Why buy an apartment abroad?

Maybe you are a real estate investor and you are looking for new ways to expand your investment strategy. You don't want to limit yourself to a single market, but want to explore emerging cities where high returns can still be found.

Often, real estate investors who do not have international experience find that one of the risks to buying an apartment abroad is the lack of knowledge of the language, the lack of legal certainty and, of course, those doubts and uncertainty that can arise when we are looking for new opportunities.

Let us show you some reasons why, despite all this, it is worth buying a home abroad if you choose excellent locations, such as the Dominican Republic, a country with which you share language, has a large influx of tourists and is the main center of interest in the Caribbean for real estate investments in the Spanish-speaking world.

Reasons to buy an apartment abroad

There are multiple reasons why as an investor you should not be afraid to expand your investments to other markets. The sooner you do it, in fact, the better to diversify your income and avoid the risks of being subject to a single real estate market, which may have serious structural problems that prevent you from growing.

Tax savings

Don't just look at the price of the property, the size, or the publication. Look at the taxes, which can substantially increase the cost of your investment. When real estate taxes are high, we indirectly think that the price of the house is more expensive, but in reality the payment of taxes does not represent any benefit for the investor.

There are real estate markets abroad that would allow you to execute the same type of operation, paying much less tax, or even an exemption for 15 years, if the property meets certain characteristics, as is the case of the Dominican Republic with the Confotur Law.

2. You need to diversify your real estate portfolio.

Owning real estate in a single country subjects you to the legal vagaries and unique characteristics of the real estate market. If that scenario is also prone to increased regulations on the rental market, or taxes are frequently increased, the lack of predictability puts your long-term investments at risk.

Lack of fun can be a problem if you find yourself in a market with a lack of legal certainty. Different situations may arise that lead you to see your profitability diminished and not achieve the objectives you had planned at the beginning.

3. You wish to have a second residence abroad

Perhaps you are buying an apartment abroad because you would like to have a second home. You want to buy an apartment as a second home, which is in a vacation location, where you can retreat to rest, but still provide you with certain amenities, and is relatively close to other places you might travel to.

Dominican Republic is the perfect place for investors of this profile, where you can also easily obtain residency by investment. Not only because it is a short flight away from the USA and Latin America, but also because it is a country that receives more than 11 million tourists a year, and has excellent beaches to enjoy an excellent experience.

4. You don't want to assume the opportunity costs of investing in a single market.

If the market in which you have invested in housing is expensive, or presents serious difficulties in accessing properties at an attractive price, you are assuming opportunity costs that you may not be aware of. Because the same amount you invest in a property in the United States or Spain would give you access to apartments of much higher quality, with more affordable prices, and a greater potential for long-term profitability.

This would allow you to grow faster and see results sooner, as you would enter the luxury apartment market, a much more stable type of investment in the long term, whereas the other way can often be more difficult to find buyers, or you may find yourself in distressed situations if a real estate crisis occurs.

Dominican Republic, the ideal destination for real estate investments abroad

Thinking of buying your first home abroad? Whether you are a professional investor, or simply want to enjoy a home of your own in the Caribbean, the Dominican market represents just what you might be looking for right now.

A Spanish-speaking market, with legal security and a continuous flow of tourists throughout the year thanks to its warm climate, which can be a perfect option for tourist rentals. We are talking about a market where you can find apartments with temporary tax exemption, in the heart of Punta Cana, and with yields that can exceed 10 or even 15% per year.

Would you like to receive more information? Are you an investor looking for opportunities abroad? Talk to us here.

How to choose a profitable apartment for investment in Punta Cana

As a real estate investor, many times you may be tempted to buy a property because you like its location or its design. Or perhaps because, without knowing the city's real estate market well, you decide to take some risks, based mainly on what you see or have been able to study.

But choosing a profitable apartment for investment in Punta Cana requires taking into account different factors. Not everyone invests with the same objectives, nor does everyone have the same investment profile (discover here our real estate opportunities in Dominican Republic).

Whatever your objective is when buying an apartment for investment, it is important that you take into account some metrics and indicators that will help you make the best decision.

What to take into account when measuring the profitability of an apartment?

When we talk about the profitability of an apartment, we must be clear about what we are referring to.

If you are looking for properties to invest in Punta Cana, you may be thinking about the ROI or return on the real estate investment of the purchase-sale. You are interested in the revaluation of the property, and obtaining a margin or capital gain from its sale one or two years later.

Or maybe you are thinking about tourist rentals, so that the net income you get from short-term rentals will allow you to cover the full cost of the apartment and generate profit.

In many cases, in order not to wait too many years, investors look for a hybrid formula: rent for a few years and sell later when the apartment has appreciated at least 10% per year.

Metrics and indicators to buy a profitable apartment in Punta Cana

Seen from this perspective, there are several indicators and metrics that you should take into account when investing in apartments in Punta Cana.

A developer or promoter who knows the market can inform you about the profitability of each property, although having the advice of a real estate lawyer and an economic advisor can help you solve all your doubts.

In any case, these are some of the indicators you should look for when investing in an apartment.

Cap rate (capitalization rate)

This metric measures the profitability of a property with respect to its market value, without considering financing costs.

Thus, for example, it can be calculated by a simple formula:

(Net sales transaction revenue / Purchase Price) × 100.

At the moment of buying an apartment in Punta Cana, you may not know the real net income that the apartment will produce. However, you can make an estimate, considering the growth rate of real estate prices in recent years, which would allow you to establish a range in which your profits will be found.

Some real estate investors also consider the return on equity invested, in case of applying for a mortgage, using the following formula:

Cash-on-Cash = (Annual Cash Flow / Equity Capital Contributed) × 100

Metrics to determine the profitability of real estate rentals in Punta Cana

If you are going to buy an apartment and then wish to rent the property, the first thing to do is to find out the fixed costs involved in the maintenance of the property.

In many cases, property management is carried out by a hotel brand, which includes all maintenance costs, and is a figure that allows you to easily find out the net yield of your rentals and determine prices.

It is also essential to know the taxes you will have to pay, even though with the Confotur Law you may be exempt.

Whatever your case may be, rental yields may vary, depending on whether they are short or long term rentals. Long-term rentals have a fixed price per month, so you know in advance how much you will earn if you sign a contract. On the other hand, in short-term rentals you must take into account different variables. For example:

● Occupancy rate: percentage of nights rented during the year.

● ADR (Average Daily Rate): average daily rate per night that you usually charge.

● Overnight rate: average number of nights each customer stays.

Lead time: time elapsed between booking and guest arrival, or level of anticipation of the booking. This indicator is not really a problem for availability, but it does show you the risk and predictability of bookings.

As you can see, determining the actual profitability of a vacation rental requires taking into account operational metrics, and is somewhat more complex to determine.

However, if you buy real estate in condominiums, small units located in apartments with all types of amenities, Generally, these indicators can be easily determined so that you can know what price to charge for rent, what your maintenance costs will be and what profitability you will obtain during the year.

These benefits in a tourist environment like Punta Cana are considerably higher than in long-term rentals, and can help to cover the cost of buying the apartment in less time, and thus maximize the benefits of your investment, whether you decide to keep it or sell it after a few years after its revaluation.

Would you like to discover tourist apartments in Punta Cana that offer predictable results for a profitable real estate investment? At Vivantia Homes we would like you to get to know our market opportunities in detail. Book a video call with us.