A Guide For Expats Buying Property in The Dominican Republic
- Jul 18, 2024
- 6 min read
Updated: Dec 23, 2024
Are you an expat dreaming of owning property in the Dominican Republic? Buying real estate abroad can be tricky. The Dominican Republic offers foreigners the chance to buy a property with few restrictions. This guide will walk you through the key steps and tips for purchasing your slice of paradise. Ready to make your dream a reality?
A Complete Guide to Buying Property in the Dominican Republic
Buying property in the Dominican Republic can be a little tricky for foreigners, as it doesn't have an MLS and there is no governing body as yet, but don't let that put you off there are plenty of professionals here to guide you. The country's real estate market has grown by 7% annually over the past five years, especially just after COVID-19. This guide will walk you through the essential steps to be aware of or purchase your dream home in this Caribbean paradise.
Key Takeaways
The Dominican Republic’s real estate market has experienced 7% annual growth in the last five years, with rental yields of 6.2%-8.9% in tourist hotspots like Punta Cana and Santo Domingo.
Foreigners face no major restrictions when buying property, but understanding local laws and working with experienced professionals is crucial.
Buyers should budget for a 30% down payment, as banks typically finance up to 70% of a property’s value but 50%+ for foreigners.
Key taxes include a 3% transfer tax and a 1% annual property tax for properties valued over RD$9,520,861 (approximately $160,000 USD).
Foreign investors can fast-track residency by investing at least $200,000 in government-approved real estate projects, please remember there is nothing fast about a Caribbean lifestyle.
Determine Your Budget
Setting a realistic budget is essential when buying property in the Dominican Republic. In addition to the purchase price, consider the following costs:
Expense | Percentage/Amount |
Transfer Tax | 3% of government-appraised value |
Legal and Notary Fees | 1%-1.5% of purchase price |
Annual Property Tax | 1% of property value over RD$9,520,861 |
Rental Income Tax (Residents) | 15% of rental income |
Rental Income Tax (Non-Residents) | 27% of rental income |
Financing Costs (if applicable) | Varies, typically 10%+ interest for national banks |
Example Budget for a 3 Bedroom Luxury Villa with a pool
Purchase Price: $730,000 USD
Transfer Tax: $21,900 USD
Legal Fees: $7,300-$10,950U SD
Total Initial Costs: $759,200-$762,850 USD (excluding financing or renovation costs)
The CONFOTUR Law
The CONFOTUR Law (158-01), also known as the Tourism Incentive Law of the Dominican Republic, is a game-changer for anyone looking to invest in real estate in this tropical paradise. This law is all about boosting the country’s tourism industry by offering significant tax incentives to developers and buyers of properties in areas rich in natural beauty or high tourism potential.
Here’s what this means for you as a savvy real estate investor: if you find a new development boasting the CONFOTUR status, you’ve struck gold. This designation can qualify your investment for substantial tax benefits. For buyers like you, these benefits could include exemptions from key property taxes, such as:
The 3% property transfer tax, which is typically paid when transferring a property title.
The annual 1% Real Estate Property Tax (IPI)—and here’s the best part—you’re off the hook for this tax for an impressive period of 10 to 15 years!
In short, CONFOTUR isn’t just a selling point—it’s a smart move for your financial future.
Research the Market
The Dominican Republic offers a diverse real estate market, a good real estate agent will know the difference between the different regions, including beachfront condos, countryside villas, and luxury rentals. Areas like Punta Cana, Bavaro, and Cap Cana are popular with tourists and investors due to their rental potential and increasing property values.
Growth Rate: The property market has grown steadily alongside the country's 10.6% GDP increase over the last five years.
Rental Yields: Tourist hotspots yield 6.2%-8.9% annually, outperforming many Caribbean destinations.
Working with reputable real estate brokerages like The Agency ensures access to accurate market data and expert insights.
Choose the Right Location
Each region in the Dominican Republic has unique characteristics, ask your real estate agent what's the best fit for you, give them as much detail as possible and the right agent will be able to guide you to your dream property.
Location | Highlights |
Punta Cana/Bavaro | Pristine beaches, high rental demand, and modern developments. |
Cap Cana | Exclusive gated communities with luxury amenities. |
Las Terrenas | Charming coastal town with French influence and expat appeal. |
Santo Domingo | Vibrant capital city with cultural attractions and urban living. |
Sosua/Cabarete | Popular among expats for relaxed beach vibes and surfing. |
Taxes, Fees, and Costs
Buying property in the Dominican Republic involves several taxes and fees:
Tax/Fee | Amount/Description |
Transfer Tax | 3% of government-appraised value |
Annual Property Tax | 1% for properties over RD$9,520,861 |
Legal Fees | 1%-1.5% of purchase price |
Notary Fees | Included in legal fees, for authenticating key documents |
Property Appraisal | Varies, typically $200-$500 USD |
Residency Application Fee | $1,200 for initial application |
Differences for Foreign Buyers
Taxation: Non-residents pay 27% rental income tax compared to 15% for residents, a good accountant is essential in the Dominican Republic, and properties bought in a company name attain other benefits that an individual wouldn’t.
Financing: Limited mortgage options; private lenders require higher down payments (50%+), but the process is usually quite quick once all the documentation is in order.
Residency Perks: Investing $200,000+ in approved projects can fast-track residency, remember there is nothing fast in the Caribbean.
The Buying Process
Partner with a Real Estate Agent: Choose a reputable brokerage, and surf for testimonies of good agents, The Agency for example, have high standards for choosing their agents, remember you wouldn't choose a car mechanic to do your heart surgery.
View and Select Properties: Tour multiple options with your agent, or ask them to do video showings for you, ensuring thorough due diligence.
Make a Formal Offer: Submit a Letter of Intent/Offer to Purchase with a minimum 1% deposit.
Sign a Promise of Sale: Legally binding document authenticated by a notary. Typically, 10% of the purchase price is placed in escrow, this depends on a few variables
Conduct Due Diligence: Includes title searches, property surveys, and environmental assessments.
Sign the Deed of Sale: Finalize the transaction and pay the transfer tax.
Glossary of Common Real Estate Terms
Spanish Term | English Translation |
Certificado de Título | Title Certificate |
Promesa de Venta | Promise of Sale |
Notario Público | Notary Public |
Impuesto de Transferencia | Transfer Tax |
Ley de Registro Inmobiliario | Property Registry Law |
Hipoteca | Mortgage |
Zona Turística | Tourist Zone |
Avalúo | Property Appraisal |
Due Diligence | Debida Diligencia |
Escritura de Venta | Deed of Sale |
Residencia | Residency |
contrato de mantenimiento | Maintenance Agreement/HOA |
Carta de intenciones | Letter of Intent |
Abogado | Lawyer |
agente de ventas | Listing Agent |
empresa inmobiliaria | Real Estate Company |
Cuarto de servicio | Service quarters |
Linea Blanca | appliances |
fuerza mayor | force majeure |
Supplementary Steps
Residency Application: Investing $200,000+ in approved real estate can fast-track residency, don’t forget you are in the Caribbean and nothing is essentially fast.
Legal Review: Engage an attorney to ensure compliance with Property Registry Law No. 108-05.
Community Rules: Review any homeowner’s association (HOA) or maintenance guidelines.
Conclusion
Buying property in the Dominican Republic offers exciting opportunities for both investors and expats. By researching the market, choosing the right location, and partnering with experienced professionals, you can navigate the process confidently.
With due diligence and a clear understanding of taxes and fees, your dream Caribbean property is within reach. Ready to take the first step? Contact a trusted real estate agent today.
FAQs
What’s the first step in buying property in the Dominican Republic? Start by partnering with a reputable real estate agent to guide you through the process.
Are there restrictions on foreigners buying property? No major restrictions exist, but foreign buyers must adhere to local laws and tax requirements.
How much are property taxes? Annual property tax is 1% of the value exceeding RD$9,520,861 (approximately $160,000 USD).
What’s the minimum down payment? Dominican banks typically require at least 30% of the property’s value, expats are 50% on average.
Do I have to use an attorney? You will always need an attorney to complete real estate deals in the Dominican Republic, for 1. the contracts are all written in Spanish, and 2. as there is no MLS, and therefore no governing body over real estate and experienced conveyancing attorney is essential.
Sources
Property Registry Law No. 108-05
Dominican Republic Tax Code
Banco Central de la República Dominicana
The Agency Real Estate Brokerage
The Confutor Law No. 158-01
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