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September, 2009:

Santo Domingo – Samana Highway gets additional funding

The new highway connecting the Dominican Republic’s capital city, Santo Domingo, to the popular tourist area of Samana has been open for use for over a year.  However, there are a few sections that have not yet been completed. Currently the drive is about two and a half hours from Santo Domingo to Las Terrenas.  With the new sections completed, it should take about two hours for the same trip.  Before the highway was opened in 2008, the drive was approximately five hours on a road in poor condition. 

 

According to the following article posted on September 8, 2009 on the Gov Monitor, the Inter-American Development Bank will lend up to $44.8 million to the highway project.  The 99 kilometers of existing highway that connects Nagua, Sanchez, Samana, El Limon, and Las Terrenas will be rehabilitated and there will be a new 24 kilometer route connecting Las Terrenas and Majagual.  

 

Last year when making the drive from Santo Domingo to Las Terrenas we took a few photos of the new highway.

 

Here’s the article that appeared in the Gov Monitor:

 

IDB Supports Toll Highway in Dominican Republic

 

Project will back development of road infrastructure to improve travel connections in areas with great tourist potential

 

The Inter-American Development Bank will support a toll highway project that will reduce the travel time between Santo Domingo and the Samaná peninsula, an area with great tourist potential, located in the northeastern part of the Dominican Republic.

 

Continue reading article: The Gov Monitor

How to Prosper in International Resort Real Estate

Do you dream of owning property in a tropical paradise? Do you know the essential steps you must follow to truly prosper by investing in the right international resort real estate project?

Knowledge combined with a solid plan can make the difference between a strategic and smooth decision-making process leading to a successful profitable transaction and an ongoing headache (and heartache) project that never pays off. 

Most people don’t realize how affordable and accessible beachfront and resort property can be; however, it’s critical to do your homework before you commit to anything. LasGaleras_Hotel

 

The first steps are all about getting educated. This part of the process will likely be the most time-consuming and the most valuable. 

Resort real estate can be very profitable and may offer significant tax and lifestyle benefits.  It is important to be clear about your financial strategy and risk tolerance on the front end, since every project and opportunity will present unique risks and benefits. 

How would you hope that owning international real estate would impact your lifestyle?  Is it appealing to you to benefit from the tax advantages and lifestyle of visiting your investment property periodically as part of your investment management plan?  Or, do you simply want to enjoy a second home in a beautiful beachfront resort and know you have an appreciating asset? Would you be greatly disappointed if a project took five years to be completed, when you were hoping for two?  Be clear about what you want.

Buying raw land and building a home or a project of any scope often offers the highest return potential hand-in-hand with the most risk (Think 500 – 1000% ROI, over a three to eight year period, assuming everything goes exactly as planned–which rarely happens).  Investors who buy into a development project in its earliest stages will benefit from lower prices and will assume more risk than those who purchase just prior to construction or after construction has started.  The safest bet (and the highest cost) is usually found with completed construction.  Not to say there are not risks with purchasing finished homes; however, the risk of the developer running out of money and not completing the project, the risk of permits being denied, or the risk of an extraordinarily slow building process are mitigated when the building is already completed and ready to move in. 

There are several trends, which have led to the popularity of resort investment, but perhaps the most significant trend is that baby boomers are hitting financial peaks in their careers and are also inheriting substantial sums of money from their parents.  More and more Americans are flocking to resort-like cities.  Kenneth Johnson, a senior demographer at the University of New Hampshire’s Carsey Institute said, “You get the wave of the baby boom, which is bigger than the wave before it, and on top of that, the baby boomers are more likely to purchase these second homes, or amenity homes, or move to these areas. And so you get, essentially, a demographic perfect storm.”

A “demographic perfect storm” seems like a compelling argument to invest in a resort location, but you must decide if this asset class is a good fit for you.  Also, you will need to decide if you will pursue raw land, pre-construction, completed construction, or rehab projects.  This is largely a decision based on risk tolerance and desired timeline.  

If you have determined that international resort real estate does in fact fit your investment strategy, risk tolerance, and life goals, it’s time to begin investigating potential geographic markets. Factors you might want to consider first include the political and economic stability of the country, the year round climate conditions, the policies and attitudes towards foreign investors, and ease of travel to the country. If you are starting your search for prospective investment markets from scratch, the Internet is a good place to begin.  There are an abundance of global real estate portals, packed with information, including http://www.escapeartist.com, http://www.globalpropertyguide.com, http://www.overseaspropertymall.com, and http://www.viviun.com

This market investigation process will inevitably lead to the discovery of multiple projects in your desired geographic market that warrant further research. 

Conducting adequate due diligence on each project under consideration will help mitigate your risk exposure.  At minimum, you will want to understand how property management will be handled, investigate the builder/developer’s background and track record, and verify that property title and permits are in place.  It is also important to know the exact location of a project and its immediate surroundings.  For example, a project may be located in a beach town, but its proximity or access to the beach may be less than ideal. 

Visiting the real estate market you are considering, getting a feel for the community (if one exists), meeting face to face with the developer and seeing the exact location of your prospective projects is one of the best ways to conduct due diligence.  Plus, you’ll likely have a lot of fun exploring the area. 

At this point, much of the research and education process is completed; however, there are still important steps to take.  You’ll need an international real estate team including an international tax attorney or CPA, and a possibly an attorney in the market you have chosen.  Financing options, tax implications, impact on cash flow and net worth all need to be considered.  Always look at the worst-case scenario, and make sure you can “wait it out” should that become necessary.  Know your exit strategy options.

Once you have narrowed you search down to one or more properties or projects, Review all purchase contracts and payment terms with your attorney.  Be ready to walk away if you don’t like the terms and conditions offered in the contract. Make sure that everything in the contract is clearly stated. 

Now you are ready to commit to and finalize your deal by signing the contract and submitting payment. If you have found a good project, you will have a new asset to add to your portfolio and you will have a beautiful property to enjoy.

1 ‘Amenity Migrants’ Alter Life In Resort Towns, by Daniel Kraker, Aug. 19, 2008, NPR

Dominican Republic Starts to Recover

This article, written by Joachim Bamrud, appeared in Latin Business Chronicle on August 11, 2009.  

 

The Dominican Republic is starting to see signs of recovery, leading to more optimism among local and foreign investors…

 

Osvaldo Oller, a director of the Oller Group, sees real estate in tourism areas like Punta Cana, Puerto Plata and Samana picking up after months of low or no demand. ”There’s a noticeable improvement,” he says. The Oller Group is involved in real estate, construction and tourism. 

 

Continue reading article

 

Another article, also featured on Latin Business Chronicle, states that the Dominican Republic has largely been spared by the international economic crisis, seeing only a slight decline in tourism for the first half of the year.  

 

The article points out “The Dominican Republic last year received a total of 3.8 million international visitors, which was virtually the same as in 2007.  However, tourism receipts grew by 2.8 percent to $4.2 billion, according to the World Tourism Organization (WTO).

 

The Dominican Republic is also the largest tourism destination in the Caribbean and the fourth-largest in Latin America after giants like Mexico, Brazil and Argentina. When measuring arrivals compared to total population, the Dominican Republic ranks third in Latin America.”

 

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