Dugrene Enterprises Inc.
| Tom Gougeon, Susan Hutton and Barb Scott look over one of the pictures they placed on the website to show a view from Apartment 7B in San Juan Puerto Rico. |
About Us as Entrepreneurs
Picture by Dana Lyons
Considerations for Purchasing Vacation Rental Properties Overseas
- Select a region that you want to spend time. We selected Tucson AZ for Susan lived
there for a year in the 1980’s and she knew that was a place she would like to return. We
selected San Juan PR for it was in the Tropics and an island location which means beaches
and year-round warm temperatures.
- Select a location that is value added and places your property apart from most of the
others. In Tucson, our places are against a saguaro national forest and Santa Catalina
Mountains which is highly desired by locals. In San Juan, our places are on the beach, and
with 27 condo buildings going up in 2008 in the area, none are being built on the beach for all
the beachfront is taken up.
- Decide whether you want to rent unfurnished or furnished units. We rent some
properties unfurnished on 12 month contracts and some furnished units on short term
contracts. Long term contracts on unfurnished units, in our experience, can often lead to
substantial damage to the unit by tenants. While you avoid the cost of furnishing the unit and
paying for utilities, the unit tends to require significant repairs between tenants.
- Decide whether you need off-season rent income. We chose two large cities in
which to own vacation properties for we depended on rental income during off-season
periods. We typically rent to ‘Snow Birds’ during high season and to local people or business
consultants during the off-season. We could not do that easily in the Bahamas or Mexico, for
example.
- Decide between a condo association and freehold house. We opted for a condo
association (Home Owner’s Association) for we felt it provided more security during the
months the units would be empty.
- Find out whether the city or state requires you to pay business taxes. In some
cases business taxes must be submitted to the city or state quarterly. This may be a deciding
factor whether you purchase a vacation rental there.
- Find out whether you will be required to charge Tourism Taxes. The paperwork
may be daunting enough for you to look elsewhere to purchase property.
- Check out the Condo or community rules and regulations. Make sure the HOA or
community regulations that govern owners enable you to rent your unit(s). We have more strict
regulations about renting in Tucson than in San Juan, in that we cannot rent for under 3 month
contracts in high season in Tucson, but we determined that there is a market for longer term
vacation rentals there. We rent in San Juan for 5 or more days and that works for the clientele
that take holiday there.
- Check out the profile of owners in the condo community. We found that in Tucson,
about 50% of the owners rent, and the others who do not rent are more critical about the
renters we bring in, for they become part of the community. In San Juan, about 90% of the
owners rent their units during the year, therefore we could predict that the Condo Board would
be accepting of renters.
- Establish that the building is actually on the property you are buying. In many
countries, Land Title systems are not current. We discovered a beautiful house that was
actually built on the neighbour’s land by having the property surveyed in advance and avoided
a huge mess.
- Involve a reputable local lawyer when purchasing a property. We bought a
property using a lawyer who we found on our own, but he went out of business before the title
of our land was registered. Eight years later we had to find the original seller, who, luckily still
had the original documentation to take to a reputable lawyer who finally registered the deed
for us.
- Take out a mortgage with a local bank if possible. Taking out a mortgage with a
local bank (i.e., Banco Popular in San Juan) protects you, for the bank ensures proper
easements and completed titles, and it demands an assessment and survey of the property.
We were able to get mortgages with local banks, for Susan possesses a US citizenship which
is required by the banking system in the US and its territories. We also used lines of credit
with Canadian banks for some purchases, but Canadian banks are only concerned about the
legalities of the property in Canada that backs the line of credit and not the property on which
you are actually spending the money.
- Buy low in a great location. We spend a few months each in San Juan and Tucson
every year and always fix up a unit in the process. For instance, we completely renovated a
bathroom, a kitchen, repainted a unit, or laid down slate stone patios, or refurnish a unit during
stays in different locations. Each year we upgrade the units and over time, a unit which was
positioned in the bottom 50% of the market when we bought it becomes well-established in
the top 50% of the market.
- Maintain a local bank account. We have bank accounts in San Juan and Tucson for it
is easier to pay bills online, including utilities, land taxes, insurance companies, property
managers, etc as mail takes too long to get back and forth between Calgary, and San Juan or
Tucson. Also the local bank account establishes our credibility with local merchants.
- Keep a healthy rental bank account balance. We never draw upon the rent income
for personal use. It is important to have one year of financing in the event the house goes un-
rented or is damaged by fire, etc. Each unit costs about $10,000 US annually so we ensure a
minimum of that amount is in the account at all times.
- Maintain an escrow account for rent deposits from guests. We normally have
between $20,000-$25,000 liability in rental and damage deposits. These must be returned to
guests in even of cancellations or at the end of the rental contract, so it is important not to mix
the income from rental with income from deposits.
- Explore how other owners advertise their rental properties. Most people are using
the internet to advertise their properties and some ‘dot com’ companies specialize in rentals
on golf courses while others specialize in oceanfront rentals, etc.
- Identify where most guests/clients live who would be interested in renting your property.
We mostly rent our San Juan rentals to clients on the East Coast of the US or in Western
Europe, while people from the Midwest/Great Plain States of the US and Canada are
interested in renting our Tucson villas. This has implications in how to advertise in order to
reach these people.
- Work toward owning more than one unit in each area you plan to purchase a
vacation rental property. If you check out the Canadian tax laws you will discover advantages
to owning two or more properties in each location you have rentals. Also you will experience
less risk maintaining your financial obligations if you have two or more rents coming in each
month. For example, if one person cancels, you will not be desperately trying to figure out how
to cover the monthly expenses, for the second unit will have income that can cover payments
for both units.
- Purchase a timeshare to treat yourself. We found that we needed a timeshare which
enables us to take a holiday away from the rental locations where we can lie back and relax
without guilt. For instance, we flew over to a timeshare in Puerto Plata, Dominican Republic
for a week during the time we are in San Juan. This was our time to relax and energize. Back
in San Juan, we continued to build a concrete block room as an addition to our Rain Forest
house.
If you think of other considerations please email me and I will add them and
recognize your name as contributor.
Tom
- Select a region that you want to spend time. We selected Tucson AZ for Susan lived
there for a year in the 1980’s and she knew that was a place she would like to return. We
selected San Juan PR for it was in the Tropics and an island location which means beaches
and year-round warm temperatures.
- Select a location that is value added and places your property apart from most of the
others. In Tucson, our places are against a saguaro national forest and Santa Catalina
Mountains which is highly desired by locals. In San Juan, our places are on the beach, and
with 27 condo buildings going up in 2008 in the area, none are being built on the beach for all
the beachfront is taken up.
- Decide whether you want to rent unfurnished or furnished units. We rent some
properties unfurnished on 12 month contracts and some furnished units on short term
contracts. Long term contracts on unfurnished units, in our experience, can often lead to
substantial damage to the unit by tenants. While you avoid the cost of furnishing the unit and
paying for utilities, the unit tends to require significant repairs between tenants.
- Decide whether you need off-season rent income. We chose two large cities in
which to own vacation properties for we depended on rental income during off-season
periods. We typically rent to ‘Snow Birds’ during high season and to local people or business
consultants during the off-season. We could not do that easily in the Bahamas or Mexico, for
example.
- Decide between a condo association and freehold house. We opted for a condo
association (Home Owner’s Association) for we felt it provided more security during the
months the units would be empty.
- Find out whether the city or state requires you to pay business taxes. In some
cases business taxes must be submitted to the city or state quarterly. This may be a deciding
factor whether you purchase a vacation rental there.
- Find out whether you will be required to charge Tourism Taxes. The paperwork
may be daunting enough for you to look elsewhere to purchase property.
- Check out the Condo or community rules and regulations. Make sure the HOA or
community regulations that govern owners enable you to rent your unit(s). We have more strict
regulations about renting in Tucson than in San Juan, in that we cannot rent for under 3 month
contracts in high season in Tucson, but we determined that there is a market for longer term
vacation rentals there. We rent in San Juan for 5 or more days and that works for the clientele
that take holiday there.
- Check out the profile of owners in the condo community. We found that in Tucson,
about 50% of the owners rent, and the others who do not rent are more critical about the
renters we bring in, for they become part of the community. In San Juan, about 90% of the
owners rent their units during the year, therefore we could predict that the Condo Board would
be accepting of renters.
- Establish that the building is actually on the property you are buying. In many
countries, Land Title systems are not current. We discovered a beautiful house that was
actually built on the neighbour’s land by having the property surveyed in advance and avoided
a huge mess.
- Involve a reputable local lawyer when purchasing a property. We bought a
property using a lawyer who we found on our own, but he went out of business before the title
of our land was registered. Eight years later we had to find the original seller, who, luckily still
had the original documentation to take to a reputable lawyer who finally registered the deed
for us.
- Take out a mortgage with a local bank if possible. Taking out a mortgage with a
local bank (i.e., Banco Popular in San Juan) protects you, for the bank ensures proper
easements and completed titles, and it demands an assessment and survey of the property.
We were able to get mortgages with local banks, for Susan possesses a US citizenship which
is required by the banking system in the US and its territories. We also used lines of credit
with Canadian banks for some purchases, but Canadian banks are only concerned about the
legalities of the property in Canada that backs the line of credit and not the property on which
you are actually spending the money.
- Buy low in a great location. We spend a few months each in San Juan and Tucson
every year and always fix up a unit in the process. For instance, we completely renovated a
bathroom, a kitchen, repainted a unit, or laid down slate stone patios, or refurnish a unit during
stays in different locations. Each year we upgrade the units and over time, a unit which was
positioned in the bottom 50% of the market when we bought it becomes well-established in
the top 50% of the market.
- Maintain a local bank account. We have bank accounts in San Juan and Tucson for it
is easier to pay bills online, including utilities, land taxes, insurance companies, property
managers, etc as mail takes too long to get back and forth between Calgary, and San Juan or
Tucson. Also the local bank account establishes our credibility with local merchants.
- Keep a healthy rental bank account balance. We never draw upon the rent income
for personal use. It is important to have one year of financing in the event the house goes un-
rented or is damaged by fire, etc. Each unit costs about $10,000 US annually so we ensure a
minimum of that amount is in the account at all times.
- Maintain an escrow account for rent deposits from guests. We normally have
between $20,000-$25,000 liability in rental and damage deposits. These must be returned to
guests in even of cancellations or at the end of the rental contract, so it is important not to mix
the income from rental with income from deposits.
- Explore how other owners advertise their rental properties. Most people are using
the internet to advertise their properties and some ‘dot com’ companies specialize in rentals
on golf courses while others specialize in oceanfront rentals, etc.
- Identify where most guests/clients live who would be interested in renting your property.
We mostly rent our San Juan rentals to clients on the East Coast of the US or in Western
Europe, while people from the Midwest/Great Plain States of the US and Canada are
interested in renting our Tucson villas. This has implications in how to advertise in order to
reach these people.
- Work toward owning more than one unit in each area you plan to purchase a
vacation rental property. If you check out the Canadian tax laws you will discover advantages
to owning two or more properties in each location you have rentals. Also you will experience
less risk maintaining your financial obligations if you have two or more rents coming in each
month. For example, if one person cancels, you will not be desperately trying to figure out how
to cover the monthly expenses, for the second unit will have income that can cover payments
for both units.
- Purchase a timeshare to treat yourself. We found that we needed a timeshare which
enables us to take a holiday away from the rental locations where we can lie back and relax
without guilt. For instance, we flew over to a timeshare in Puerto Plata, Dominican Republic
for a week during the time we are in San Juan. This was our time to relax and energize. Back
in San Juan, we continued to build a concrete block room as an addition to our Rain Forest
house.
If you think of other considerations please email me and I will add them and
recognize your name as contributor.
Tom