Always secure the assistance of a knowledgeable, reputable and local real estate agency in order to secure a fully executed contract and title.
Option 1 - Use your own money
Using your own cash or liquidating assets in your home country is the best and easiest way to secure property quickly and to negotiate the best price, terms and conditions.
Here’s an example of how such an offer could be structured: 40-50% down upon acceptance of an offer with balance due approximately 30-45 days after the contracts have been legally signed and are in motion for expediting the transfer of title into the buyer’s name.
Option 2 – Purchase a resale property with your own money
When purchasing property originally purchased by another and sold by the individual seller, the same principles outlined in option 1 could be applied.
A motivated seller may accept less for the initial deposit and stretch the payment terms out for 6 months to up to 2 years. Once the final payment is made, the title transfer can be applied for. The seller may or may not grant keys prior to the final payment.
Option 3 – Lease Purchase
Similar to option two, a buyer, through the creative assistance and representation of a reputable agency, can formulate a lease purchase agreement with a seller. The agreement is similar to a mortgage with a bank, but instead the terms of the lease purchase are made directly between the buyer and the seller. The terms of a lease purchase agreement vary on a case-by-case basis.
An ideal lease purchase agreement would outline that with a small initial deposit (usually 5%–10% of the agreed selling price, plus a % of the agency commissions and legal costs), the remaining payments would be set up on a monthly or sometimes quarterly basis. At the end of a typically 1-year probationary period, the buyer and seller have the option to (a) proceed with a lease purchase arrangement, (b) go into a standard rental agreement, or (c) go into a more formalized purchase agreement. Should the buyer default with the obligations set forth, the buyer moves on and the seller retains the deposit. Should the buyer decide not to purchase, the deposit is either retained by the seller, or divided between the buyer and the seller as agreed in the probationary contract.
Option 4 – Use your IRA Money
Convert your traditional IRA into a Truly Self Directed IRA- LLC/ Roth with checkbook control, then use this money as you wish BEFORE YOU RETIRE. This option is perfect for those who are considering buying real estate to leverage as a short term vacation rental income property now, and who do not plan on living in the purchased property until later. Please consult with a financial consultant versed in Truly Self Directed IRA- LLC.
For More information start with: IRA FINANCIAL GROUP and review our list of recommended professionals.
Option 5 – Finance a New Property through a Developer
Some developers of brand new or near completed properties are in strong financial positions to accept payment terms. For example, Palm Suites offers 7.5% financing with 25% down stretched out over 8 years. Or Santa Maria del Mar I and II offers 6.5% interest with as little as 25% down, stretched out over 20 years! (If you are interested in financing with either of these communities, please contact us ASAP to verify inventory.) Please contact us to see which developers are currently accepting creative terms.
Option 6 – Finance a Pre-Construction Property through a Developer
Many preconstruction developers offer the best pricing and payment terms. Sometimes these preconstruction condos cost 50% less than they will cost when finished! This is an excellent way to make a turn-over resale investment. Many developers will agree to stretch the payment terms over a 1-2 year period of time until the condo is finished. For example, upon accepted offer, 30% down, then 20% six months later, another 20% after 1 year to 18 months, and the final 30% upon completion and turnover of keys.
There is always some inherent risk in pre-construction, however, we are in constant correspondence with most developers here, and in most cases are able to recommend which projects hold deposits in escrow (Stewart Title), which projects are on target for completion as scheduled, which developers are financially strong, and which developers will not provide status reports (which is typically an indicator there may be financial concerns).
Option 7 – Finance with a Bank in the Dominican Republic
Although we know even U.S. banks can fail, overall banks in the DR have had excellent financial stability because they are affiliated with the world bank and not primarily dependent upon one or just a few countries. Popular Bank is the largest branch in the DR. Other strong banks are Scotia Bank (also in Canada) and BHD Bank.
Because mortgage bank rates are directly tied into the real estate market and since most properties in the DR are purchased with mostly cash, and because there are not many short sales or foreclosures in the DR, bank rates remain more consistent. Real estate throughout the DR is still very affordable compared to most Caribbean destinations and values are holding steady. Thus, bank interest rates are higher than in the U.S. or other countries that need low mortgage incentives to stimulate the market.
Since DR banks mirror the U.S. qualification process, requirements are much the same (credit score, two years income tax records, debt to income ratios, etc). The banks in the DR also require proof of title and typically between 30% – 40% down. Titles for new or pre-construction properties, may take up to 18 months to obtain due to the high volume of sales over the past 5 years. Therefore, if you are planning to buy a pre-construction, under-construction or brand new property, please check with us to see where the developer is in the title process, and if he is offering direct financing as an alternative option.
Bank rates in the DR have come down considerably, which indicates that the DR government is recognizing the need for financing incentives for foreign investors in order to continue stimulating the economy. If you are interested in bank financing options, please click on the following attachment for more information and direct bank representative contact information. Even after applying for a loan, you will need a responsive and reliable real estate broker here to coordinate the many details of the sale directly with the bank representative and other professionals in order to keep the process moving within a reasonable time frame.
Bank Requirements for Getting a Mortgage or Bank Account in the DR
An established and reputable real estate agency can provide property management services so you can convert your property into a vacation rental investment, or rent it out on a mid to long-term basis. Then use this money to pay your mortgage/ loan or other ownership costs (such as maintenance fees, electric, gas, cable TV, homeowners insurance, property management fees, and general maintenance and repair costs). There are no guarantees that rental income will totally cover your payment, but chances are it will cover a good portion plus cost of ownership expenses. It may even provide enough income for you and/or your friends to use it 2-3 times a year as your second home.
For example, you could purchase a 2BR/ 2BA condo within walking distance to the beach for around $150,000. Your expected rental income would be around $600.00 a week or $1500 a month (more during high season, which is late November through early April). A 2BR beachfront condo priced around $295,000 would yield nearly double the rental income because of its increased occupancy rates. Of course your property won’t rent out every week, but so far occupancy rates for properties managed and maintained by Reliable Property Management have averaged 38% occupancy. We’ve never heard any success stories from people living abroad who try to rent and maintain their own properties. It is mandatory to seek local, trustworthy and reputable property managers to assure your property investment is well maintained and secured, and that your vacation guests or tenants are happy.
Option 9 – Consider Fractional Ownership
Can't afford property now, but feel time is ticking away? Maybe fractional ownership is right for you. Fractional real estate ownership is a well-established concept that is commonly confused with time-shares. With most time-shares the investor never actually “owns” a portion of the property; they simply “rent” time, which is no different than staying in a resort or hotel. With fractional real estate, or “shared ownership” you actually own the asset, take part in its appreciation, can rent out your unused weeks or months, trade up, and pass down to your heirs as inheritance. You can also sell your portion of the property at anytime.
Fractional ownership is the fastest growing segment of the real estate market today. Fractional ownership is an ideal investment because it allows investors to (partially) own high-end, luxury properties in some of the most desirable areas in the world, for a fraction of the cost and without any personal maintenance responsibilities.
Fractional ownership can consist of as little as 4 owners per property or up to 12. Owners buy shares (or months) for as little as $27,000* for a fully furnished ocean view luxury property and can divide or rotate their time (months or weeks) with other owners, all coordinated by a fractional management company. The cost of fractions depends on the property purchased. Please contact us for an inventory and pricing of all fractional properties Reliable Realty represents.
Whe benefits from fractional ownership?
- Those who thought they could never afford a second home in the Caribbean
- Those who prefer to own instead of rent or stay at a resort
- Those who only plan to visit for a couple weeks, one month, or a few months over the course of a year
- Those who don’t have the time or desire to manage property overseas
- Those who have considered buying property with trusted friends, investors, or relatives, but don’t have time to research the legal ins and outs of this type of ownership
- Investors who want to spread their risk
- Those who love various areas in the Dominican Republic or around the world and would like to own fractions of multiple properties overseas
Fractional ownership in Punta Cana was featured on HGTV's House Hunters International in September 2010. Also check out this video on the benefits of fractional ownership.