Puerto Rico real estate

[moneymaker]

Hi all, wife and I are starting to really thinking about purchasing a vacation condo in Puerto Rico. This is not a knee jerk decision at all. My wife is Puerto Rican and all of her extended family is still on the island, so we have been vacationing there for years and plan to continue to with our 2 young girls. Obviously we are very familiar with the Spanish culture and we speak Spanish.
Just recently we have began discussing options of purchasing a 2nd home/ vacation place in Puerto Rico for us to use for vacations as well as rent out. We are only looking at beach front/view condos.
From my research it seems that now could be a good time to purchase with the new laws giving incentives for investors as well as the economic situation. I really wanted to hear the thoughts of some of you that have experience knowledge of the Puerto Rico real estate market or any of you who have owned vacation homes near or on a beach. What are the pluses and minuses? I would think anything near or in the water is a good investment, but would love to hear your thoughts on Puerto Rico. Thanks!

[Blue Collar Guy]

I used to vacation in Puerto Rico during weeks 4 and 5 (late January, early February). They used to show the weather in Miami and then the weather in Isla Verde, hands down the weather in P.R. was much better during that time of the year. Can you give me a link if you have it about the new laws? I wouldn't mind wintering there.

[Senator]

With the tax structure in Puerto Rico, you may want to declare residence there. From what I have heard, it is even better than living in a non-taxed state.

[Sunset]

You seem well suited to do that, having family there.
However, you will run into the long distant landlord problem, so it would be fantastic if you had a family member that was happy to look after things when you are not there, (probably for some $$)

[Koolau]

I'm certain you are aware of the multitude of economic woes facing Puerto Rico. You are also most likely aware of some of the social issues (probably) exacerbated by said issues (rising crime, exodus, tax structures in flux, etc.) I would hesitate to invest in such a territory, but YMMV.

[Bamaman]

We have many friends with resort properties in Florida. It can sometimes be quite a hassle to deal with the properties. I look at the income is just icing on the cake. You've also got to make the commitment to go and live in the property--if just part time. And unfortunately, flying to Puerto Rico is much more expensive than a 400 mile drive to Florida. The jury's out on whether condo values will greatly increase in the near future in a bankrupted territory. I do know Puerto Rico had to be a snake pit of corrupt politicians to have ever run up the $ billions in debt and have little to show for it. Those poor people need jobs. With the worlds best weather and such a beautiful island, P/R should be a premier vacation destination--which it's not right now.

[ERD50]

I would think you would know better than just about anyone here, with family there and the time you've been there.

But from the little I know (following the news, and currently have some friends from Puerto Rico with family there), I guess I'd look at it as "how much can I afford to lose"? I wouldn't count on a 'comeback', though I hope it happens. It may be at a low point, so values maybe won't drop further, but they might. No, I doubt you'd lose it all, but consider it could drop further, and consider that you might not be able to sell it if you wanted, that money could be tied up a long time. Are you OK with that?

And the related crime issues that were mentioned, that accompany a bad economy, but it seems you would be aware of that from your time there.

It's sad, I was in PR on business in the early 80's, and the tax laws were encouraging lots of investment, so our electronics firm was there, as were others, and lots of Pharma. So the economy was doing at least OK, and I wasn't aware of any crime problems, and felt safe where I traveled. I understand that's not the case now.

I hope this works out for you and you can enjoy your time there, it is a beautiful island.

edit/add: Here's a bit of local color I can add - we've had big storms and flooding here, and the road leading up to the home of our friend from PR got washed out where a culvert goes under it. It was repaired in just a few days (even though you could get to all the homes by just coming in one side or the other, no one really needs to go from end to end). This was done even as road crews were dealing with lots of issues all over the area from the flooding (and Illinois is broke too!). He was amazed, he said that road wouldn't be fixed for years in Puerto Rico.

-ERD50

[phil1ben]

Moneymaker, I have been to PR many times and like the area near Fajardo. I also was considering buying real estate on the island. If you don't mind could you provide some answers to the following:

1. What financial incentives are in place for non-residents (US citizens living in one of the 50 states) to buy property in PR? I was not aware of any.

2. Are you concerned about the potential substantial increase in the real estate tax which may be implemented to help PR out of its current dilemma?

3. Has there been any discussion about implementing a rental tax for people who rent their vacation homes?

[dallas27]

Quote:

Originally Posted by moneymaker Hi all, wife and I are starting to really thinking about purchasing a vacation condo in Puerto Rico. This is not a knee jerk decision at all. My wife is Puerto Rican and all of her extended family is still on the island, so we have been vacationing there for years and plan to continue to with our 2 young girls. Obviously we are very familiar with the Spanish culture and we speak Spanish. Just recently we have began discussing options of purchasing a 2nd home/ vacation place in Puerto Rico for us to use for vacations as well as rent out. We are only looking at beach front/view condos. From my research it seems that now could be a good time to purchase with the new laws giving incentives for investors as well as the economic situation. I really wanted to hear the thoughts of some of you that have experience knowledge of the Puerto Rico real estate market or any of you who have owned vacation homes near or on a beach. What are the pluses and minuses? I would think anything near or in the water is a good investment, but would love to hear your thoughts on Puerto Rico. Thanks!

If things don't keep getting worse, it is an amazing time to buy into PR. I would pray statehood becomes a reality if I bought down there. Sadly i don't see any quicker path to a stable system than statehood and fiscal rescue. Need federal funds to come in and build infra and revamp failed institutions.

[ERD50]

Quote:

Originally Posted by dallas27 If things don't keep getting worse, it is an amazing time to buy into PR. I would pray statehood becomes a reality if I bought down there. Sadly i don't see any quicker path to a stable system than statehood and fiscal rescue. Need federal funds to come in and build infra and revamp failed institutions.

Ummm, Illinois is a State, and it hasn't seemed to help us to maintain a stable system.

Here's a decent summary of the bad news, I won't quote it here, as it is too depressing.

https://rebootillinois.com/2017/07/2...-risks-remain/

-ERD50

[dallas27]

Quote:

Originally Posted by ERD50 Ummm, Illinois is a State, and it hasn't seemed to help us to maintain a stable system. Here's a decent summary of the bad news, I won't quote it here, as it is too depressing. https://rebootillinois.com/2017/07/2...-risks-remain/ -ERD50

And no way would I choose to move to a state and work to pay taxes into a system like that, funding Illinois' past mistakes. At least in PR, you are getting the Caribbean at discount rates.

[ERD50]

Quote:

Originally Posted by dallas27 And no way would I choose to move to a state and work to pay taxes into a system like that, funding Illinois' past mistakes. At least in PR, you are getting the Caribbean at discount rates.

But they don't have our lovely winters!

-ERD50

[Sunset]

Quote:

Originally Posted by dallas27 And no way would I choose to move to a state and work to pay taxes into a system like that, funding Illinois' past mistakes. At least in PR, you are getting the Caribbean at discount rates.

PR has a huge deficit and somebody is going to pay for it.
Sure they might be able to skip out on paying loans, but then you can be sure any loans they take out will have some extra % on them for risk.

That would be one of the issues I would have with buying in PR,
for example the property taxes for non-full-time residents could easily be raised substantially.

[Koolau]

Quote:

Originally Posted by dallas27 If things don't keep getting worse, it is an amazing time to buy into PR. I would pray statehood becomes a reality if I bought down there. Sadly i don't see any quicker path to a stable system than statehood and fiscal rescue. Need federal funds to come in and build infra and revamp failed institutions.

Hawaii is the 50th state, but culturally, it is still a Kingdom. It has tons of problems from rampant nepotism, mostly benign corruption, outrageous prices, bad business climate, drugs, (primarily) property crimes, and limited sources of income (Most agriculture is gone because land is too expensive - as is labor. Military is at the whim of whichever gummint leaders are in power - not to mention budget. Tourism is thriving now, but is incredibly vulnerable to WORLD economies.) I once heard someone say "Hawaii is part of the United States, but it's not America." Truer words were never spoken. I'm guessing that if Puerto Rico became a state, it would go through even worse problems of transition because of the added issue of language. YMMV

[Blue Collar Guy]

Quote:

Originally Posted by Sunset PR has a huge deficit and somebody is going to pay for it. Sure they might be able to skip out on paying loans, but then you can be sure any loans they take out will have some extra % on them for risk. That would be one of the issues I would have with buying in PR, for example the property taxes for non-full-time residents could easily be raised substantially.

I think the bond holders are going to pay it

[Johanson]

Quote:

Originally Posted by dallas27 If things don't keep getting worse, it is an amazing time to buy into PR. I would pray statehood becomes a reality if I bought down there. Sadly i don't see any quicker path to a stable system than statehood and fiscal rescue. Need federal funds to come in and build infra and revamp failed institutions.

I don't ever see that happening in my lifetime.

Quote:

Originally Posted by Koolau Hawaii is the 50th state, but culturally, it is still a Kingdom. It has tons of problems from rampant nepotism, mostly benign corruption, outrageous prices, bad business climate, drugs, (primarily) property crimes, and limited sources of income (Most agriculture is gone because land is too expensive - as is labor. Military is at the whim of whichever gummint leaders are in power - not to mention budget. Tourism is thriving now, but is incredibly vulnerable to WORLD economies.) I once heard someone say "Hawaii is part of the United States, but it's not America." Truer words were never spoken. I'm guessing that if Puerto Rico became a state, it would go through even worse problems of transition because of the added issue of language. YMMV

I've worked in Hawaii a number of times and I've never seen such a slow pace for business. Not only do things constantly get put off until tomorrow, they get put off to next week, next month, and next year. I've worked with a number of different people that have moved there from the mainland and everyone of them wanted to get off the island. N=5.

[bearkeley]

We recently looked int purchasing an ocean view condo because we love Puerto Rico and we're attracted to the tax incentives (federal tax incentives for income earned as a resident of PR) and an awesome condo that was priced at about a third of what we could get in Florida. At the end, we decided to hold off because of the instability.

Now the OP is in a very different situation. We don't have family, nor have we had time to visit as regularly. It would have been a vacation rental until we are able to relocate full time in a couple of years

So, Money, I would suggest considering the following:

A. Is it really a great buy? We compared the listing prices of real estate this past year to prior years and despite the news about prices dropping, it didn't really Impact listing price of condos in areas we were interested in...maybe only about a 10-12 percent drop. With your familiarity with the area and family, you are in a great position to do research and buy a 'great buy' that someone like us could as investors from outside the area.

B. Are you buying it as an investment (to make money) or as a vacation home (rental income would be nice but not needed)?

Knowing the culture, you probably are staying with family a lot when visiting instead of hotels, so getting your own place would be very nice, but offsetting hotel expenses probably isn't a benefit for you. But, if a second home is really your main reason for purchasing (and you are aware of expenses and issues of having a second home), then Puerto Rico sounds perfect for you and we are jealous!

However, don't rely too much on the rental income. We have 9 rentals now in the US and were able to retire before 50 because of it. However, there were times when we would have had major issues if we relied solely on rental income and didn't have our full time jobs to offset losses, so if you have never rented out real estate before, please be careful!

Condo rentals are still a good market for oceanfront / view homes, so great choice on that. However, having a management company can be a huge headache. They make their money on repairs and maintenance, not the management fee. We are fortunate to have one now manage 4 of our long distance rentals, but we had 5 different ones prior to finding them. Lastly, we would never ask any relative, other than my mother to help manage our rental. It's just asking for trouble. If you have someone like my mom who can assist you, then again, we are jealous!

Please keep us posted on what you decide to do and how it goes

[GravitySucks]

Quote:

Originally Posted by dallas27 If things don't keep getting worse, it is an amazing time to buy into PR. I would pray statehood becomes a reality if I bought down there. Sadly i don't see any quicker path to a stable system than statehood and fiscal rescue. Need federal funds to come in and build infra and revamp failed institutions.

Already have been hearing the talking heads say how USA needs to bail out PR where they really mean bail out their bond holders.
I'm afraid it will come to pass. No harm to any of the guilty parties.