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Is buying real estate in
the DR risky?
The risk is small if the persons involved in the transaction
(developer and real estate attorney) are reputable. That’s why
here in PARAMOUNT PROPERTIES, S.A., we have our own legal
department, we are recognized as a reputable firm that will
ensure that a title search gets done, certifying the actual
status of the property. When you make the decision of buying or
selling a property, our lawyer will be answering all your
questions just right there.
Today it is possible to get title insurance on real estate
purchases with one of the most reputable companies in the United
States, based in the Dominican Republic.
Our company is willing to provide title guaranty, escrow and
closing services for buyers and sellers of residential and
commercial property and also we offer and provide insurance for
your construction in process and finish construction to guard
your investment a 100%.
What are the taxes on real estate purchases?
If the purchase is done through a Savings and Loan Association
(Asociación de Ahorros y Préstamos) total closing costs amount
is approximately 2.5% of the purchase price, including legal
fees. Interest rates on the loan, however, are between 12 and
18%+ per annum. Being a peso loan, however, you may end up
paying less than at home depending on the rate of depreciation
of the peso.
For a straight purchase from an individual to another, total
closing costs come up to approximately 6% of the purchase price:
approximately 5% for transfer taxes plus legal fees.
What other taxes do real estate properties pay in the
DR?
Property taxes (”IVSS” taxes) are levied on sumptuous homes and
unbuilt city lots. Any home worth more than RD$5,000,000 pesos
(approx. US$142,000) is considered “sumptuous” for tax purposes.
Homes worth less than RD$5,000,000 pesos and commercial
buildings are exempt from property taxes. The government
penalizes late payment with a 10% tax due for the first month
and 4% for each subsequent month.
How can I find out how much IVSS my property will pay?
Go to the local office of the “Dirección General de Impuestos
Internos (DGII)” (Internal Revenue) with a copy of your
certificate of title or come to our office and we will provide
you with such service.
What documents will I need to purchase property in the DR?
What you need will vary with the institution and with the form
of purchasing. The minimum you will need if requesting finance
from a financial institution is: Two forms of official photo ID,
one being your passport. If you plan to finance the property,
some type of official document is required to disclose your
income. This could be copies of last year income tax filing, a
letter from your present employer on company letterhead (if you
plan to move and work in the DR, get a letter of intent from
your prospective new employer, nothing start date, length of
employment and salary); documents of other sources of income;
savings and checking statements; outstanding debts and proof of
on time payments.
You should bring anything you can to prove your solvency. You
will also need to show plans of the house/building you wish to
build or copies of the title of the property you wish to buy.
It’s not much different from buying property in the US. But if
you are planning to buy your property with no financial
institution involve, meaning, Cash, Check or Wire Transfer, you
will only need copies of your passport.
How is land measured in the DR?
Officially, the metric system should be used in all real estate
transactions, the hectare (10,000 m2 = 2.47 acres) being the
basic unit. However, the “tarea”, a unit of measurement from
colonial times equivalent to 628.86 m2 is still widely used. An
acre is equivalent to approximately 0.4 hectares or 4004 m2 or
6.4 tareas.
Other land measurements are:
1 M sq = 10.795 sq ft ,
1 Tarea =629 m2, 6.433 Tareas=1 acre, 15.89 Tareas= 1 Hectare, 1
Hectare = 2.47 acres , 1acre=43, 560 sq ft
Who pays the vendor/seller commission?
Usually the vendor/seller pays the commission. But there are
many occasions when the seller will stipulate that his price is
a net price and therefore the buyer will in effect compensate
the real estate broker for his work.
To transfer the title from one individual to the next, there are
transfer taxes. The buyer/purchaser pays approximately 5% of the
declared value.
The custom is that the lawyer for the buyer makes the contract
and thus the buyer pays for that, sometimes the seller wants a
lawyer to represent his interests so he will have to pay too. In
our office we have our lawyers on site with all their time
available only for you.
What are the interest rates on a mortgage loan?
The lowest real estate interest rate that can be secured at
present is 18%, but depending on the time and amount it is
always negotiable with the financial institutions, we do all the
due diligences to get you the best rate as we do have great
business relationships with the local banks.
What is a normal down payment?
Most loans and savings banks will finance up to 80% of the loan.
While you will pay less financing the property abroad, in the
long run if you take out a long mortgage locally you may end up
paying less. If you do your construction all the way through our
Construction Company, you will be paying for your construction
while it gets built. Here’s the Deal:
30% to start your construction
30% when the roof is on
40 % when keys are delivered
Plus, if you are not living in the DR while your house/apartment
or commercial property is been built, an onsite camera will show
you the phases of how is your construction going.
Are there any taxes on renting real estate property?
The tax reform implemented in January 2001 establishes a 20%
withholding tax on rental payments. Also, commercial rentals are
subject to a 12% ITBIS tax.
What are the advantages of forming a Dominican company to
purchase property?
The main advantages to forming a Dominican company are that you
will not be personally liable for debts or problems incurred
during the operation of the business. A second very important
reason to incorporate is to avoid the application of Dominican
rules of inheritance to your Dominican properties. Inheritance
of real property in the Dominican Republic is governed by
Dominican law which provides for “forced heirship”: part of the
estate must go to certain heirs by law. For example, a foreigner
with a child must reserve 50% of the estate to that child
despite the existence of a will or of the law of his country of
residence. A third advantage is to avoid having to put up a bond
in case you (a foreigner) have to sue in the DR.
What are the chances I will lose the money invested with
devaluation?
Over the years real estate investments have proven to be good
business for many. In many areas, such as Casa de Campo, where
values in foreign currency have never gone down, only up. In
other areas, the values have stabilized, or in some there’s no
way to lose as the property price value in the DR only goes up.
Whether your investment gains will depend on how you have
financed it (if you can get a loan in pesos you will probably
gain more), or if the area where you invest gains or losses
worth as it becomes more developed. This is no different
anywhere else in the world.
Should I rent or buy?
Yup, the cliché is true: Buying a home is one of the smartest
financial decisions most people will ever make.
Don’t take my word for it. Take the Federal Reserve’s. Its
Survey of Consumer Finances has consistently found a huge gap
between the wealth piled up by homeowners and that accumulated
by renters.
Home ownership builds wealth in two ways: through the forced
savings of paying down a mortgage, and through appreciation --
the rise in the home’s value over time.
If you have plans to live in the country for a short term,
consider buying and renting. This gives you the flexibility of
working in your country and vacationing in the DR in your own
house. How’s that????
If you want to buy a property in the DR, but you are spending
here only a couple of months; get ready for it: We offer you to
administrate your property and rent it out for you only for the
time that you are away, so every summer, winter of fall that you
decide it is time for a break, your house will be available for
you.
We do rent out program for most of our buyers, where all your
bills are paid, the maintenance to your property is done, the
monthly check is sent to your country (not matter where you
are!) and we pick you at the airport. So, while you are working
and living abroad, your property is making money for you, and if
you got a loan or mortgage, it gets paid by itself.
What is the usual commission realtors charge?
Realtor’s commission is usually 5%-10%.
I want to rent and have been asked for a guarantor who is
legally liable for paying my rent in the DR. If I am a new
arrival and don’t know anyone how can I get around this?
Sometimes making a six-month security deposit will work. In
tourist areas, property owners will be more flexible because
most of the newly arrivers will of course not have local
guarantors. In Santo Domingo, it is difficult to rent without a
guarantor.
Can foreigners qualify for a mortgage loan from a loans and
savings institution? What will be required in order to qualify?
Yes, foreigners can obtain loans. However, most savings and loan
will require residency status.
What other channels of lending are there available to foreigners
and/or Dominicans? Are there builders that will finance?
Many
sellers will offer financing on the sale of their properties. In
some subdivisions, the owner will offer financing both for lot
purchase and home construction.
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