Guidance in Purchasing Investment/Retirement Property

Hello everyone, thank you for allowing me to part of your social group.
I am looking to purchase property in Las Terrenas. I am planning to retire to DR in approximately a year and was hoping to purchase a beachfront villa or condo. 
I would like to know if anyone is familiar with and could instruct me on the best way to proceed in getting a loan. I am currently living in the USA where all my funds are located. My funds are mostly in a 401K and IRA accounts. My question I have is anyone knows there is a way that I can get financing/loan in the USA to pay for the house?  If not what is the best way for me to get financing. Any advice concerning purchasing property in Las Terrenas would be appreciated. The property is going to be for living and using as a vacation rental.

I'm in the same boat as you my friend.  Only thing is I'd like to rent in the area I wanna be in before I buy.

I'm in the same boat as you my friend.  Only thing is I'd like to rent in the area I wanna be in before I buy.

First welcome to the forums.

It is darn near impossible to get financing here.  You will need to arrange it there before  deciding what to purchase. 

How much time have you spent here?  Are you really familiar with the area?  We recommend spending  6 months to a year renting before buying. The market here behaves very differently then what you may be used to.

I suggest you ask in the USA how to use your funds there to finance a purchase here. IF you borrow your rates will be significantly better there! 

Others will likely  chime in with what they have done.

And if you really dig and 'get behind the scenes' a la Wizard of Oz, you'll find, I believe, two entirely different pricing metrics.  That's why time on the ground, renting first, is essential in the due diligence process.

Or, if  you have money to burn..... have fun....

Or, if you don't want to do your own DD you can hire somebody to smoke out the unadvertised bargains.

One thing that struck me was the number of 'partial finished' dwellings potentially available at a large discount if you have the right connections to see the construction finished to your specs.

That's going to be my approach.  I have the time and the stomach for it and lack the money to simply pay in the gringo market.

Kind regards,

JR

JR. 

You are spot on.  Partially completed homes only showing bricks N mortar, are prime examples of finding a home.  And they are easily found.  And typically, the owners are easily approachable and anxious to let it go at a very good, low price to recover their investment to date.   

Note.  The buildings were not completed obviously, because the owner did not have the money to finish it.  They will be anxious to talk to a serious buyer so they can recover some or all of their investment.

Finding their owners is not difficult.  Just ask the neighbors.  In fact, I am looking at several in Luperon near where I am currently staying, to purchase them, finish them and flip them.  Two would also make perfect rentals.

Great post JR.

BIG Bob

Thank you Planner and Jaycreynolds for your quick response. I have been spending a lot of time in Santo Domingo where I own two condos which I purchased 11 years ago. I've also been to Las Terrenas but years ago when most of the area was undeveloped. I certainly didn't spend a lot of time there to get a flavor of living in that area. So point well taken about renting first. I was able to get a loan from Banco Popular on one of my condos but the interest rate was insane.  I inquired about a loan in a few financial institutions in the states but none would deal with loans for property in DR. Was hoping that someone may no of a loophole or somewhere I can go to get this loan.

I agree Jaycreynolds, partial finished dwellings would be a great option but I don't know who to deal with for that type of property. It appears that when I mention anything about distressed property or partial finished dwellings most real estate agents appear to not want to bother with that type of property. I agree, that most are trying to sell the widely advertised properties. Finding the right Agent/broker is like finding a diamond in the rough.

I am planning to be in DR shortly and take the advice  you both gave me. If you have any more thoughts or suggestions I would love to hear from you.

Just as a afterthought...Jaycreynolds, I believe from your header, that you are either spending a lot of time in Cabrera or living there. I just recently read a little bit about Cabrera and saw a few videos...honestly it looks like a dream area. I would be very interested with investing there, but I don't know if there is a strong market for short term rentals. But from the videos and what I read so far this area will boom!

JR is correct but be cautious in what you buy unfinished. It will need close survey.

And be ware expats attract a premium whatever you buy from a local. So you deal through a Dominican intermediary without making it known you are an expat. An estate agent is in business to make that premium on you too, so the focus for them will be readily available sales at good market prices and less likely the local deals.

Finding the right accomplice and maestro to do your building work requires local knowledge and time on the ground. The savings on offer are very significant.

I am sure some of the residents of places like Cabrera, Sosua, Las Terrenas and Luperon may be able to help you with local builders and maestros if that is a route you choose. I hope you speak Spanish well.

Great advice  Lennox and JR.

Solomente,  you may be able to leverage your real estate here.  You have history and that will make a difference!     Mortgage rates have  changed a great deal in the last few years.  Take a look at options here using what you already own as collateral. 

Let me know when you are back in SD,  would love to have coffee and chat!

Lennoxnev.

Good advice.  Thanks for continuing my thread by adding critical details.  Muy importante.

The other important point I think, is to say that the obvious places like Las Terrenas, much of the North Coast and Punta Cana already has a lot of expats and indeed Dominicans thinking exactly the same and looking for property to buy and rent to expats in the main.

If I were motivated in this direction my first aim would be to identify where I could get all year round rentals at good prices in an uncluttered market.

My choice would be close to the capital for starters because the middle class Dominicans  are mobile and are out of the city at every opportunity. I wouldn't rely on expats.

A thought.

Google Palmar de Ocoa/Ocoa Bay! And the Airbnb options available. This area is on the up going forward with the new Punta Arena complex on it's way and so close to Santo Domingo, more so when they build the Bani ring road. It is also a lovely part of the country with much to see and do and close to the mountains around San Jose de Ocoa too. There are some nice properties in the area and maybe you could still find a bargain there to buy, refurbish and rent out. But I guess it is out of the expat comfort zone.

And perhaps look at Juan Dolio or Palenque too.

Again good advice.   I  often try to do what others are not in terms of investments.

I live on the east side of Santo Domingo.  The growth in the last  5 years is phenomenal. And it is not slowing down. 

I also would not count on  expats totally for rentals.  Spreading your risk with the local market is worth looking at.

All good INTEL.  However, I am concentrated on Luperon for now and looking at something in Punta Cana for tourists.

Awesome.

Thank you Bob,

As far as I can tell thus far through my limited on the ground research looking at partials (purchase + price to rehab) it's about 50% for less than ARV (After Repaired Value). Could be significantly higher but the key to making it work, at least what I aspire to, is to work in that market learning the ropes and meeting all of the contractors and seeing their work and waiting for the right property to come along.

Until there I rent and keep an open mind lol

Thanks again,

Kind regards,

JR

Good plan JR.

Rather than looking for full blown contractors, find out the local Maestros. These are master builders who can get this official designation through MOPC, Ministry of PUnlic Works. All towns and villages have them and it is often best to work with the local maestro. He may offer a deal of labour only price and you buy all the materials but he helps you with quantities and sources. This is the Dominican way. Larger contractors tend to sub let to maestros. You will need plumbers and electricians as well. Find the local good guys once you choose your location. This way you will buy and build what you want at lowest price.

JR.

You are approaching it the right way.  Rent before making a purchase.

Good luck.  I am always available as others like Planner. 

BUG Bob

I will be using a lot of this advise while searching the various locations. I actually will print out every response and place in folder for future reference. I am so glad I found this site. A wealth of information and great folks with sincerity to help. Thank you to all!

It is our pleasure passing on our experiences and knowledge gained whilst living in the Dominican Republic, so please ask.

If you do decide on considering Las Terrenas further, please reach out. I lived there for 2.5 years and was involved in a major resort development which was to have been branded Six Senses but never came to fruition. Property prices are generally quite high because the area is very popular with middle class and wealthy Dominicans as well as expats. It certainly has a year around appeal with there being both North American and European high seasons in play plus a regular weekend and holiday migration from Santo Domingo. It is also a diverse resort spread over several beaches and some wonderful tropical hillside backdrops so the range of property options is wide. It is different from the East Coast and North Coast tourist models and a longer stay there would be revealing to you. Without doubt it is going to grow as a resort and the Playa Coson area is ripe for the next stage of development. Further afield in the rest of Samana province, Las Galeras with nearby Playa Rincon has long term growth potential but less tourist traffic so that is more for longer term investment imo. And we are not even mentioning Playa El Moron or El Valle (where there is an interesting eco tourist venue with tree house hotel and zip lines through jungle) and so on.

We need to discuss several of the tourist locations you mentioned.  I would like more information.

Fact:  I remain fully committed to Luperon.

The OP is one of many who have plans to invest in DR buying property and rent that property out when not here. The initial idea was Las Terrenas and for which my last reply was focused, but as has been pointed out there are other options including Luperon.

We could provide information on so many locations but lose sight of what the investor wants and must consider and be part of their long term investment plans. I think we have helped in that regard so far in our replies.

The general observation from long term residents is, come here and investigate the areas by renting first and exploring options. I couldn't agree more having traveled the length and breadth of a very  diverse and 'much bigger than you think', DR.

In one sentence I could happily recommend, Santo Domingo, Constanza, Jarabacoa, the South West beyond Barahona, Samana Peninsula, Peravia and Azua, Cabrera, Luperon and even Punta Cana and the towns of Puerta Plata too and more. But it all depends on the potential investor and what they seek. Brochures and online reports,videos and photographs look great but the only sure way to find out is live here for a period.

Maybe let's share our more detailed experiences of places like the Samana peninsula in a stand alone thread so it is easier to find for future readers? I would be glad to offer some more insights into any part of the country if I feel sufficiently well versed, having visited.

Hello all, thank you for having such a wonderful community from which to gain invaluable knowledge.  My husband and I are looking to retire, spending 6 mos abroad and 6 mos at home.  We are still a few years away from retirement, but want to start early, perhaps purchasing now so the property can be paid off by the time we retire.  It appears from the conversations, the best bet is to do extensive research, make local connections, and have financing ready before evening considering any kind of purchase.  We are in the beginning phases but have firmly decided that the DR is the place we want to be having traveled to other Caribbean countries.  There is such a wealth of information, it is almost overwhelming.  That’s a good problem to have! I’m not sure where to even start.  We met with a real estate agent while vacationing recently, but don’t want to jump into the fray without performing our due diligence.  I guess my question is:  Where do we start?  My husband has his heart set on Sosua and surrounding areas.  I’m open to anywhere that is not overly touristy, but has a nice group of expats for support and comraderie.

Welcome honey.  You are going about this really smart! Do your research.

First decide what area. Visit!!! Check various areas out. Come and rent for 3 months or so to really understand what the area is like. 

Keep reading and learning, ask lots of questions!

And thank you for your nice comments!

Welcome honey.  You are going about this really smart! Do your research.

First decide what area. Visit!!! Check various areas out. Come and rent for 3 months or so to really understand what the area is like. 

Keep reading and learning, ask lots of questions!

And thank you for your nice comments!

From all I can tell thus far (and I'm subject to being overruled, gladly by those more knowing) you will find at least the price tiers:

1)  We just got off the plane and are negotiating on our own behalf price...(high retail)
2) We've been here a few months and are just starting to dig into how things work (closer to retail)
3) Been here long enough know the basic numbers and are starting to think that there might be a 50% margin between cost of construction and selling price at 2)  retail or below
4) Understand Maestros and getting a local to make inquiries on my behalf (maybe 25% below retail
5) Meaningful time on the ground.  At this point you are paying X dollars for your education. Every dollar spent equals some %'age saved.  The more you plan to spend the more handsomely this pays off.
6) You get to the $30/sq foot ninja level for a really nice place in a nice place..

Nice to me means somewhat out of the tourist zones  yet amenities in full are nearby.

Welcome!

Pay to spend time on the ground equals X times that down the road.

Kind regards,

JR

JR.

Great post.  Very helpful.  Keep is updated as you learn more intel.

BUG Bob

Jay - now that is interesting!  With a few tweaks that can be said of almost everything here!!!

I will have to copy that and tweak it for life  here.  Thanks honey!!!

It has been my experience that  many unfinished structures may be that way because the builder did not receive proper title to the land when they purchased it. They discover after they begin construction and receive a visit from local authorities that they do not own the land and they then abandon the property. Use a lawyer and insist on receiving a hard copy of the title when making an offer to purchase. 

It has also been my experience that the real estate market is very slow in the D.R. and if you are planning to build or buy, be prepared for the long haul if you decide to sell, unless you are prepared to sell at at a loss. It is a buyers market here in the La Romana, Juan Dolio, Casa de Campo area. Lots of inventory and a limited number of buyers. The place you consider to be paradise today may become your problem down the road. Like everyone else said, rent, rent, rent until you are certain. I am in the real estate business here. I can give you my opinion on any questions you might have. www.stevepakozdy.com

That is likely one of the reasons.  There are many! 

And you are correct,  the market here is very different then other countries and you should understand it at least somewhat before buying!

Not all the unfinished domestic structures have title problems.

Dominicans often acquire land through there family and the first thought they have is to start building a house. But they lack the necessary funds to complete, and so they get the foundation and walls to bond beam built and then wait until they amass further funds before moving onto the next stage. And of course not all find the extra funds and some family crisis comes along and they need to sell. Hence all the 'se vende' signs on part built properties. A lot of the half built domestic structures also belong to the many Dominicans living and working abroad who build stage by stage.

The Dominican way is to build as and when you can afford.

Yes, insist on seeing the hard copy of the title. If you know your vendors of campo land well and know the land is bona fida as we did, the cheap option is to go to a notary public and exchange the purchase sum and have a sale contract signed bu both parties and then go off to the local administration and pay the taxes and get the title changed to your name with a cost of a couple of hundred dollars. I know most expats wouldn't dream of doing this but when you have a Dominican better half, it is too painful for her to pay a lawyer as I wanted, and she proved me right and saved us many hundreds if not thousands of dollars albeit she had a lot of leg work involved. Level 6 on JR's scale

But I wouldn't do it this way in the cities nor more active tourist areas and Steverino is right. But anyway, I wouldn't want to buy in the cities or tourist areas and will continue renting as I have done for years living in Las Terrenas and Santo Domingo.

Yes you must be very careful with  titles and confirmation!

Years ago a lot of construction was started when the peso value fell dramatically and quickly under a previous president.  I remember it at  almost  56 to one in 2003/2004. 

Lots of Dominican families were sending money for construction. Then  the peso was regulated to  its proper level and allowed to  move at a much slower rate.  30 to 1 rings a bell a couple years later.

That stopped lots of investment here!   

Lennox makes good points -  life interferes with people plans and then the project sits!   Inheritance fights slow many many projects down!   

Its not simple to understand the real estate picture here!  Lots to learn and understand, often what it looks like on the surface is very different when you dig in.

Thanks Bob,

Right now I'm on what may be my last crazy oilfield job, this time around Ardmore, Oklahoma.

Last week I logged 104.5 hours.  Glad this is fun and can't wait to get back down there. 

I'm still waiting on my house to sell which is discounted about 30% below appraisal.

See ya'll soon!

JR

I am reading a book...Factfulness..
Explains a lot about the world .., poverty down, health and longevity up...etc
But it alsompoints out how many in the 3rd world are too quick to apply their own values and culture on other ones.

The bldg example is cited.

In some countries/economies/whichever , people save for a house.
Without a bank account they stash the money which can be susceptible to robbery....so they put what they have into the construction.
The materials might get stolen unless used quickly at the site.
Both these facts lead to small build sessions, and are common in many developing countries.
RD is no different.

Just to tweak your mind ...
Which country would you guess has a had a higher % increase in sales in cell phones over the last 5 yrs?
USA or RD?

Fascinating!  Now I need to buy another book.

When you come to live in another country you must park your judgements at the airport. Pick them up when you leave. 

If I had a dollar for every timeline heard: it should be or in my country it's......  Well let's just say I would have a really really big pile of dollars.

Think about it...
No different than a monthly savings plan for retirement, Christmas, anything !

Yessiree girl... check the values at the airport....
Then one you left...

Hey Solo,
I spent 22 years as a Financial Advisor and may be able to shed some light on your 401(k) and IRA situation.  The problem of course, is that drawing money from a Qualified Plan would trigger a taxable event you may not want to endure.  To avoid that, one option is to move the funds to what we call a Self Directed Solo 401(k).  This plan allows the owner to buy real estate properties with the money in the account without triggering a taxable event.  You have to be extremely careful how you set up the account, but if done properly, it is an amazing tool.  There also is a huge difference between borrowing to buy an investment property and buying a residence, so be informed. Also, there are institutions that will lend money to a Qualified Plan to buy property, but they usually required about half down and have to be non-recourse loans (meaning the bank cannot go after anything in the plan except the property).
Sounds complicated? It is, but well worth the time to be educated.  Contact New Direction Trust Company for some great info.  If this works out for you, you owe me a cold Presidente. Here's their link.

https://www.ndtco.com

A couple pointers for financing.  This applied to me (Canadian) but may not be available to Americans.  I owned my property in Canada and had a healthy line of credit against my property.  Basically a pre-approved loan at a very low interest rate.   This is what I used to buy 2 properties in the DR no questions or approval process necessary.  The down-side...when you buy a property in the DR it is better to try and get a mortgage in the DR even if it's only for a few thousand.  The reason being is that the bank will ensure the title is clean and will apply their own lien against it until your loan is paid off.  Builders love to put liens against your property to blackmail you into paying them or losing your property.  Using a bank acts as both protection and insurance that the property will be yours when and if you ever pay off the mortgage.    Use cash as collateral if you have to.  Nothing is impossible.

Some great info here. For Americans the options are different then Canadians which are different from those from England etc etc.

Each of you is responsible for figuring out what is in your best interest.

Great point Mike about Dominican banks helping protect you!  I had not even  thought of that but you are absolutely right!!!!

Hello and agree.  The whole challenge to me seems to be in bridging the gap in the two markets and not walking into a rehab situation without tested resources so that you can plug into their network.

Can't blame the realtors, which of those wants to be doing all of that?

Unless there are running a vertically integrated operation that includes maybe limited development, realtor stuff, condo management, construction oversight.

If you are looking around Cabrera PM me and I can give you a reference that you can check out to your heart's content.  Even if that is not your preferred area I'd think there is a good chance they would know someone in your area of interest with the needed skillset.

Good luck!

JR

Well... be careful

A year ago - I bought a car and  it said financing available
so I thought - Why Not?

Turned down..... I was too old - 69 then

What the hell does age have to do with it ?
I'm not the security for the loan !!!

Live & learn..........life in the DR

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