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Wanting to Buy a Condo in Punta Cana Area
No there are different ways of calculating value.
If something produces an income stream but is not saleable there is still a vaue. If I study at college for 1 year and don't earn money that year of study has a cost.
If after that study jobs are available that pay more than if the study had not been done the difference in income is an income stream. That additional income stream could last 20 years or more. But the income stream is the only benefit : the years college training cannot be packaged up and sold.
If you buy rental property you buy an income stream - hopefully an increasing income stream. Even if the market is soft for 2/3 years and down that potential loss is not realized because the property is not sold.
Over time markets recover and if sale occurs at an opportune time a capital gain can be made in addition to the income stream over the years. Actually much property in the DR has risen strongly in value over the last 5-7 years and the case can be made for this trend continuing.
On inflation:
Banks here quote peso inflation. As few gringos hold pesos this does not matter unless income is in pesos and does not rise with inflation. It is inflation measured in swiss francs, dollars, euros etc.
Measured in these currencies many items in the DR have been remarkably constant in price over the last 7 years.
pi2
Except in YOUR case the income stream of putting $$$ in the bank at 2.5% interest is stronger than income generated by your condo...even without the hassle factor.
I wouldn't call that a great investment.
Now it's different if you buy a property to utilize it personally. Then one should not consider it a financial investment per se, but a utility cost of a particular lifestyle.
Big difference.
The DR is a nice place to live, and there are nice properties to live in, but in an uncertain world economy...especially if one is from the states or a Euro...and a dubious DR RE market, I'm not so sure there are such great investments unless one happens into a desperate seller.
FWIW: my family has never had rental property that we could not generate a 20% cap rate at purchase (Donald Trump talks about building image to generate a 30+% cap rate in his properties, and his algorithms of marginal investment to generate marginal cap rate.) It's just not worth the effort to go lower when one factors in the work it takes to be a landlord. But if someone is happy at 4.5%....well, opinions vary. There are amateurs and there are pros.
I'm the one renting your 4.5% cap rate property...
No I live in the condo.
There are plenty of takers for say London property at a cap rate of 2-3% when the bank rate is 0.5% and in most post-war periods sell price has increased steadily as has income.
Donald Trump has developed properties in New York - small 500 sq ft rents for 2000 dollars plus a month. You have to assume that the economy will continue to support very high wages to support high rents.
Of course Trump or his companies have filed for bankruptcy four times.
The DR economy is growing strongly and many properties are very good value.
In many developments in the DR good management is in place and the effort by the owner can be very small.
At the moment properties in Florida can yeild 15% - but also consider the over-supply of properties, unemployment, property taxes and condo fees etc.
pi2
There are plenty of takers for say London property at a cap rate of 2-3% when the bank rate is 0.5% and in most post-war periods sell price has increased steadily as has income.
Donald Trump has developed properties in New York - small 500 sq ft rents for 2000 dollars plus a month. You have to assume that the economy will continue to support very high wages to support high rents.
Of course Trump or his companies have filed for bankruptcy four times.
The DR economy is growing strongly and many properties are very good value.
In many developments in the DR good management is in place and the effort by the owner can be very small.
At the moment properties in Florida can yeild 15% - but also consider the over-supply of properties, unemployment, property taxes and condo fees etc.
pi2
Except in YOUR case the income stream of putting $$$ in the bank at 2.5% interest is stronger than income generated by your condo...even without the hassle factor.
I wouldn't call that a great investment.
Now it's different if you buy a property to utilize it personally. Then one should not consider it a financial investment per se, but a utility cost of a particular lifestyle.
Big difference.
The DR is a nice place to live, and there are nice properties to live in, but in an uncertain world economy...especially if one is from the states or a Euro...and a dubious DR RE market, I'm not so sure there are such great investments unless one happens into a desperate seller.
FWIW: my family has never had rental property that we could not generate a 20% cap rate at purchase (Donald Trump talks about building image to generate a 30+% cap rate in his properties, and his algorithms of marginal investment to generate marginal cap rate.) It's just not worth the effort to go lower when one factors in the work it takes to be a landlord. But if someone is happy at 4.5%....well, opinions vary. There are amateurs and there are pros.
I'm the one renting your 4.5% cap rate property...
Bananas are cheaper today than yesterday.
In the US you have solid property laws and infrastructure, and good deals at the moment.
Food, clothing,alcohol and gas are cheap.
In the DR you should rent and at least a year in the community were you want to purchase.
Buying does not have to be a bad or losing proposition, but you must know what you are doing and should understand Spanish.
Just because the price of bananas is up, you are not guaranteed a profit on DR real estate.
I used to work as a banana bender in Queensland, now India is the worlds largest producer with 16.8 metric tonnes.
I'm now unemployed and sleeping in a hammock on Sosua Beach, because also rental prices are inflated and do not reflect today's economy.:tired:
In the US you have solid property laws and infrastructure, and good deals at the moment.
Food, clothing,alcohol and gas are cheap.
In the DR you should rent and at least a year in the community were you want to purchase.
Buying does not have to be a bad or losing proposition, but you must know what you are doing and should understand Spanish.
Just because the price of bananas is up
, you are not guaranteed a profit on DR real estate.I used to work as a banana bender in Queensland, now India is the worlds largest producer with 16.8 metric tonnes.
I'm now unemployed and sleeping in a hammock on Sosua Beach, because also rental prices are inflated and do not reflect today's economy.:tired:
In the US you have solid property laws and infrastructure, and good deals at the moment.
Food, clothing,alcohol and gas are cheap.
In the DR you should rent and at least a year in the community were you want to purchase.
Buying does not have to be a bad or losing proposition, but you must know what you are doing and should understand Spanish.
Just because the price of bananas is up
I used to work as a banana bender in Queensland, now India is the worlds largest producer with 16.8 metric tonnes.
I'm now unemployed and sleeping in a hammock on Sosua Beach, because also rental prices are inflated and do not reflect today's economy.:tired:
Food prices are not that low in the US. Local food is very reasonable in the DR. Some prices 50% of US prices .Little clothing is necessary in most parts of the DR.
Alcohol is expensive in the US much cheaper in DR.
In many parts of the US a car is a virtual necessity whereas in the DR push-bike or motorcycle is often the only requirement.
I don't see how buying in the DR is very much different than buying in Spain, France etc. Buying off-plan is more difficult maybe but the potential rewards are that much greater.
A good opportunity may present itself within weeks or arrival - on the other hand longer wait may be good. If prices are rising renting for a long period is a waste if the plan is to stay in the DR for a reasonable time.
Sounds if you are enjoying living on the beach!
pi2
No you won't normally get a cap rate of 10% when mortgage rates are 2-4%.
3% is more likely - maybe 5%.
pi2
What Does Capitalization Rate Mean?
A rate of return on a real estate investment property based on the expected income that the property will generate. Capitalization rate is used to estimate the investor's potential return on his or her investment. This is done by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property. If you want to get technical, it is basically the discount rate of a perpetuity.
Capitalization Rate = Yearly Income/Total Value
Read more: Capitalization Rate Definition
:cheeky:
Wanna bet? We start with a 20% cap rate when we bought property and the rates were 7%! Trump gets near the 30's. We have some properties that get even more with time!
My family has been in that biz for way too long to be told how it works, pi.
The fact you had to rage google speaks volumes of your investment IQ.
Enjoy your 4.5%. As I showed, I could make more $$$ putting my money in a bank at 2.5% and renting YOUR property.
I expect Trump gives you lifts in his private jet and yours in on order.
Also you must have a substantial business giving property seminars etc.
pi2
Jesus christ.... you can buy wherever you want a property and make whatever calculation you want. But NOBODY knows if it will be correct. Crisis is always there and never there!
If you buy an apartment just enjoy it.
If you buy an apartment just enjoy it.
Hello. I have a family member that resides in the US and decided to purchase a single-family home in SD in 1998. After the initial deposit for the land (I believe 50% down payment), there were issues with the land title and her price went up considerably between lawyer fees, municipal fees, etc. (and other unforseen/unplanned expenses). Once the title was cleared (at a considerable price increase), it was time to build the house and--while the issues were less burdensome--there were also unplanned expenses that brought the project price of the home up about 30%. Since then my relative tells me that the maintenance and upkeep costs of the house are not worth the amount of time she spends there (about 3 months per year). Furthermore, the opportunity cost of the money spent (about 15% interest) have shown that she could've doubled her money while investing in other endeavors (i.e., Corporate Bonds, etc.). Hope this helps.
Roughly at the same period I invested in a Spanish property 'off plan' partially constructed. I sold on completion with a real rate of return of 40% after 2 years since at the end of the construction period I had only paid 30%.
Now of course Shanghai, HK etc. are looking considerably less attractive and of course some investors have lost 100% on property in Miami - GM shares etc.
Now the property you mention could be worth considerably more than the price paid - even with supplements.
A condo near the beach and airport can be a better living and letting proposition.
pi2
I had some close friends last month look for properties in Punta Cana (thanks to those who PM'd me with info) while they found a pretty good selection in their price range, in the end they decided to rent and see how it goes. They decided to get a feel for things without the financial burden and then if it goes well they will buy. In their situation I think they really wanted to be sure Punta Cana was the right choice. I am glad they did this. They come here about 5-6 times a year but still visiting here and living here are in my opinion very different. They thought about renting out their property (if they bought now) but did not want the headaches and were not sure if they were comfortable with " strangers " staying in their home. This will also give them the chance to explore more of the island and who knows maybe they will find another part of the island their paradise.
pi rhymes ith 'hi'
2 with 'you'.
Punta Cana may be a very good choice - direct flights to many part of the World including 3 Russian cities. Russia may be the next 'hot spot'.
www.imf.org/external/pubs/ft/survey/so/2011/INT092711A.htm
Many people have realized good gains in Spain and the US in the last few years and are looking to diversify into a stable, fast growing Cribbean economy.
Winter holidays and extened stays are becoming more popular as people have more free time.
pi2.
It's not a 'peso account', it's a CD, and you have to tie your money up for 7 years. It's available from most banks, actual CD is from the Central Bank/Banco Central.
AE