The Why the Dominican Republic?

The Dominican Republic offers some of the best values around for the retiree or expatriate. Aside from having the fastest growing economy in Latin America, the Dominican Republic offers tax-free US Dollar banking. Local bank interest rates for US Dollar CD’s are about 10% or more for a 90-day deposit, plus the country does offer some of the most reasonably priced property in the entire Caribbean.
The key to finding bargains in any market or country is in knowing where to look.

For those of you that like the idea of cooler climates, we suggest a visit to the Jarabacoa region and general surrounding areas. What you will find are some of most beautiful mountain scenery & fresh water streams you have ever seen. In addition, being close to the highest mountain range in the Caribbean, Pico Duarte, means that you will also need to pack your sweater. Frost is very common in the mornings and local Dominicans often call this region the “Alps of the Caribbean”.
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Jarabacoa is located about 1 hour south of the second largest city, Santiago de Los Caballeros, and about 2 hours from Santo Domingo. What this means for investors is a conveniently located spot which is fairly close to the beach resort towns of Sosua & Puerta Plata.
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As with what we mentioned above, the prices for a comfortable building lot in a country setting is very reasonable. Lots in a new “Country Club” development of 1,200 square meters are selling for the equivalent of US $ 20,000. Designed to be an upscale weekend Country Club retreat or get-away for the upper middle class from Santo Domingo or Santiago, we think it is a far better value for the money than some other properties being marketed elsewhere.

Santa Domingo a modern city with 3.5 Million people is expanding to the north and east primarily. This being the case, there are a number of new residential home developments and building lots available at much less expensive prices then within the “city center”. Investors can find small building lots 200 square meters in size in the San Isidro section of the “Zona Oriental” for about US $ 6,000. Many might even prefer to purchase a double lot, which would provide 400 square meters of land for about US $ 12,000.
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If you would prefer to purchase a small but comfortable brand new home, we can suggest the newer residential sections of Lucerna & Cancino, also in the “Zona Oriental”. Such new homes can be purchased for about US $ 55,000 at current exchange rates. While these 3 bedroom homes are not would can be called “extravagant”, for the money they make for a very reasonably priced second or retirement home. Close enough to visit the shopping malls, the new “PriceMart” & movie theaters, golf courses and local beaches – yet far enough away from the traffic of the city center.

Before one considers buying property and calling it home or usingit for rental income, then it seems only logical that you need to look first at the economy. In the section below we give you the run down on a country that has basically started at the bottom and is on its way up....and President Leonel Fernandez presented decree 2543-45 on January 9, 1998 eliminating restrictions to real state ownership by foreigners, thus recognizing that the former law was a barrier for foreign investment. Prior to this new decree, a real estate purchase by a foreigner was a lengthy procedure, had to be processed by local attorneys and required the special authorization of the Executive Branch. Under Decree 2543-45, real estate investors will enjoy the same rights as Dominicans.

This is now the government's attempt to improve the investment climate will be served by this decree and will attract foreign firms interested in investing in or entering into a seeking joint venture possibilities in the Dominican Republic...Its seems to be working! The Central Bank third quarter report on the economic performance from January to September indicates the economy grew 1.8% during that period. Third quarter growth alone was5.5%, offsetting the slow start to the year. The most dynamic sectors were communications (22.7%), electricity and water (21.1%), government (7.7%), farming (4%), and finances (2.8%). The hotel industry declined 0.2%, construction was down 1.2%, transportation 2.2%, manufacturing 2.3, commerce 3.5% and mining 3.5%. Once predominantly an exporter of raw materials, the country has been transformed into a service supplier, the most dynamic being tourism, followed by light manufacturing from the industrial free zones. The Gross Domestic Product of the nation grew 8.5% in 2000 (up from 8.3% in 1999), the highest in Latin America and the Caribbean. According to preliminary statistics, in 2000 the best performing sectors were: communications (15.7%), tourism (15.7%), transportation (11.9%), electricity/water (11%), manufacturing (9%), mining (9.2%), and commerce (8.4%).

The fiscal deficit widened to 1.5% of GDP, while the rate of inflation, at 9.02%, was higher than in 1999. Capital inflows were not sufficient to offset the deficit on the current account (6% of GDP and 3 percentage points above the projected level), resulting in a negative overall balance-of payments position. The fiscal reform project contained in the Tariff Reform and Fiscal Compensation Act has raised tax on the transfer of goods and services (ITBIS) from 8% to 12%, expanded its scope, changed the excise tax rate and levied new taxes on non-essential items. In current terms, the Gross Domestic Product (GDP), expressed in Dominican currency as RD$322,866 million, grew by 16% in 2000, up from RD$278,163 million in 1999.In its Latin American Prospects 2001 report, the Economic Commission for Latin America and the Caribbean (ECLAC) has revised its January forecast of 6% growth rate for the DR to 4%. This is down from 7.8% in 2000 and 8.2% in 1999.

The lure of the Dominican Republic is not just about beautiful beaches, crystal clear water, luxurious tropical breezes and all of the other things that come to mind when conjuring images of the Caribbean. In fact, many other places you can name do in fact offer the same. So, what is so special about the Dominican Republic? In short, it is still one of most affordable places for tourists and for property investors alike. Tax free banking, property taxes so low they are almost non existent, plus the ability for a couple to live very comfortably on less than £1500 per month. Think you may miss out on some home comforts then think again.

Buying Real Estate As a foreigner, am I legally permitted to purchase or rent property? Yes. Reporting the purchase of a foreigner to government authorities is now only a technicality. You may also consider purchasing property after incorporating a company established in the DR. There may be tax advantages to this. When you come to sell you simply transfer ownership of the company i.e. the shares to the buyer to avoid stamp duty. There are no restrictions on foreigners renting real property in the Dominican Republic even under long term leases. Title to real property must be registered with local land registries. Prospective purchasers should ask for a copy of the owner’s title, and should take steps to assure that the title may be registered at the time of closing. Inheritance taxes should be carefully examined with qualified experts. Is a lawyer strictly necessary? We think so yes! Things are not as straight forward here as they might be in other countries and there are many technicalities and possibilities for fraud in the real estate business.

People have been known to sell properties which were already mortgaged, which were in the middle of an inheritance dispute or which did not legally belong to them. A lawyer should be able to evaluate the land, make sure that it meets all of the necessary requirements and determine whether the documentation is legitimate. He
can also assist in the necessary government procedures. A lawyer may indeed save you money. A good lawyer can provide helpful advice on many issues, such as tax issues, that will in the short run reduce the final cost of your property. Finally, a good lawyer should be able to inform you about all the technicalities. For example, people purchasing undeveloped land are required to “improve” it within a certain period of time. Even a shack, it seems, may be considered an “improvement.” Lack of knowledge of these finer points could lead to some inconvenience for the owner. How can I find a good lawyer? The best way is by recommendation from those who have previously used legal services in the area of real estate.

What should I look out for if I decide to go it alone? Check the property title very carefully. Make sure that the seller is the legal owner, and that there are no outstanding debts or inheritance problems. Obtain receipts for any payments and watch out for what is called the promesa de venta (payment promise). These agreements state that if you have not purchased the property by a certain date, you will lose your deposit.

Never sign a contract with any blank lines, regardless of the explanation you are given. It is a good idea to ask for a copy of the contract to review at home. There may be references to laws or decrees which you will need to investigate before signing. (Of course, it would be better still to have a reputable lawyer look over the document for you.) You may wish to have an independent appraisal of the property to ensure that you are paying a reasonable price. Be sure to ask the previous home owner for current copies of the electricity, telephone, water, maintenance, cable TV, gas or any other applicable bills. If the previous resident has left unpaid debts, you will be held responsible for them. Check into your present and future neighbors. Is the area turning commercial now or does it have the potential to do so in the near future? What are the advantages of using an estate agent? A good agent should do all of the leg work for you, eliminating unsuitable places and finding those within your budget. You should not be charged for their services: they are paid by the vendor. If you are a foreigner, it may be to your advantage to have a local company negotiate the price for you, as some people expect foreigners to pay more. The estate agent cannot generally help you with the legal or financial aspects of buying property.

Can I finance my purchase in the D.R.? It is possible to finance part of your purchase in the Dominican Republic. In theory, mortgages for up to 75% of the property’s value are available from commercial banks, as well as from special mortgage societies. The policies regarding repayment vary from institution to institution. The most attractive rates and conditions are available at savings and loan associations (building societies). As of mid 1996, the best rate was 18% for a term of up to 20 years. Banks even vary internally in their requirements for a loan. A general rule of thumb is that your monthly repayment should not exceed a third of your monthly income. Other factors taken into consideration will be your other financial commitments and the success of your business, if that is the source of your income. If you decide to go ahead, you will need to take stacks of documents to the loan department of your chosen bank, including a copy of your passport, an official letter detailing your income, your bank account statements, an identity document other than your passport, the plans of the house you plan to build, if you are purchasing a vacant plot, or the title of the house you wish to purchase. It is probably better to make a personal visit first to ascertain the appropriate documents that you will need to bring. If you have decided to form a company, you will need to take its statutory papers. In the case of a new company, it is likely that the bank will ask for a personal guarantee.

Is buying property in Dominican Republic a good investment? Opinions vary, but the general consensus seems to be that money invested in property is better than money sitting in a bank, and that money invested in a growing business is better than money in blocks and concrete. Property values have traditionally risen, and more so when the U.S. dollar has increased in value against the Dominican peso. The peso has been relatively stable in relation to the dollar for the past six years. Like anywhere in the world, location is obviously an important factor. If you are considering investing in a new tourist area, do investigate the past record of the developers. There are numerous unfinished developments around the country, and you may not want to own property in one. Remember the first and only rule of real estate investing...LOCATION, LOCATION, LOCATION.

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 Dominican Republic Info Guide - Pedro Henriquez - San Domingo - Dominican Republic