White sandy beaches, balmy year-round temperatures, glitzy hotels, an eclectic Caribbean-Spanish culture, and architectural remnants of its colonial past all make Puerto Rico a truly one-of-a-kind destination. For many U.S. citizens, these factors also make the island a compelling investment and lifestyle ideal. Because Puerto Rico is a commonwealth of the United States, there are no restrictions on Americans acquiring property on the island.
Another advantage is that U.S. citizens don’t have to go through customs when traveling between Puerto Rico and the U.S. mainland—this can be a big time saver.
- You may have to deal with a number of agents in your property search in Puerto Rico; it's advisable to deal with reputable, certified agents, or nationally-recognized real estate brands.
- You can use TasaMax, the third-party service, to acquire sales data about the local real estate market.
- Determine what is and isn’t included in the homeowners association (HOA) fee.
- Hire a licensed home inspector to ensure the unit is in sound condition.
- You can obtain a home equity loan on your U.S. residence or draw from a U.S. line of credit to purchase your Puerto Rican condo in cash.
The Risk and Possible Rewards
One important caution: In recent years, Puerto Rico has experienced a serious debt crisis. In 2019, the country filed for bankruptcy, in one of the largest bankruptcy filings in U.S. history. As a result, real estate prices have plummeted in recent years. Of course, that means it could be a good time to snag a deal. However, purchasing property in any unstable economic climate comes with an obvious risk: If the economy continues to deteriorate, it could force property prices down even further. However, if the situation stabilizes, it may work in your financial favor.
Consider the risks, and if you decide to proceed, condos in particular offer foreign buyers access to some of the best beach locations at a fraction of the cost of purchasing a house or land. You can snag a two-bedroom waterfront condo for as little as $180,000, depending on the area and level of luxury you desire—not bad for a low-maintenance vacation home in a beautiful location.
Other condo draws include the ability to generate rental income when you are not using the property, which can help offset ownership costs.
Buying Property in Puerto Rico
If you are looking to purchase property on the island, keep these six factors in mind.
1. Real Estate Agents
Buyer’s agents aren’t as common in Puerto Rico as they are in the U.S., as brokers acquire their own listings to which they steer potential buyers. This means you may deal with a number of agents in your property search. Once a broker has shown you all of its exclusive listings, you’ll have to move on to another broker and its portfolio.
As with any real estate purchase, it’s a good idea to deal with reputable, certified agents—or nationally recognized real estate brands. Local databases include the Multiple Listing Service of Puerto Rico. Other comprehensive sites worth checking out are Point2Homes.com and Clasificadosonline.com. But be forewarned: The databases may not be up to date.
Use agents who live and work in the area or community where you’re looking to buy, and who speak Spanish. They can advise you on local lifestyle and cultural issues. Burglary and drug-related trouble, for instance, are rife in some areas.
One of the best ways to get connected with a reputable realtor is to ask around the local community. Keep in mind that if you attempt to do a property search on your own, you’ll need conversational Spanish. Even though English is the official language, not everyone speaks it fluently.
Chances are you’re unfamiliar with the local market and what constitutes a legitimate price point. Fortunately, the third-party service, TasaMax, provides comparable sales data to financiers and real estate professionals. You can subscribe to the service yourself (though much of the website uses the Spanish language instead of English). To be on the safe side, it is a good practice to obtain a report on any property that captures your interest. Be sure to compare the quality (and cost) against other condos in the area.
3. Management and Fees
Prior to purchasing, it’s important to determine what is and isn’t included in the homeowners association (HOA) fee. HOA fees typically cover general maintenance for the building, as well as any common areas and facilities, insurance for the complex, and manned security.
Obviously, the more privileges provided and the more manpower required to operate the complex, the higher the cost to its owners.
Whether the condo is brand new or has been lived in, hire a licensed home inspector to ensure the unit is in sound condition. This should extend to the main condo construction and shared facilities. Be sure you personally visit and closely inspect the property. No amount of research is as reliable as seeing the condo and its facilities firsthand.
5. Financing and Legals
While there’s no obligation to purchase in cash, you can obtain a home equity loan (on your U.S. residence, if you have one), or draw from a U.S. line of credit to purchase your Puerto Rican condo in cash. However, local lending is also an option. Just make sure you locate an English-speaking loan officer and be prepared for an extraordinary amount of paperwork. Also, have a lawyer review your contract to ensure that your interests are protected.
Mortgage lending discrimination is illegal. If you think you've been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report to the Consumer Financial Protection Bureau or with the U.S. Department of Housing and Urban Development (HUD).
6. Tax Breaks
In 2012, Puerto Rico passed legislation shielding new residents from paying most federal income taxes. Since then, the island is swiftly emerging as a hot new tax haven for Americans. If you reside on the island for a minimum of 183 days annually—and meet other qualifying criteria—you may pay minimal (if any) taxes on interest, dividends, and capital gains under the Act 22 tax law. These tax incentives are attracting more U.S. citizens and plenty of new, luxury developments.
If you reside on the island for a minimum of 183 days annually and meet other qualifying criteria, you may pay minimal, if any, taxes on interest, dividends, and capital gains under the Act 22 tax law, passed by Puerto Rico in 2012.
The Bottom Line
Buying real estate in Puerto Rico offers a number of logical investment perks for Americans, including flexible finance possibilities, zero immigration concerns, and amazing tax breaks (should you qualify). And while the island’s money crisis may turn up some appealing real estate steals, the instability does come with great financial risk.
If this doesn't deter you, it is always advisable to work with reputable, certified professionals who are bilingual in Spanish and English. Obtain comparable sales data to ensure the price point is reasonable. Organize a property inspection from a licensed contractor. Visit the property personally. And clarify all fees associated with managing and purchasing it upfront. If the local economy and real estate market regains momentum, you may reap financial rewards (in addition to the lifestyle perks) for your investment.