Thinking of Purchasing 2 Bed Villa in Res Hispanolia as Rental Unit

I'm not familiar with the residencia or Sosua, but I'm wondering how much you think your villa would rent for. If you want to clear $1000 per month after paying HOA, utilities, maintenance, pool servicing, property management (you need someone local to handle issues as they come up - trust me, there is only so much you can do when you're out of the country), gardening, etc., then you're monthly rent is creeping up pretty quickly.

I'm hopping to average in the year 24k per year so average 2k a month.

I spoke to another villa owner told me take $100 a day and occupancy at 70 percent so that would be about 25,550.  So I rounded down to 24000. He was at casa Linda similar style villa but location is worse as car is needed to.go anywhere. So I'm assuming I'll rent easier at the place I'm looking everything is walking distance.

I also accounted $1000 for expenses per month. Hoa is 350 I do have a guy there who will clean pool for me for $125 a month. So $475 and then I calculate another $525 for insurance electric and other maintenances.

I hope I'm over estimating expenses and underestimating revenue

What do you think. I own a triplex in Canada so I have an idea about managing a rental . However I understand that the RD is completely different and as well as holiday rentals are a diferent beast altogether. 

Am I being realistic in your opinion

If  you like to read, get a copy of a book called Lifestyle Assets, it is a little simple but it will help set the table. If you look at rent roles, subtract for the cost you mentioned plus plus plus, items such as replacement cost of of appliances furniture, repair, think in terms of 50.00 per bedroom, so two beds 100.00 a month. Property management, a fee to acquire tenants put all the numbers on a spreadsheet and the answers will guide you as to if its a good deal or otherwise. Vacancy is a real percentage too, I have a background in: Tech, Business & Apartment buildings. Hope this helps.  All the best, Bobby

And  70% average  occupancy is very aggressive. I do not believe that for one second.

High season runs  near Christmas to after  Easter. Maybe  80 to 90 %

Summer high season  may be  mid June to early September. Maybe  60 to 70%

Shoulder seasons are both in between the above.    MAYBE  20 to 25%

I have only one example of a rent roll it it was 48% occupancy In  a vacuum that means almost nothing.  That being said, its not 70% for sure.

First i would really like to thank you for taking the time to reply. I will def check out that read you suggested.

Hi thanks for replying.

So based on your numbers I would say its more like a 50 percent occupancy if I average it out.

In your persoanl opinion do you think rental unit in touristic area a good investment?

Do you have pros and cons you can help me understand.

Do you have any personal experience in this area I could learn from?

All information is appreciated thanks a million!

My first advice is never ever invest in what you do not fully understand. Take your time to learn about this and learn about real estate investments as a whole. Then learn about this area in particular

My new friend, I am with “Planner” on this. I understand your anticipation & joy trying to make this a reality. This exact opportunity, I can’t say.  In general yes run the numbers lead with your head and not your heart. 

I am new to this group but not to the world (age 64) if you want to continue here that works but if it’s too detailed for this area reach out via private message as long as that’s permissible.


Bobby Maurone

So regarding real estate investments. I have some knowledge. Bought my first building at 27. Currently own a triplex for rental and own my own home and have bought and sold few homes at a profit over past decade. I have done well here in Montreal Canada. My father owned several buildings so I learned a lot from financial and maintenance side.of things. However, the DR and Canada are extremely diferent and long term and short term vacation rentals are very different also. That's why I was looking for actual feedback from people who have experience to help me learn and better understand real life experiences.

So anyone who has actual experience owning and operating a vacation rental in Dominican and better yet sosua would be greatly appreciated thanks again everyone

The info you are getting is good information.  A couple of things not yet mentioned for you to consider:

taxes on the property -  A 1% annual tax is assessed on real estate property owned by individuals. ...  For built lots, the 1% is calculated only for values exceeding RD$6.5 million pesos or ($133,000 US)
For unbuilt lots, the 1% tax is calculated on the actual appraised value without the RD$6.5 million pesos ($133,000 US) exemption.

Also you should consider the capital gains and income taxes for CRA.

Another issue is resale.  It could happen quickly or my experience has been, it could also take several years.  In case you are thinking "if it doesn't work out I'll just sell it"...

A 200K + property is not something everyone looks for in a rental.  Especially long term.  You need a very aggressive PM to have that rented more than 40-50% of the year.  Longer terms also mean less money per month.

I am not that familiar with that particular area so if someone has better info, please let us know.

Thats some usefull information for me to consider dominicanadamike.

And I appreciate all the feedback from everyone.

Can I ask does anyone have any experience in owning rental properties on the island? And better yet in Sosua/Cabarete?  I would love to get feedback from somebody who have owned and rented.

I am not in a rush to buty anything and am looking for a good investment. It's not emotional because I can just as well rent something when I retire or buy something at that point. It's something for a long term investment and for me to diversify assets and revenue streams. As mentioned I do have experience with real estate and for most part they are all long plays.  I have bought and sold a reposession quickly for a decent profit but that was an opportunity that I did not plan on just opportunity presented itself and I took adbvantage. But in general my real estate investments are for long term. However I know equity doesnt grow at same rate in The DR as it does in Canada. 

So please if anybody with experience owning and renting  would love to hear what you guys have to say.  Thanks everyone~!

Last year I bought two beach front condo's in East Cabarete for both use and rental.  The personal use end has been busy and have had one rental for 3 months.  I bought them right, and same units, in same complex are now 30% higher.  North Coast is growing fast with new cruise ship port, kite surfing, nice beaches, and condo's with small expense ratios.  HOA's, utilities, and security is so cheap compared to any other place in the world.  You don't need much rental income to cover the expenses, and when you sell is where your profits show up.  Mine rent for about $1,000/mo. but are very nice places.  Just to give you a real perspective on properties and profits.

Can I ask where you bought? Which property (example ocean palms, tropical casa Laguna ect... Like which complex?)

Also are you managing yourself or using a property management company to rent out?

Just trying to project normal common sense.  Rather not mention names of complexes, but I do have my real estate guy as management.  Occupancy is not booming, but I do not rent AirBnB or short term.  Too many come in to party and tear the place up and cause problems.  Ten renters may be fine, but that one will kill your spirit and be lots of dollars.  If your expenses are minimal, then rents don't have to be much to cover most of the year will a couple of long term renters.

We owned a rental apartment here in Las Terrenas, at Playa Bonita Beach Residences. PBBR is one of the best developments in Las Terrenas and enjoys higher occupancy than a lot of others around town. We averaged about 50% occupancy for the first three years we owned the apartment, and then COVID hit. Lots of Dominicans were coming to Las Terrenas from the Capital since they couldn't travel (as easily) internationally. From September 2020 to July 2021, we had close to 80% occupancy, including being booked every weekend and for several month-long stays. If someone shows you historical rental rates, please understand that rentals during the pandemic were impacted in two ways - fewer international renters, but much higher rental rates from Dominicans. In our case, the increase in Dominicans was greater than the decrease in foreigners.

Selling properties - we sold our apartment pretty close to the purchase price after 4 years. The problem is that there are lots of new properties being built and the supply, at least here in Las Terrenas, exceeds the demand. When COVID first hit, there were fire sales because many owners couldn't pay mortgages, fees, and other fixed costs without rental income. Just a couple of months without rentals and they were desperate to unload their investments. That wasn't good for the rest of us. Some of the folks with villas weren't able to maintain their properties to their former standards, so they started getting bad reviews and fewer renters.

It took us about 6 months to sell the apartment. We had one couple that agreed to buy it just below our asking price, then came back and asked us to lower it even more. Another buyer couldn't get the financing he wanted. Then we had a guy who already owned one apartment there who wanted another - the sell of an investment property in the US fell through and he backed out. Finally, we got a buyer with cash and willing to pay our asking price. We had one price for realtors (higher to cover their commission) and another price for direct sales.  We had a few agents bring in potential buyers, but they all ended up going with brand new construction that they could buy at the same price (because somehow the thrill of the brand new outweighs the inconvenience of living in a construction zone and endless delays).

The need for a local property manager is key! You'll want someone to field the questions in the middle of the night when they've locked themselves out, or the water heater breaks, or the air conditioner starts leaking. You also need someone to be there for check ins and check outs - to make sure that your belongings aren't damaged or walking off. And if you charge for electricity, which I highly recommend, then you need someone to check the meter on arrival and departure and collect the payment.  We were fortunate to have a PM on site. He managed quite a few of the apartments and was either there or had a designated associate available for any renter requests. We paid $80/month, plus 10% of rents.

@ ddmghee. Thaks for your detailed response.  So this is something I noticed that there are constantly new developments which can make an exit strategy tough. As I look at real estate from a long term point of view and not from short term rental revenue maybe short term rentals on the island is not best place to put my money.

For example in Canada I dont mind if I make small profits over 25 years as long as I cover costs as I will make good ROI in equity on top of having tenants return my initial capital and cover expenses. Especially here in Montreal we have seen a sharp increase in home values recently where I have gained quite a bit in equity on my properties.

My goal was to start setting something up for my retirement . Thought I could start with a rental learn the business there and maybe aquire another. That way when I retire have one for me and another for a supplemental income. But maybe better invest my money elsewhere and just retire there if I would like

I am ddmcghee's hubby and she pretty much covered it above, but I tend to be more plain speaking, and I'll say the rental property we owned here was a pain in the a$$. I couldn't wait to unload it. Even with a full time property manager on site we had to deal with so many issues and wacky renters. Not to mention making very little money on the whole misadventure. Never again.
Wall Street is sinking. Wait for later in the year and buy some good stocks. Much easier, profitable and safer than dealing with Dominican rental property.
Sorry to be so negative but its an honest opinion from someone who has gone through the process.

Honesty and experience are very important.  I have not owned property, I only speak as a renter!

Hey Rocky and DD thanks for your imput. It is very helpfull.  I know a good property management company is key especially if im out of the country. The rason I am asking personal advise is because I want to gage if this is good place to invest my money.

I do buy and sell stock (only TSE) currently and have a certain percentage of my assets invested in the stock market or in liquid set aside to buy stock when the opportunity arrises. So this money for real estate purchase it outside of funds I use for stock market investment. I like to be diversified. That way if I get stuck in stocks I cant sell which happens sometimes I have a diversified portfolio thats might be performing well while other investm,ents are performing bad.

I'm not gong to rush into anything and everyone feedback is very helpfull.  I would really like to hear from people who have owned in Sosua as this is where I want to buy. Even better if they owned a villa in Casa Linda or Resedencia Hisponolia or even Ocean Village. As I feel they are all somewhat comparable and relatively close to each other.

Thanks a million to everyone for there feedback!

Your looking to make 12% return which I would say is unlikely because of many of the above variables.

No I was working with 6% per year net. 12k net on 200k investment.

This was my estimate.

Do you believe 6% is still unlikely

Let me know

I do not know that area but probably more likely but would check on how many vacancies in the area and do a more of a look in person.

My biggest fear on long term rentals in general s squatters or defaults.

Also consider this.  Any information gathered during the "CV19" period will be next to useless in predicting data for the future.  There were many more people with pent up desire to travel, buy second homes, etc recently than in the years just before CV19 hit, 

So be careful if you use data from the past 2 years in your estimates of payback times.

I agree 70% is a bit overestimating it.  Go to airdna and enter Sosua.  It's closer to 60% occupancy.  Go a step further into airbnb and enter Sosua and you will see almost all of the 300 properties in the town have an open calendar which is not a good indicator.  It means they are not getting any bookings. I'm in town myself on a fact finding trip to see if this is a good place to expand my short term rentals business.

My findings so far are that it is definitely promising but not there yet.  You may have more luck with long term renters though.

Lastly OP, I wrote a free e-book on how to do research before you begin your short term rentals biz.  I can send you the link if you are interested.

Gracias,

Martine

Yes please do send the link . Thanks!

@mvpinkandoffice thank you for your post, I’ve been a real estate agent in NY for the past 15 years, after 30 years living out here I’ve decided to move back home to the Domican Republic which let me to get involved in short term rental investment properties in Domican Republic as well as Mexico (long story). The best advice I can give my clients is location, location, location, real estate is the same every where, you need to look at the stats, and ask yourself if the location’s infrastructure supports your investment. Is their an international airport near? how many countries does it service? How many direct flights does it support? How many visitors come through a year? Etc. when you look at the properties look at what life style or experience will it offer your guest, is it well amenitized? Will these amenities along with the area’s amenities  compensate for not going for the typical all inclusive experience…. Need to probably make a list or put it on a spreadsheet. There is no one answer, you need to do an analysis of all these variables. 

Excellent post!   Remember that info from last 2 years will be skewed due to covid effect on everything travel and tourism related! 

All our opinions are subjective and based on personal experiences.  I enjoyed reading all the comments here.  Let me add a few of my own.

I have rented many high end condos here in Punta Condo, the best available, in the last 5+ years.  Some of these were brand new, others only 2-5 years.  I also tried some local areas.   You need to have security to protect your investment including yourself and your car, this can be a dangerous place and crime is very high due to such high poverty and low salaries.  If you want to be sure the music cant play all night long as loud as they can blast it, then you need to move into a gated community that has rules and enforces them. Or buy a very big fenced property, I guess.

While renting, I found unexpected problems that opened my eyes into investing here in real estate.  Imagine not being able to use your beautiful bathroom because it smells like raw sewage?   This also happened to me in Mexico.    What about the windows, can you open them and do they have screens on them?  I rented a very nice condo with a wall of glass (floor to ceiling sliding doors).  How nice, but then I was not able to open them.  That was not by design, someone had to repair them.  I never thought to verify that they would open, so I had to run the a/c the entire time.   I am just saying, even the windows and sliding doors need to be maintained.  The faucets/bath fixtures (and appliances) often become damaged with the salt water and humidity, and this is important if the place is not occupied and not being temperature controlled every day.   If you want to take hot showers and baths, you need to have a good water heater and to run it is expensive. Same with the air conditioning.  These things tend to need more repairs or to be replaced more often.

Reliability of services:  the water and electricity is turned off frequently, and there is often no notice given, and you cant do anything about it, no matter how much you paid for your condo in a beautiful location.  You can be in the middle of cooking and then suddenly there is no water for 3 hours.  If your a flexible person, and dont mind the interruptions and inconvenience, then its not a problem.

I have met people who are property owners and their property has not increased in value over many years even though they keep up with their maintenance and have done improvements to their homes.

Alot of good advice already provided but in my opinion, I will not buy a rental property here.   The purchase price and condo fees may seem very reasonable, but the there are too many other variable costs and considerations to make it a money making investment.  I would possibly make an exception if I intended to occupy it myself as my permanent home.

Great post Karin1. Agreed.

Karin1 makes a very good point .with the maintenance upkeep but has anyone thought about the economy world wide with average peoples disposable income  , let’s see how long the war last and the aftermath of it before Europeans start going on vacation with the cost of living skyrocketing back home or the North Americans with the price of gas going to $5 a gallon which affects everything , even what they buy in the store’s also. What about your plane ticket probably will maybe double to get here and home with fuel rising…. No I wouldn’t count on a renter to subsidize my income or pay my maintenance …. Just my opinion…🤔

Karin1 makes a very good point .with the maintenance upkeep but has anyone thought about the economy world wide with average peoples disposable income  , let’s see how long the war last and the aftermath of it before Europeans start ... - @Tippj

Good points, but remember that there are a lot of Dominicans that typically vacation internationally. The same factors that might keep foreigners from vacationing here will also keep more Dominicans vacationing domestically. Our most solid rental performance for our apartment in Las Terrenas was during the pandemic. We had folks from Santo Domingo or Santiago there every weekend. 

I wholeheartedly agree with not depending on rental income to pay a mortgage or maintain the property. If you can't afford to have it sitting empty for 6 months, you shouldn't buy it!

Coming to town from Philadelphia on 4/22 my ticket was 742.00 non stop mid morning. I could have traveled for less and the travel time would have been extended to 19 hours and two stops.  Having worked (contractor) for American Airlines years ago believe me I understand the pricing model. It’s  build to maximize profit for the airlines. I know that does not surprise anyone. Hope that provides a little insight into ticket pricing. 

@elleceepea

I don't think this is offered anymore.

I will check it out.

I have stayed there and really like the property