Investing in the Dominican Republic

21 juni 2022

In a blog I wrote earlier, you may have noticed that when it comes to investing, my clear preference is investing in the Dominican Republic particularly in A1 locations and in new construction or real estate with a maximum age of 5 years. I have explained the reason for this in detail before: because I believe that this is how you create a good exit strategy.

In this blog I try to explain to novice and potential investors why location is the most important factor in whether or not they are successful in investing and can achieve high returns. I will give you several calculation examples of different scenarios and show you a practical example of an investment I made myself last year.

The location of a property has a greater influence on the amount of the rent than, for example, the number of square meters that the apartment has. The occupancy rate is much higher in the long term at an A location than at a B location because A locations are always easier to rent, and tenants are less likely to move. If you look at investments that are suitable for short-term rental via, for example, AIRBNB or Booking.com, the location usually plays the largest role in the pricing for the rent and occupancy rate. There are many ways to value locations, the most important thing is to determine who the target audience is. For a fashion lover, the city center is a bad location and for a history lover, an apartment near the beach is probably not interesting at all. As an investor, you must have a broad vision and you must sometimes be able to switch off your emotions, do not buy exactly what you find very beautiful, but buy something that you support yourself.

What are Type A locations? The A locations have the following characteristics: the demand for these locations is higher than for other locations in the same region, the occupancy rate is high compared to the average in the same region, rental income per M2 is higher than average and the location has an excellent exit strategy. Type A locations in the Dominican Republic are mainly located on the beach or in the middle of the city. I am in favor of investing in the city because the occupation of beach locations can fluctuate greatly due to high and low season. When renting at A locations in the center of Santo Domingo, the landlord focuses mainly on the business market, think of medical tourism, this runs well all year round and does not depend on a holiday period, rentals to diplomatic visits, Santo Domingo counts many embassies these organizations always need housing for staff or visitors. Santo Domingo is a business center, and many international companies have a branch here and therefore also need housing. Rentals to foreign regular workers is also called expats rentals. For long-term rentals, the average budget per month of an expat is between US$2,500 and US$3,000. Type A locations in Santo Domingo: The neighborhoods of Piantini, Naco, Ensanche Paraiso, Yolanda Morales, La Yuca, Serralles, La Julia and La Arboleda can be considered type A locations. These neighborhoods together form the epic center of Santo Domingo also called Poligono Central. These neighborhoods mainly consist of commercial locations and high-rise apartment complexes. Given the infrastructure, architecture, and amenities in this area, these are by far the best locations to invest. My personal preference for investing in these neighborhoods is in the Piantini neighborhood because this neighborhood shows by far the most appreciation, this is because the streets are quite wide compared to the surrounding neighborhoods and there are many luxury restaurants and shops. leading restaurants such as: Bottega Fratelli, A La Cubana, Adrian Tropical, Allegra, 3 Mariachis, Sophia Bar and Gril, Laurel, Loretta Cafe Bistro, La Dolcerie, Restaurante Don Pepe, Okra Restaurant, Italia in Bocca, La Locanda, The Vita Place , Outback Staek House, Peperoni, Leek, Factory Steak & Lobster, Barelo, Turo, The Market, Yao, Lincoln Road, Ajuala, Samurai, Monalisa Lounge, Lila, Cafe SBG, T.G.I. Fridays, Dimagi Restaurant, Julieta, Mitre and the bars Mix, La Posta Bar, Maruja Bar, Eme by Marketcito, Mantra Bar, Beer Market, Cavaalta, Piano wine dine Music, Vonp Bar, Bier Garden, Nunchi Bar, Districto 151 are located here . Piantini also offers several schools including Discover and learn, Enalas, King Cristian School, St. Michaels’s School, Colegio Decroly and Colegio Lux mundi are located here. For sporty residents there is plenty of choice in gyms and you can visit Fitness Factory, Exercise Acropolis, In Shape, Electrobody Center, F45 TrainingCrossfit, and 4xercise. In addition to the many smaller shopping arcades and individual shops in the Piantini district, you can also shop at the shopping centers Acropolis Center, Plaza Piantini, Plaza Central, Unicentro Plaza, Plaza La Lira, Plaza Morichal, Plaza Capuchinos and Plaza Las Americas.

Neighborhoods with as many high-end facilities as Piantini has to offer are rare in the Dominican Republic. Buying property in this area if done correctly is guaranteed to be a good investment. Below I have worked out an example for you that roughly shows the differences when investing in various locations.

There are of course many variables involved, such as maintenance, rent indexing and environmental factors, which I have not taken into account in this overview because I do not assume a specific location. If you do not have sufficient resources to invest in a high-yield location, I usually advise you to look at the possibilities of using loan capital so that you achieve the highest return. When using loan capital, make sure that your real estate continues to generate positive cash flow and that you do not have to add money for years to be able to cash out only at the end of the period. In that case, I recommend investing in slightly lower-yielding real estate or participating in an experienced party that achieves the highest return for you.

Are you interested in investing or participating in real estate? Please contact me at info@dominican.luxury

Adriaan Smit

Real Estate and Financial Advisor

Investing in the Dominican Republic

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