How to Invest in Caribbean Real Estate

Charting real estate in the Caribbean

Buying into real estate in the Caribbean is either a lifestyle or rental return decision, perhaps both. The near perfect climate, tropical paradise landscape plus the tax haven status offered by many of the islands can prove irresistible, if you can afford it. However, the level of sophistication endemic to the real estate sector on individual Caribbean islands can vary tremendously, with some far more advanced than others regarding standards of service, unit quality and the way in which they conduct business. Real estate law also differs among destinations.

Instructions

Invest Wisely in Caribbean Real Estate

1. 

   Bahamas an established market

   Decide on your budget, which dictates where you are able to invest and on what basis: direct, fractional ownership or even via a fund. The Caribbean divides into three main sections: the Bahamas and the Greater and the Lesser Antilles. In terms of popular real estate purchasing locations, islands like St. Lucia, Barbados and the Cayman Islands in the Lesser Antilles stand out. However, while they offer exceptional quality, these in-demand markets are now potentially priced beyond the resources of an average buyer.

2. 

   Antigua offers value opportunity.

   Investigate the real estate destinations in terms of pricing, capital growth potential and return. The Internet offers comprehensive coverage of the Caribbean markets. This will help refine the options open to you, both in terms of general affordability and the style of unit, house, duplex or condominium that falls within your budget. Emerging residential markets on a number of alternative islands offer better value for money as they try to establish themselves. Gated communities in the Dominican Republic, for example, match standards elsewhere but are far more cost-effective. New developments in expanding Antigua also offer attractive golf and sailing facilities at competitive prices. The U.S. Virgin Islands still have value propositions, as do the Dutch Antilles, and there are bargains on Belize.

3. 

   Figure out all the costs

   Establish the true costs. This is necessary if you opt for direct ownership, the fun way to invest in real estate. The disparity in legislation among different island jurisdictions comes into play. You'll need to know what local fees/taxes are required over and above the purchase price. Stamp duty (U.S. transfer tax), other taxes and tax incentives differ from place to place; for example, there are zero stamp duty and capital gains taxes in Dominican Republic, zero capital gains taxes but 9.75 percent stamp duty in Turks and Caicos Islands and a 10 percent transfer tax in Barbados. Do not forget to factor in legal and document fees. Also, figure out all the annual service costs: yearly insurance, sewer, power and water supply, pest control, Internet and telephone and the charges any local letting agent will levy to rent out the property. This last "to do" list could require some email interaction with a local property management company.

4. 

   Homes in the Virgin Islands

   Browse the websites of Caribbean-focused brokerages. Crunch the numbers. By this stage, you should have at least made a financial choice as to which island best suits your budget and intentions. Bear in mind that you will need airline access to reach your destination, and begin the unit selection process. At this point you should also decide whether you will buy off-plan (undoubtedly cheaper) or a completed end product. Regardless, start communicating with real estate brokers on specific developments and associated mortgage facilities. Unless you are extremely cash rich, leveraging via a local mortgage is the best route, especially with off-plan investments.

5. 

   The Final Flourish

   Visit the decided location, and if you are not already acquainted with the island of choice, turn it into a vacation. You may find, dependent on the value of the development you are looking at, that the real estate broker or the developer will fund part of the trip. This is also the time to set up an offshore bank account and instruct local lawyers, given that the destination and end product live up to expectations. Should you be sufficiently convinced to take the plunge and sign a reservation document, then you must be in a position to make an immediate 10 percent down payment on the investment as a sign of commitment.

Tips & Warnings

• Look at less popular islands that are starting to become accessible.

• Exhaustive research and sound legal advice are the only ways to make the right decision.

• Even a short visit is a must to get a feel for the environment, especially in a second home context.

• Good transport links are fundamental to a good investment; your trips will verify this.

• Before you sign up, you should see signs of a healthy tourist count. Although a fickle indicator, it is another pointer to a sensible investment.

• Historic established real estate havens in the Caribbean are substantially more expensive.

• Check carefully to confirm whether you need to secure a nonresident (known locally as a "nonbelonger's") license before you are allowed to purchase. This is certainly the case in the British Virgin Islands and Anguilla and can take more than a year to come through. In Barbados, specific permission to purchase by non-Barbadians has to be obtained from the Central Bank.

• Loan-to-value ratios on local mortgages offered may not be much above 50 to 60 percent, in rare cases 80 percent, however; the Caribbean is awash with offshore banking facilities.

References

• Definitive Caribbean: Map of Caribbean Islands
• Caribbean Edge Magazine: Property Investment Across the Caribbean
• Definitive Caribbean: Recommended Caribbean Real Estate Brokers
• Uying Association: UK site with helpful Caribbean Real Estate information

Resources

• Escapeartist: Living in the Caribbean