Puerto Rico Mortgages on Investment property

You will likely have to put at least 20% to 30% down.  I would consider contacting SunWest Mortgage:

https://www.swmc.com/swmc/home_owner/PR … e_loan.php

I worked with Bob Chamorro who spoke good English and was very responsive.  Good luck!

David

The local banks will require 20-30% down payment for the financing. Plus depending the bank, there are other fees you will have to pay. With so mamy default loans in the island you will need to have excellent credit to qualify. Specially for a rental property. Check out Banco Popular and Santander. They are the biggest ones in the island. Also local coops and finance lender but those will charge you higher interest rate.

Thanks Davidtx,


    I was using someone at Popular but the issue i was running into was she seemed very novice to the idea of rental history as part of the qualification process.  I have enough in savings to cover as much as 30% plus down, however she seemed reluctant to really customize the loans for my situation.  I will reach out to the link you provided tomorrow and really appreciate the response.

Scott

Never heard of Rental History used toward loan qualification, I have not seen it mentioned at any of the banks I checked. The practice may not exist in PR, don't know.

You may be able to phase it as a vacation home instead. Since your plan is to spend a few weeks in it a year.

Are you planning on doing short term rentals like AirBNB for example or just rent the unit to locals for 6 months or so?

The reason I ask is because a house left by itself is likely to get broken into and they will steal everything including the nails, cabinets, electrical cables in the walls, lights fixtures, lights, toilet, you name it.

Short term rental requires somebody close by to maintain the property and to meet and greed the vacationers. Long term rental is not as critical as the majority of the standard maintenance could be passed to them.

Be wary of long term rental, it is hard to kick them out if they don't pay or do major damage to the property. They could stay for close to a year without paying rent and who knows what damage they may do just to piss you off.

With short term rentals like AirBNB there is a contract in place and their credit card, if they leave later than agreed you can legally have them charge the credit card, the same for damages.

I would not be comfortable doing long term rentals, the next time you visit you may not be able to use the house as the previous renters may still be there or they may have sub-let to somebody else or the local drug lord.

Sorry, not very trusting, we in PR tend to always look for an angle on how to get around rules and I know that.

Thanks for the reply Rey.  I would be renting it AirBNB style with a property manager.  The unit is in a condo with restricted access and security.  I do appreciate the potential pit falls you mentioned.  We manage a few properties in NJ that are some longterm and some AirBNB style.  The short term is always the easier of the two!

Thanks

Scott

I am glad you have experience and have a plan. Unfortunatly many of us never heard of rental history as a way to get a loan, good luck and happy renting.

Im not out of the woods yet.  The link that DavidTX gave me was the one bank that would consider rental history to qualify for the loan.  Normally its done with tenants and a year to six month lease, however i will be looking at seven day rental history.  Believe it or not but the sellers are the ones who are reluctant to give me the rental history of the unit!  If it doesnt come through our dream of buying in PR will be put on hold.  I could buy the unit with cash but due to the current situation in PR i feel its too risky.  Thanks again, this forum is a great avenue with a wealth of information.

Scott

They will not give you the rental history probably because they rented under the table and are afraid the government may come after them for back taxes if they have a record with the bank of how that property was rented in the past. I could be wrong.

A lot in PR happens under the table, including jobs rentals, etc.

I plan to invest in property also, but I will be living in PR first and able to do the maintenance and cleaning needed. My aim is mostly to pay for the property from the proceeds, not so much as a way of life but as creating value for the future. A little extra income won't likely hurt.

I just have to keep the wife from buying too much thru Amazon and we will be fine even without rental property.

I am curious about rental occupancy rates for beach property.   Is there a way to research the average occupancy rates?   I'm contemplating developing a couple of rental units.  Before I jump into such a project, it would be a good idea to know what to expect in terms of future rental income. Any suggestions would be helpful. 🤗

On talking with others about properties within 10 minutes from the beach, not on the beach, it seems some people have 80-60% occupancy most of the year. The highest seem to be between Dec and April.

Beach front will likely be higher. Check with people that have property in AirBNB, they should be able to give you an idea of how often they rent and which are the weakest months.

According to the people I talked to a lot of times the rentals are 1 to 3 days, but because you charge a cleaning fee, it works well. A lot of people want to try an area for a day or 2 then move to another area or go stay at some of the islands.

To be on the safe side count on 50% occupancy, that is 182 days a year to pay the property, maintenance and make a profit.

Also a typical practice is to rent with a discount based on length of stay, so 1-5 days normal rate, 6 days 10% discount, 7 days same as 6. Then another discount on 2 weeks and another discount on a month (say same as 25 days).

So lets take a mortgage of 500 a month, with 15 occupancy, you need to basically charge about 34 dollars a day to pay the mortgage, but likely you will charge around 100. The take would be 1500 a month minus the 500 mortgage would leave you 1000 in profits which you can use or apply each month toward the mortgage so you can pay it off faster.

A 800 mortgage would require you to charge a minimum of 54, but you can rent for say ... 150 a day so your take is 2,250 - 800 which means a profit of 1450 a month.

Taxes for rental are separate and payed by the customer, they are 9% I believe. I am not counting for property tax since it all depends but a property valued at around 120k will likely only pay based on a 60k value so it is not bad.

Remember all numbers above presume your are only renting the place 15 days a month, every month.

Hello everyone, used to work in Santander Mortgage until 2014, 20 yrs experience in mortgage and real estate ..having a large down payment always is a positive, our banking is pretty much like any state but banks might put their own seasoning, expect to have good scores, reserves and a steady job..and voila you are an owner..if you or anybody else need assistance feel free to contact us..tks

Right now, I would not recommend Santander.  I have a close friend with a credit score of 800, a substantial cash down payment and a guaranteed steady income.  They made her jump through hoops to get a mortgage. They kept on asking for the same information, some of which she faxed directly from  a Santander Branch.

Thats what I meant by own seasoning..sometimes irrational.. currently a mortgage can take 30-90 days and expect a lot of paperwork..feel free to ask anything

What sort of paperwork do they ask for a typical home mortgage?
Are the interest rates different for a second home / investment property?
Do they ask for additional paperwork for an investment property?
If one is retired, with a set income, how hard is it to get a mortgage?
If you have a piece of land already and want to build a house in the land, what sort of loan you need to get to do the construction?

ReyP good ones..

What sort of paperwork do they ask for a typical home mortgage?
income, savings, property info, legal 

Are the interest rates different for a second home / investment property?
Second and investment loans are riskier hence higher rates or points

Do they ask for additional paperwork for an investment property?
Not neccesarly but nowadays underwritters can ask for anything that make them comfortable approving a loan anything

If one is retired, with a set income, how hard is it to get a mortgage?
Same as employed

If you have a piece of land already and want to build a house in the land, what sort of loan you need to get to do the construction?
Construction loans that are converted to a regular mortgage when construction is done

Typically good credit solid income healthy savings will get you a loan, which by the way will be as complex as your life is..so stay financially easy to see and understand the more tricks you play the more you'll need to explain, will need more explanations and paperwork

At the end mortgage is not a right but granted

Based on our experiece when we decided to build the house. We check with a local bank, the construction loan had between $3-4K in fees and stuff they charge plus higher interest rate, then after the house was built, they wanted to charge more fees on top to convert the loan into a mortgage loan. We have good credit, the property was paid off and in our name plus we have other paid off properties.

At the end we calculated almost $6k in fees and over charges the bank wanted to charge us. They even wanted to charge a fee to run a credit score. We save that money and built the house using cash over almost a year period. If you have the means safe yourself the headache and over charges, use cash, get a personal credit line, or get a loan towards your 401K.

Maybe other folks had a different experience, we certanly did not expected the local banks to charge so much. I had mortgages for my houses in the mainland and the charges were never that outrageous.

Cash is king and will continue to be king for a long time in PR.I plan to build based on cash, and use mortgage to fund 1-3 investment properties.

Since the grey economy of the island mostly works on cash, it will be king for a long time. But some of the members here will need a mortgage of some kind, so it is important they learn about the process, cost and paperwork.

Had the banks not made so many bad loans, there would be less of a reason for them to be so picky. Their greed and a bad economy got them there in my opinion.

Thank you for mentioning the line of credit. I agree with setting up a line of credit before you come to PR.  I did this when I bought my first property here in PR and I did it again  in 2014.  It was much easier to get this done  in New York with my Credit Union with whom I had a thirty-year relationship.  Also got better rates. As another safety net, which thankfully I have not needed to use, I set up something with my Credit Card company, just in case some very big disaster occurred.

Hi Sitka,

     I own a single family home with a pool that sleeps 6 in Arecibo that I rent as a vacation rental property. It's a little less than a 10 minute drive to the beach. This past year was our first year renting it and we had, on average, about a 75% occupancy rate. Sept-Nov were the only months that were slow and even then we did over 50%. We don't do shorter than 3 day stays because we aren't living there yet and with the cost for our caretaker to clean and reset the house it doesn't make sense. But, if you will be there to handle the property yourself, you may be able to fill some days in between reservations with 1-2 night stays, bringing your occupancy rate up higher.
    The biggest thing before purchasing or building a vacation rental property is to know your competition. Go on Homeaway, Airbnb, and Tripadvisor and look at the prices and rental calendars of properties close by, similar to the ones you're interested in investing in.
   In my area, single family homes seem to do much better than condos or apartments, but I know it's different in other areas.And know your target market. In winter, we got mostly mainlanders just on vacation. Last summer and the reservations for this summer  are mostly native islanders wanting to get away from the city for vacation and people coming back to the island to visit local family. So it might make sense to advertise in a place like classificados online if you have trouble filling dates in the summer.
   I'm still pretty new to renting a vacation property in PR, but I've learned a few things over this past year that Id be happy to share. Feel free to contact me with any questions.