Six yeas ago we purchased our home in Naguabo Puerto Rico (PR) in the barrio of El Duce. Some of the lessons we learned are shared in this article. I do not mean this to be an all inclusive guide to purchasing property but rather an introduction in what to look for when considering a home on the Island.
Where do I begin to look for property in PR?
Puerto Rico is diverse in both culture and climate. In the south, there is an arid; almost desert terrain while in the northeast there is rain forest. The north and west coasts have great surfing. In the central regions there are mountains spotted with coffee plantations and in some places, views where you can see both the north and south coasts of the island from one vantage point.
Where you decide to look for a home will depend on your priorities as well as your needs. When we decided to look for property the first thing we knew we needed was time. It's a big island with a lot of diversity; make sure you give yourself enough time. We took six months. I know this will not work for everyone but I would say that 90 days would be the minimum. Remember, you are not moving to another State, this is a foreign country. Even though PR is part of the USA, the culture and infrastructure can produce a shock that many people find hard to deal with. Taking 90 days will also let you live as a resident instead of a tourist.
Rent a house in an area you think you will want to live in while you are looking for property. We rented a magnificent home on the water in Yabucoa. It was modern, had a pool and a hot tub, custom furniture, exotic wood on the floors and was for sale for three times what we could afford to pay. It also had tarantulas, was unbearably hot, had faulty wiring, terrible air conditioning and was close to a noisy bar! We would have never known the downsides of living near the water in that part of the island if we did not rent! There is a reason the Spanish lived in the hills when they occupied PR, it's cool up there, fewer bugs and there is plenty of water.
Make a list of what is important to you. Some of the things on our list were, access to an international airport, close to a Veterans Hospital, accessibility to a pharmacy and grocery store. We also wanted to be near a dealer who serviced our car and have access to emergency services like fire and police. We take these things for granted in the States, but in PR they do not always exist. We still have to drive twenty minutes to get drinkable water. The water in our home comes off the mountains in the rain forest and although it tested as drinkable, it gives us a mild case of dysentery. If internet and television services are important, make sure you can get them, very often television service is by satellite only and internet is not available. Every time a heavy rain comes through the satellite will go dead, and it rains almost every day in some parts of the Island. I think you get the idea, make a list, use it as a checklist when you look at property.
To Gate or not to Gate'¦
There are basically two options other than condos, these are gated communities and houses outside the gates. You will need to determine which one works best for you. In our case we chose to live outside the gates in a very rural area even by PR standards. We enjoy having dozens of fruit trees, some land for privacy and above all solitude. All this sounds lovely until you count the cost. We are responsible for all our own maintenance. In my opinion there is more maintenance on a Caribbean home than say a home in New England. You also can't choose your neighbors or the way they keep their homes and there is no such thing as zoning in PR. Land ownership and property rights can be tricky outside the gates and even simple clear cut disputes can take years to settle. Gated communities have none of these problems, but you give up a lot of the uniqueness and beauty of living in PR when you live within the gates. If you think you prefer living in a gated community, rent outside it, if the opposite is true, rent inside the gate. This will give you a better perspective on the island and it's availability of living conditions. Gated communities usually command a higher price than those outside the gate. If you prefer to live gated and money is an issue then wait until it isn't. It takes a special kind of person to live in the 'campo'. Between the lawn, fruit trees, house, pool, guest house, neighbors, insect infestations and normal house maintenance, our issues never end. Unless you enjoy keeping busy and are handy, a gated community might be a much easier life. I have never regretted our decision to live in the hills. Right now we have two types of oranges, breadfruit, guava, avocadoes, plantain and dragons eye ready to picked. Most people would think our little home a paradise. What they would not notice is all the work it takes to keep it that way!
It's the little things
Almost nothing in PR is built to code. Here in the States we have a building code that regulates how things are built. When examining a house in say Florida, you can rest assured that the same standards will be met in Rhode Island or California. Not so in PR. I am in the construction field and know a bit about code and home construction. We saw three houses out of fifty that came close to code. We bought one of them and still had six winters of work to do on it. Take nothing for granted or at face value. Here is a list of some of the things to look for.
Electrical- check how many amps come in to the house, this is listed in the breaker box. Standard in the States is 200, in PR 60 is common. This means a lot of your appliances, computers and all the other modern electric gadgets we North Americans like will not work or will not work well. Ask about brown outs. PR has a terrible electrical grid especially in the back country. We went through two refrigerators, a laptop, scores of light bulbs and two televisions in four years due to power grid problems.
Plumbing- What kind of waste system do you have. It's common for houses in the country to go through a makeshift septic system and drain into a stream. Do the toilets work? What is the water pressure like? Do you have water from the town or do you need to buy it. In many places, water is scarce and residents purchase water not only for drinking but also for bathing, especially during the dry season. Almost everyone buys drinking water. Where is your cistern, is it on the roof or on the ground. If on the roof are you comfortable climbing up there when there is a problem? How new is the water pump and pressure tank, are they on the roof or on the ground? Is there hot water? Many PR homes do not have hot water, again, where is the tank and how old is it? We recently had our cistern, water pump and pressure tank moved to ground level. I am very comfortable on roofs but am getting older and know at some point I will not be able to safely climb ladders. If there is a pool, ask who services it. If the answer is no one, beware. Pool pumps and the associated piping take a lot of abuse and are expensive to replace. Some homes receive water from a common or shared well. Examine the pipes that feed the house, are they copper or PVC. PVC is affected by the ultraviolet rays of the sun and will weaken, we just had all our piping changed over to copper after years of PVC patching. Remember, PR houses have concrete walls, replacing pipes is a labor intensive job. It's much easier to start off with a good set of pipes!
Windows and Screens- This is a commonly overlooked area. Many houses in PR do not have windows, they use folding metal panels with screens'¦get windows! The metal panels fail and do not close well after a few years. When looking at windows, check the cranks to make sure they are not stripped. Look at the windows and make sure they are weather tight, we get lots of rain in PR! Insects, especially ants are a constant problem. You MUST have good screens that fit tightly in their receiver. At our home we have mosquitoes, three types of ants, lots of small flying things like June bugs and katydids as well as geckos, centipedes, tarantulas, smaller spiders and several things I could not begin to categorize. All except the tarantulas try to get in through the screens! I re-screen everything every three years and use a clear caulking around the receivers to keep out the little sugar ants. We have cats and they love to go after what ever is trying to get in. Their claws make small holes in the screens and it is enough for the beasties to enter'¦get good screens!
Roofs- Most roofs in PR are concrete. Some are wooden but they are usually on less expensive homes. Wooden roofs should be avoided because they will not stand up to hurricanes and can be prone in insect infestations. Concrete roofs require a special sealer that resembles a thick paint to keep the water from leaching through to the house. Sealing a roof is hard work and requires some experience to do correctly. If you hire it out it is expensive. Look for stains or discolorations on the ceiling of the house, this will indicate roof leaks. Inquire how long since the roof has been sealed, about every three years in rainy areas is about right. Houses with pitched roofs are harder to seal than those with flat roofs. Our house has a pitched roof and we have had endless problems with it. I have since gone with panels made in Israel that I secured to the roof and it is working quite well. Check the roof drains, these are usually pipes sticking out of the roof that allow the water to drain. Make sure they are cleaned out and not spilling on to the lawn and making holes. Some older homes use these roof drains to fill the cisterns used for non drinking water.
Most of what we have discussed applies to properties outside the gate. Gated communities usually have a higher standard of construction but not always. If I were to emphasize one point it would be to take the time to rent and live in PR for at least three months. North Americans come to the island, fall in love and want to purchase as soon as possible. We all believe that our experience as property owners will be the same as our tourist experience. Unfortunately this is not the case. PR is truly a foreign country and although my wife and I love it dearly, it is not for everyone. There is no shame if it is not for you. Some places are meant to be visited instead of lived in. I hope that our experiences in purchasing property and the lessons we learned will help you in your search for your own piece of paradise. Who knows, maybe someday we will be able to sit down and complain about how long it takes to get an error on our electric bills corrected. By the way, the poorly kept secret is that they never get resolved!
Happy house hunting.
Puerto Rico offers many advantages to homeowners, including a lower cost of living, tax benefits, beautiful weather and beaches, and a rich culture. However, there are also potential challenges to be aware of, such as natural disasters, property values, and infrastructure challenges.How much is a downpayment on a house in Puerto Rico? ›
To purchase a home in Puerto Rico, you are required to be pre-qualified for a loan. If you are planning a cash purchase, you must show evidence of sufficient funds. A good credit score and a 20% downpayment is the norm for getting a loan.Who can buy land in Puerto Rico? ›
US citizens may purchase property individually or by setting up a legal entity such as a limited liability company or a corporation. A foreigner can also take the corporate route to acquire property in Puerto Rico.Can I buy a home in Puerto Rico? ›
Foreigners can freely buy property in Puerto Rico. To enter into a real estate transaction, it is important to hire a real estate agent as knowledge in Spanish is very much needed. When an agreement has been reached, a deposit of 5% of the purchase price is usually paid by the buyer.Is there annual property tax in Puerto Rico? ›
Puerto Rico real property is subject to an annual real property tax. This tax is computed based on property values that date back to the fiscal year 1957–1958 (which was the last time that a general appraisal was conducted by the government).Is buying property in Puerto Rico a good investment? ›
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).How much is a downpayment on 200000 property? ›
To purchase a $200,000 house, you need a down payment of at least $40,000 (20% of the home price) to avoid PMI on a conventional mortgage. If you're a first-time home buyer, you could save a smaller down payment of $10,000–20,000 (5–10%). But remember, that will drive up your monthly payment with PMI fees.What is the average mortgage rate in Puerto Rico? ›
Current national rates are 6.88% for a 30 year fixed loan, 6.03% for 15 year fixed loan and 6.20% for a 5 year ARM.How much is capital gains tax in Puerto Rico? ›
The holding period to qualify as long-term capital gain will depend on the date of sale or exchange. Long-term tax treatment will apply to those capital assets held for more than one year. Long-term capital gains are subject to a special tax rate of 15%.
The 500-acre law, which stipulated that corporations operating in Puerto Rico were forbidden from owning more than 500 acres of land, was usually circumvented by proxy landownership and absenteeism.
U.S. citizens who become bona fide residents of Puerto Rico can maintain their U.S. citizenship, avoid U.S. federal income tax on capital gains, including U.S.-source capital gains, and avoid paying any income tax on interest and dividends from Puerto Rican sources.What is the new inheritance law in Puerto Rico? ›
The portion of the estate reserved for forced heirs in a will is two thirds. In the absence of a will (intestate estate), estate is distributed equally among forced heirs. The portion reserved for forced heirs in a will is reduced to 50%. In the absence of a will, estate is still distributed equally among forced heirs.What is the law 20 and 22 in Puerto Rico? ›
As has been widely reported, Puerto Rico's Act #20 and Act #22 provides incentives for high net worth U.S. citizens to move to Puerto Rico and potentially reduce their 39.6% federal income tax (plus any applicable state tax) to a 0% – 4% Puerto Rico income tax rate.What are the tax benefits of owning a house in Puerto Rico? ›
100% exemption from Puerto Rico income taxes on all short-term and long-term capital gains generated after the individual becomes a bona-fide resident of Puerto Rico (“Puerto Rico Gain”). Special rules apply to capital gains on the sale of securities held before moving to Puerto Rico and sold after the move.Is it cheaper to live in Puerto Rico than the United States? ›
Renting in Puerto Rico
Since the cost of living in Puerto Rico is generally lower than in the United States, the rent is cheaper as well.
The Tax Incentive Code, known as “Act 60”, provides tax exemptions to businesses and investors that relocate to, or are established in, Puerto Rico.Is there a tax break for buying a house in Puerto Rico? ›
Puerto Rico Real Estate Incentives: Law 68 & 187
Law 187: Exempts buyers from paying property taxes for five years as well as certain closing costs for the purchase of the new residence as a primary residence, second home or investment property.
Located in the Caribbean Sea, the U.S. territory of Puerto Rico is a spectacular tax haven for businesses and individuals. Much of this is due to Act 60, a piece of legislation passed to boost economic development on the island.What is the most affordable place to live in Puerto Rico? ›
Rio Marr, Puerto Rico: Affordable, Walkable, and Chill
Consistently rated as one of the best places to live in Puerto Rico, Rio Marr is a stunning place. It's also very affordable, mostly because the area has little nightlife.
The overall cost of living is lower than on the mainland.
Life in Puerto Rico is a superb value, with a high standard of living combined with an overall lower cost of living than most expect. Your dollar will go farther in Puerto Rico than in most U.S. cities.
On a $70,000 income, you'll likely be able to afford a home that costs $280,000–380,000. The exact amount will depend on how much debt you have and where you live — as well as the type of home loan you get.How much income do you need to buy a $650000 house? ›
To determine whether you can afford a $650,000 home you will need to consider the following 4 factors. Based on the current average for a down payment, and the current U.S. average interest rate on a 30-year fixed mortgage you would need to be earning $126,479 per year before taxes to be able to afford a $650,000 home.How much do you have to make a year to afford a $400000 house? ›
Assuming a 30-year fixed conventional mortgage and a 20 percent down payment of $80,000, with a high 6.88 percent interest rate, borrowers must earn a minimum of $105,864 each year to afford a home priced at $400,000. Based on these numbers, your monthly mortgage payment would be around $2,470.What is the maximum interest rate in Puerto Rico? ›
PUERTO RICO: The legal rate of interest is 6%; all other rates are set by the Finance Board of Office of Commissioner of Financial Institutions. Judgments bear interest at the same rate as the underlying debt.Is 7% a bad mortgage rate? ›
In a recent survey by the New Home Trends Institute, 92% of current mortgage holders said they would not buy again if rates exceeded 7% — up from 85% who said the same at 6%. All of this means fewer homes for sale.Is 4% a good mortgage rate? ›
Currently, a 4% mortgage rate would be considered low. If that question was asked at the beginning of 2022—when 30-year mortgage rates for conforming loans was 3.77%–instead of the end of 2022—when the same mortgage rates were 7.06%—the answer would have been, yes, a 4% mortgage rate is high.How many days in Puerto Rico to avoid capital gains tax? ›
For this purpose, an individual who is present in Puerto Rico for more than 183 days during a calendar year is presumed to be domiciled in Puerto Rico. In order to benefit from the foregoing tax exemptions, the Eligible Resident Investor must apply for and obtain a tax exemption grant.How long do you have to live in Puerto Rico to get tax? ›
The term 'resident individual' means an individual who is domiciled in Puerto Rico. It should be presumed that an individual is a resident of Puerto Rico if they have been present in Puerto Rico for a period of 183 days during the calendar year.Is there a 0 capital gains tax in Puerto Rico? ›
If you move to the island, you can legally pay none. There's also no capital gains tax. You just have to give 4 percent of your income to Puerto Rico.What is law 80 in Puerto Rico? ›
Act 80 (the Unjust Dismissal Act) regulates employment termination of employees hired for an indefinite term. Puerto Rico is not an 'employment at will' jurisdiction.
The order of inheritance in Puerto Rico is as follows: descendants (children), ascendants (parents), surviving spouse, preferred collaterals (siblings and nieces and nephews), ordinary collaterals (aunts, uncles and cousins) and, if there is no one, the government.Where should I land in Puerto Rico? ›
The largest and most accessible one is the Luis Muñoz Marín International Airport, commonly known as the San Juan Airport (SJU). Located in Isla Verde – in the Carolina district – this airport is just minutes away from San Juan. More than 20 commercial airlines fly in and out of the city every day.Does Puerto Rico tax Social Security benefits? ›
Social security contributions
Puerto Rico is covered under the US social security system; consequently, Puerto Rico employers and employees are subject to the US Social Security and Medicare taxes requirements. See the Other taxes section in the United States Individual tax summary for more information.
Note: If you are a resident of Puerto Rico, you can file Form 1040 (PR) instead of Form 1040-SS. Form 1040 (PR) is the Spanish-language equivalent of Form 1040-SS. These forms must be filed with the U.S. Internal Revenue Service at the address shown in the instructions for Form 1040 (PR) and Form 1040-SS.What is a bona fide resident of Puerto Rico? ›
Bona Fide Residents of Puerto Rico: Generally, you are a bona fide resident of Puerto Rico if during the tax year, you: Meet the presence test • Do not have a tax home outside Puerto Rico, and • Do not have a closer connection to the United States or to a foreign country than to Puerto Rico.What is Rule 75 in Puerto Rico? ›
Under Law 75, once the principal establishes a distribution agreement with the distributor, the principal cannot withdraw from the contract without just cause.What is the gift tax in Puerto Rico? ›
The Puerto Rico rates for gift tax and the estate tax are the same, 10% of the taxable amount. The gift tax return is due on or before January 31 of the year following the year of the gift.What happens to abandoned houses in Puerto Rico? ›
“Any abandoned property that has a mortgage will be subject to a judicial foreclosure process. Until then, the ownership will be retained by its lawful owners,” he said. “Then if they are finally foreclosed, it will become a real estate owned (REO) property of the particular bank.What is Rule 66 in Puerto Rico? ›
Hearsay within hearsay is admissible if both the principal and the subordinate or included hearsay fall within the scope of an exception to the hearsay rule.What is law 116 in Puerto Rico? ›
In 1937, Law 116 legalized sterilization in Puerto Rico. This law implemented Eugenics Boards within 32 states that oversaw compulsory sterilizations.
It was called Public Law 53, and also known as La Ley de la Mordaza…the Gag Law. Law 53 made it a felony to sing a song, whistle a tune, or utter one word against the US government, or in favor of Puerto Rican independence. This included singing La Borinqueña, or owning a Puerto Rican flag. Own a flag…How often do you pay property tax in Puerto Rico? ›
If the personal property tax liability is more than $1,000 it must be paid in four equal installments, which are due on August 15, November 15, February 15 and May 15.Are home prices dropping in Puerto Rico? ›
House prices were down 2.67% during the year to Q3 2022
Puerto Rico's housing market remains weak.
Between 2018 and 2021, the single-family home price rate in Puerto Rico increased by 22%, according to the Federal Housing Financing Agency's House Price Index .Is it cheaper to go to Hawaii or Puerto Rico? ›
Even though Puerto Rico is a Caribbean island, it is very affordable. As the cost of the average 7-day Puerto Rico vacation ranges from around $1,000 to $2,500+ USD per person making a Puerto Rico holiday far more affordable than a Hawaiian getaway.Why do homes in Puerto Rico have bars on windows? ›
The bars were popular in the tropical parts of Spain because they allowed better ventilation and were cheaper than glass. They also kept the home safe. As Spain colonized the Caribbean they took the architecture with them, including the ornate iron bars.Is it a good idea to move to Puerto Rico? ›
Moving to Puerto Rico to avoid taxes is just one of countless good reasons to be here. Besides an overall cost of living that is lower than on the mainland, you can enjoy picture-perfect beaches and nature trails, tasty Caribbean treats, convenient shopping, and so much more.Is there a tax advantage to moving to Puerto Rico? ›
U.S. citizens who become bona fide residents of Puerto Rico can maintain their U.S. citizenship, avoid U.S. federal income tax on capital gains, including U.S.-source capital gains, and avoid paying any income tax on interest and dividends from Puerto Rican sources.Where do most Americans move to in Puerto Rico? ›
Relocating to Puerto Rico
Most expats settle in Puerto Rico's capital, San Juan, or in the south in Ponce, its second-largest city. Carros Públicos (public cars) allow you to travel all over the island and reach even remote areas.
An approved ESTA for Puerto Rico allows a stay of 90 days with each entry for tourism, transit, or business purposes, and is valid for a total of 2 years from issue, meaning there is no need to re-apply for every trip to US territories.
You must become a resident of Puerto Rico, and you must reside there for at least 183 days a year, or meet one of several other tests that are less clear cut.How can I move to Puerto Rico to avoid taxes? ›
If you move to the island, you can legally pay none. There's also no capital gains tax. You just have to give 4 percent of your income to Puerto Rico. The tax break was started by a Puerto Rican politician who'd watched years of high taxes fail to improve life on the island.Is Puerto Rico tax friendly for retirees? ›
Act 22 is particularly alluring to potential retirees. Residents of Puerto Rico who meet the requirements are excluded from paying any taxes on dividends, capital gains, or interest under this law. You must genuinely live in Puerto Rico and stay there for more than 183 days a year to be eligible for these exemptions.Why are people moving out of Puerto Rico? ›
Achieving economic stability is typically the main reason that many Puerto Ricans migrate to the U.S. mainland. At the same time, thousands return to Puerto Rico annually, describing their homecoming as "a dream come true."