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.
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
- 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
- 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.