Whats with the intrest rates?

rates in the DR are often quoted as % per month they are so high. I know of people who loan money at rates as high as 7% per month....

Uhhh, Curt, better re-read that again. That was 7% A MONTH.
Normal bank loans are running around 36% p.a. more or less.

that is why this is a money laundering haven.....

HB

Sheesh Curt, put your money to work in the DR but don't borrow there. Thats what I do.

A few weeks ago, a friend of mine invested 500,000.00 RD$ at 20%. All he needed was a passport and a local reference.

Word to the wise

If you play the investment game you better be here to watch after your money. Interest rates are only going higher, now that the government is restricting money supply, spending more, and losing its grip on the economy.

Fixed commercial paper is going upwards of 24% a year. In other words if you invest $1,000,000 pesos on a 90-day certificate your yield at the end of three months will be about $20,000 pesos. If you renew the certificate for an equal rate for 12 months your capital will be $1,240,000 at year end, enough to take care of inflation. The dollar situation can be a negative. Your gains may be diluted by devaluation of the peso. But if you live in DR, devaluation is relative.

This is a strange country. Real estate, for example, is not as safe and productive an investment as it is in the USA or other countries. Homeowners are not given tax incentives, and more than anything else, real estate creates fixed expenses for you. If you do not live in you property, you may be a loser. Renting out is for the risk lovers considering the pro-tenant laws in DR and the rental taxes that have to be paid quaterly.

TW

Sorry, correction

The yield of $20,000 is for one month. Over the 90 days is $60,000.

TW

Re: Word to the wise

golo said:

Fixed commercial paper is going upwards of 24% a year. In other words if you invest $1,000,000 pesos on a 90-day certificate your yield at the end of three months will be about $20,000 pesos. If you renew the certificate for an equal rate for 12 months your capital will be $1,240,000 at year end, enough to take care of inflation. The dollar situation can be a negative. Your gains may be diluted by devaluation of the peso. But if you live in DR, devaluation is relative.
TW

Click to expand...

It will be a lot more than 1,240,000 with compounding Golo.

I get over 15% in Dollars and over 24% in pesos when it is compounded. You need nothing besides money to invest in the DR assuming you aren't a wetback and snuck into the DR. Then you will have ID in addition.

Escott

OK, investment smarties, tell a novice and a newcomer. Say I have US$20,000 to invest now in the Dominican Republic. Say I put it somewhere for a month. What do I get at the end of the month. Keep it simple please - never learnt to compound interest. And don't fight with me OK!

if the annual rate was 12% the monthly rate would be approximately 1% (exact would be 0.9489%)

after one month would end up with a little less than 20,200 (exact would be 20189.78)

Say I leave it for one year - what would I have at the end of the year?

golo,

What are the current going rates for 1,000,000 pesos in pesos account for a bank CD? What about commercial papers? Can we buy a CD in Sosua or in POP? What banks?

The compounding deal is this. If you invest 100 dollars at 12% you make 1% a month on the hundred for the first month. The second month you make 1% on 101 if you don't withdraw the interest. On the 3rd month you make 1% interest on 102.10 dollars. Then the next month you earn interest on 103.30 dollars. Getting the handle on compounding yet?

In the states when you are making 2 % a year, it doesnt amount to much but I get 2% a month in Peso so the compounding is considerable and 1.25 percent a month on US dollars compounds real nicely.

You can buy a CD at any bank in any town in the DR. It is just a question of who is giving the best rates. I do much better investing with a finance house in Puerto Plata than I do in the banks in Sosua. Best I was able to do in Dollars was 8.5% in a bank and 18% in Pesos. I get 15% in US Dollars and 24% Pesos now.

I get the compounding deal - somehow though, there is something in there (I guess in the percentages) that seems to be like a banana republic. I still don't understand how one can earn 15% on Dollars here, but in the US, 15% is kinda a silly number. So, I guess I don't understand how Dollars work outside of the US. Surely, if someone is paying 15% on dollars here, somewhere along the line, they are getting more than 15%. How does the investment deal work, where someone can pay 15% on dollars. This seems like flying in the face of what's happening in the rest of the world?

Yeah, I did take macro and micro economics somewhere along the line, but there is something in these numbers that I simply don't get. I also lived through the tech bubble that started in the early 90's and it seems to be to be much too easy. Maybe there is an explanation that makes economic sense??

I was way surprised and didn't understand the interest rate scenerio either when I was first there. But... They give out mortgages at a low loan to value ratio for short periods of time unlike the US where you can get a 30 year mortgage at very high rates. I get 15% on US dollars but they make as much or more than I do on the use of the money. Wild stuff but hey, as long as you don't have to borrow money and you have US dollars or any other major currency you are golden.

This particular bubble has been going on for a very long time and hasnt burst yet so... Enjoy it whilst you can.

At some point when I am in the Country full time I will probably do mortgages myself and make the whole enchilata myself.

Regards,
Scott

I have been investing with the Finance House for 4 years now - never a smell of a problem & I have now been able to "Retire" reasonably comfortably!! I introduced JazzComm & others from this board to the company & because they are investing more than me, they get better rates than I do - but what the heck, I'M happy with my income & will gladly keep on introducing people to the Finance House because I have confidence in the owner!! (Anyway, I get into see him every week & can keep an eye on my friend's & my own investments - any problems & I would know about them VERY quickly!!).

Curt. NO, you pay a monthly return which equates to in excess of 3% a month (presently nearer 4% or 5% PER MONTH) which equates to 36% p.a.( 48% & 60% for the higher monthly %ages). The period of the loan is not FIXED as it is in most counties & you are able to extend beyond the initial years contract OR pay it off earlier if you find this more convenient to your bank balance!! There are various LEGAL implications to this borrowing/loan, which I shan't go into here, but whichever way you look at it, YOU pay a LOT of money to borrow money in this country. ANY loan, mortgage costing you 36% a year in interest alone, would mean your purchase would cost you DOUBLE what the agreed price was at purchase, if the loan took you 3 years to pay it back!! Far better to try & borrow from your homeland sources if at all possible. - Grahame.