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puerto rico real estate market

Why Puerto Rico Is the Best Place to Invest in the World Right Now

A 7-bedroom beachfront property in TROPICAL PARADISE for the price of a home in Montgomery, Alabama?

Where does this exist, Narnia?

While Narnia sounds amazing, this paradise actually exists just 1,000 miles from the United States. 

Puerto Rico is currently an investor’s dream. 

Because Hurricane Maria caused catastrophic damage, the island faces unparalleled opportunities to rebuild. 

The Caribbean island and unincorporated U.S. territory, with approximately 3 million tourists annually and a population of 3 million residents, is becoming a prime real estate market. 

Here’s why it’s the perfect time to invest in Puerto Rico’s real estate market. 

Prices

According to Point2Homes, the current average selling price is $116,750. While the current average selling price of a home in Miami is nearly triple at $339,700. 

Current prices in Puerto Rico, a popular tourist destination, are a STEAL.

The median selling price of homes on the island decreased by 48% from 2010 to 2018, with Humacao and Aguadilla being the highest at a 74% decrease. 

Hurricane Maria resulted in an extra 57,000 mortgages going into delinquency and caused many homeowners to sell their homes to escape the catastrophic conditions. While this tragic event wreaked havoc on the island, it does present ideal investment opportunities. 

Income Opportunities 

With rich history and culture, pristine beaches and world-renowned attractions, it’s no surprise that Puerto Rico is a popular tourist destination – hosting approximately 3.7 million people annually. 

Airbnb provides investors with the perfect opportunity to capitalize on the current low acquisition costs and receive an expected return of 15 to 20%. 

The California based hospitality company currently has 150 million users and more than 5 million listings worldwide. About 2 million people stayed in Airbnb rentals across the world during an average night in 2018, and the company continues to grow at a rapid rate.  

$20,619 is the average expected profits of renting a two-bedroom apartment for a year. 

With statistics like these, buying a property in Puerto Rico for 50% of its value is a no-brainer! 

Our newbie’s guide to buying an Airbnb investment property outlines the following example of the potential ROI. 

Example deal for Farjardo, Puerto Rico: This is a perfect Airbnb rental income opportunity. We just put a duplex for $85,000 under contract that needs very little rehab work to make it rental ready. The three options for the property are the following:

  1. Put in minor repairs under $12,000 and rent to section 8 tenants and generate a gross income of $1,450 a month. That would give the owner an ROI of 13% and get paid directly from the government.
  2. Improve the property more and get a higher rental rate. Spend $25,000 on the rehab work and generate $1800 a month for an ROI 15% a year.
  3. Complete the same repairs as the $25,000 and sell the property for $145,000 Profiting approximately $25,000 on a $110,000 investment in six months or less. 

There are numerous opportunities for receiving a great ROI when purchasing a property in Puerto Rico. 

Tax Incentives

There are several incentives that make investing in Puerto Rico worthwhile. 

Under Act No. 20, qualified businesses are taxed a flat 4%, as opposed to the 39% and soon-to-be 20% rate businesses based in the U.S. are taxed. At the same time, eligible companies enjoy 100% exemption on property taxes, in addition to tax exemption on dividends, interest, and capital gains.

To qualify, business owners and investors need only reside on the island for a minimum of 183 days per year.

Act No. 22 is to attract new residents to Puerto Rico by providing a total exemption from Puerto Rico income taxes on all passive income realized or accrued after such individuals become bonafide residents of Puerto Rico.

This relocation is resulting in new local investments in real estate, services, and other consumer products, and in capital injections to the Puerto Rico banking sector. All of which will continue to accelerate the economy of the island.

The creation of Opportunity Zones allows U.S. investors to defer all 2018 capital gains for 8 years if the profits are reinvested and held in an Opportunity Zone, decrease the amount of such capital gains taxes by 10% and 15% if held for five or seven years, respectively, and also provides a full exemption from capital gains tax on all future capital gains on the invested funds if an investment is held for 10 years, starting in 2018.

The IRS recently announced some changes to the Opportunity Zone regulations. As a result, almost the entire territory of Puerto Rico is now designated as an Opportunity Zone.

U.S. Territory Benefits 

In addition to the increased tax benefits, investing in Puerto Rico is made much easier because the U.S. has a vested interest in the growth and development of the island. 

Repairs will be conducted according to U.S. standards, and the island has access to American disaster relief. 

Visiting the island is made easy for U.S. residents, as there is no visa or passport requirement. It’s also a short distance flight from the Southeastern region of the U.S. 

The island also uses the U.S. dollar creating no additional currency risks and making transactions much easier.

Life in Puerto Rico

One of the best benefits of investing in Puerto Rico’s real estate market is experiencing Puerto Rican culture.

Salsa dancing until the morning, eating Mofongo, snorkeling in the Atlantic Ocean, or surfing in the Caribbean Sea are just a few of many things to enjoy on the island. With the blend of Taino Indians, Spanish and African cultures, comes a melting pot of people and traditions, making it an amazing place to work and live.

Major attractions include Old San Juan, El Yunque National Forest, Castillo San Felipe del Morro, Bahía Bioluminiscente, and the many diverse beaches. There is much to explore for residents and tourists alike.  

Puerto Ricans are known for their warm hospitality, often considered very friendly and expressive to strangers, which makes working with them a great experience. 

Life in Puerto Rico can be very rewarding both culturally and financially. 

How to Get Started 

It is quite obvious that the Puerto Rico real estate market has much to offer investors. The potential ROI of 15% makes this investment a sound financial decision. Contact us today to get started. 

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