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  1. #1
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    Default Rental Income vs. Asking Price

    Hello Everyone.

    New to this forum. Thank you all in advance for your valued opinions.

    I've been thinking for sometime now to invest in a rental property in the DR. One of the biggest concerns and as I am doing research is I see a big disconnect between what people are asking/selling for to the potential rental income or lack thereof.

    I'm not new to owning rental property in the US, but certainly new to foreign ownership.

    As I am doing my analysis, I see very low rents whether it's daily rates or monthly rates, and high purchase prices. As an example, seeing listings from realtors claiming below market value on a property to entice buyers, filling them with dreams of riches and yet based on 50-70% occupancy, a negative ROI.

    When looking at the same property type on AirBnb, VRBO etc., for a $300K property rent is $85/night. So you'll say well ya for an off season rental, but when I look at various properties for high season, yes the price goes up to $110/night and even some to $195/night, but they also show available.

    I found several condos that are currently selling for $150K-190K and they too are vacant. Vacant for Christmas, New Years, Reading week, Spring Break, Easter etc.

    When I question the developer contacts, they say they have their own rental management and they fill up all their properties in the rental pool. So, then I go on their sites to check and compare and guess what, the rental price is much lower than what they say and they too are showing they are vacant and available.

    When I add up all the management fees and extra costs like mortgage or even if I pay cash, the ROI is too low to make it worthwhile.

    I'm sure some of these properties were purchase new for under $100K, ten years ago, and certainly the owners made money, but if rents don't increase to support an asking price then that property is still $100K

    Having comps back home is great and you can make an educated decision whether or not you're buying a good rental property.

    It's the wild west in the DR where owners "Think" their homes are worth more because they are getting rental income, but isn't it the reality why they are staying on the market so long.

    So am I missing something. Any help would be appreciated.

    Thanks

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  3. #2
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    You are mostly correct on all assumptions. But one thing that does happen is that owners/managers will scam Home Away and airbnb by obtaining the leads thru the site but renting outside the system - saving the airbnb commission. Not easy to do, but doable.

    This would let the apartment look empty on the calendar when it's not.

    Plus things are slow right now, even coming into the busy season. Due to certain events over the last 12 m onths. That should repair itself by next high season.

  4. #3
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    Totally different that the USA. You need to have your boots on the ground for a long period of time, get to know people in the DR to find the best purchase price. Using the internet does not work for DR like USA. If I lived in Toledo Oh. I would not have a problem using rental assumption metrics buying a duplex or 4 unit near Univ of Cincy, OSU, or IUPUI in Indy, with a never ending supply of undergrad, grad students and recent grads.

    There could be a condo listed for 190K in the DR and the owner will sell if for 90K. You have to be on the ground and know people. Also figure that if you buy you will own it for life.

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  6. #4
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    Hmm, Seems like a lot of headache and time. I don't mind paying a commission as long as it's a win win for all, but when the rents are so low, makes you wonder why people are spending all this money or are they simply not doing their due diligence. Like sheep to the slaughter.

  7. #5
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    Quote Originally Posted by Minion View Post
    Hmm, Seems like a lot of headache and time. I don't mind paying a commission as long as it's a win win for all, but when the rents are so low, makes you wonder why people are spending all this money or are they simply not doing their due diligence. Like sheep to the slaughter.
    If overpaying and wrong location, you would be correct.

    You will get a lot of varying opinions on here. Just a suggestion, but I would base my decision on opinions based on actual real estate experience.

  8. #6
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    Rental market is tricky. You have two choices, a long term lease or daily, weekly monthly (snowbirds and others).

    It is easy to buy property in this country, much harder to sell it. Buyers market. The vast majority of tourists to the DR favor all inclusive resort stays for a week or two. Those who would choose to rent a property privately, a very small portion of the overall tourist market. Lots of airbnb options already, one more probably won't stand out.

    Expats want affordable long term rentals and have lots of options to choose from with owners who purchased long ago and either own their properties outright or have left the DR and will take whatever they can get in the way of rent to offset their expenses. Lots of such properties just end up being abandoned or sink into a state of disrepair as foreign owners choose not to spend the money necessary to keep the property in rentable condition.

    I would think most snowbirds are looking to spend a max of $1500 per month for the winter months, then they leave and you have to figure something else out for the rest of the year. Property managers for owners who do not live in country are more miss than hit. A planned community that includes property management services might be a better option than a stand alone property somewhere. No guarantees though. Tourists are fickle, snowbirds have lots of options and the tourist market ebbs and flows based on location, currency conversion rates and market conditions all of which landlords have no control over.

    There are those who rent accommodations on this forum and they will surely add their observations.

    Me personally, I have chosen from the very beginning, not to buy and get saddled with property in this country. Primarily because I am not interested in having to spend on average 2 years if I ever needed to sell that property without having to include the shirt off my back to do so. I would suggest you think very carefully and make sure that very conservative numbers are used to determine your potential ROI and then expect that plan to fall apart sooner rather than later.

    Good luck.
    Last edited by Cdn_Gringo; 10-29-2019 at 01:13 PM.

  9. #7
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    Quote Originally Posted by ctrob View Post
    You are mostly correct on all assumptions. But one thing that does happen is that owners/managers will scam Home Away and airbnb by obtaining the leads thru the site but renting outside the system - saving the airbnb commission. Not easy to do, but doable.

    This would let the apartment look empty on the calendar when it's not.

    Plus things are slow right now, even coming into the busy season. Due to certain events over the last 12 m onths. That should repair itself by next high season.
    The property host still has to block those dates off on the Airbnb/homeaway calendar. Otherwise a potential renter may try to rent it, and the host will have to turn them down. if the host does that too many times I think they get suspended for a while.

    edit: someone told me this about bookings.com and so this may not apply. Sorry I can't delete the post
    Last edited by westcan; 10-29-2019 at 01:20 PM. Reason: wrong info I think

  10. #8
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    Quote Originally Posted by ctrob View Post
    Plus things are slow right now, even coming into the busy season. Due to certain events over the last 12 m onths. That should repair itself by next high season.
    Are you referring to the death of US and Canadian Tourists?

  11. #9
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    Quote Originally Posted by Minion View Post
    Are you referring to the death of US and Canadian Tourists?
    Yes. I believe it slowed everything down for a bit. Even coming into the high season, still fairly slow. But beginning to see some uptick. So hopefully by next high season things will be back to normal.

  12. #10
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    Quote Originally Posted by KyleMackey View Post
    Totally different that the USA. You need to have your boots on the ground for a long period of time, get to know people in the DR to find the best purchase price. Using the internet does not work for DR like USA. If I lived in Toledo Oh. I would not have a problem using rental assumption metrics buying a duplex or 4 unit near Univ of Cincy, OSU, or IUPUI in Indy, with a never ending supply of undergrad, grad students and recent grads.

    There could be a condo listed for 190K in the DR and the owner will sell if for 90K. You have to be on the ground and know people.
    I've been eyeing a larger property on 2400m, but the $325,000 price made no sense, especially since major remodeling would be necessary, maybe a knock-down.

    A local realtor called me yesterday and said it could be had for $175,000. I told her I'll wait for $125,000.

    There is another really nice gated community with 2000-3500m lots, US$95k+. There is a 2000m lot, mostly flat on the street with a gentle slope in the back I really like (drainage). Their sales guy called recently and suggested the lot at $65,000.

    I sense the market is slowing and a year or so from now some deals could be had.

    Quote Originally Posted by KyleMackey
    Also figure that if you buy you will own it for life.
    Unless you get a smokin' deal on it. Property here is pretty much illiquid, but some is more illiquid than others.

    Buy a property to LIVE in, not for an investment.
    Cabin Attendant,
    Augusto Pinochet Helicopter Tours

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