:
Buying a home in the Dominican Republic can be straightforward, but there can be pitfalls for someone not used to the country.
Facts about the DR
- Population: 11,332,972 million (2020);
- Official language: Spanish (85% of the population are native Spanish speakers);
- National currency: Dominican Peso ($1 is currently about $58.55 Dominican Pesos);
- Climate: Tropical climate; highest temperatures in August, the lowest temperature in January and February; rain season in the Northern part lasts from November to January and in the rest of the country from May to November;
- Entry requirements: No visa is necessary for US citizens, EU citizens, UK citizens, or Canadians, but upon arrival, they have to pay a tourist fee that is currently 10 USD. Some countries, including Argentina, Ecuador, Japan, and Israel, are exempt from that regulation.
Here are a few hints and tips to bear in mind:
- Before purchasing a property, check which electrical circuit it is on – A, B, C, or D. The former has electricity 24 hours a day, but the other circuits do not supply as much, with a D circuit having electricity only around 8 hours a day. If you are not on an A circuit, you will need a backup system such as a generator or an inverter;
- Check the water situation. Is it a cistern, a well, or is there continuous street water? How often does the water go off?
- Is there good cellphone coverage and internet? Which providers work well and which don't?
- Ensure that your lawyer checks that there are no unpaid bills for water, electricity, phone, or internet;
- Is there a rubbish collection? This service is not available throughout the country, and if there is none, you will have to find a way to dispose of your own;
- Is the title deed in the name of the people who now own the home? Given the fact that you have to pay 3% when you transfer the title, many people do not bother to do so when buying a home, and you may find that you are buying from the people who owned the house before the current owners. This is not necessarily a problem as long as you can find the previous owners.
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