Hidden costs of investing in a Punta Cana resort

Investing in an apartment in Punta Cana, in the heart of the Dominican Republic, has become one of the favourite options for European buyers seeking holiday rental returns and a second home by the Caribbean. However, behind the purchase price lie a number of expenses that many investors fail to include in their initial budget. Knowing them in advance is the best way to avoid surprises and to truly calculate the profitability of the deal. In this article we take an honest look at the most common hidden costs when buying in a resort in the Bávaro and Punta Cana area.

Transaction costs: beyond the price of the apartment

The first common mistake made by European buyers is assuming that the list price is the final cost. In the Dominican Republic, as in Spain or any other country, buying a property involves a series of compulsory expenses that should be taken into account from the very beginning.

Lawyer and notary fees

Unlike in some European countries, in the Dominican Republic it is not compulsory to hire a lawyer to buy a property, but in practice it is almost essential, especially if you are buying from abroad. A local lawyer handles the due diligence: verifying that the title deed is clean, that there are no liens or encumbrances, and drafting and reviewing the purchase agreement. Fees usually stand at around 1% of the value of the transaction, although they may vary depending on the firm and the complexity of the assignment. The notary, for their part, formalises the purchase, and their fees are also calculated on the price, generally at a similar percentage.

Registration and titling costs

Once the sale has been signed, the property must be registered in your name at the corresponding Registry of Titles. This process, usually handled by the lawyer, involves paying registration fees and the issuance of the new Certificate of Title, the document that officially proves ownership. Although these amounts are smaller than professional fees, they do need to be budgeted for so there are no surprises.

The ITBI: the 3% tax (and how to avoid it)

The Property Transfer Tax, known as the ITBI, taxes the transfer of properties in the Dominican Republic at a rate of 3% of the value of the transaction. It is one of the most significant costs a buyer must face and, precisely, one of the ones that most often catches European investors by surprise.

This is where developments covered by CONFOTUR Law 158-01 make a real difference. This legal framework, designed to encourage tourist development in areas such as Punta Cana, establishes a total exemption from the ITBI for buyers of properties within projects covered by the scheme. In other words, if you purchase an apartment in a development with CONFOTUR benefits, you directly save that 3%, which on a 200,000 USD property amounts to 6,000 USD. The exemption from the annual real estate asset tax usually accompanies this benefit for the period established by law. It is always advisable to confirm with the developer and your lawyer that the project indeed holds current CONFOTUR approval.

The IPI: the annual real estate asset tax

The Real Estate Property Tax (IPI) is levied annually on the ownership of real estate in the Dominican Republic. It applies to the fiscal value of the property above an exemption set by law, at a rate of around 1%. It is a recurring tax, so it must be included in the calculation of your investment’s annual expenses. If the project is registered under CONFOTUR, there is an exemption from IPI for the period established by law, another weighty argument for considering developments with this tax benefit. In any case, it is advisable to review the current regulations each year, as exemption thresholds may be updated.

Community maintenance fees

This is probably the most underestimated recurring cost. Apartments within communities with swimming pools, landscaped areas, security and shared services are subject to monthly or quarterly maintenance fees that cover the upkeep of all those facilities. In the Bávaro and Punta Cana area, these fees vary depending on the level of services of the complex and the size of the apartment, and must be paid whether you use the property or whether it is vacant or rented out. Before buying, always ask for the exact details of the fee, what it includes and how it is expected to evolve. A low fee may indicate poor maintenance; a very high fee may eat into part of your return.

Furnishing the apartment: an important chapter

Most apartments in off-plan developments are delivered unfurnished or with basic fittings. If your goal is holiday rentals, you will need to furnish and equip the property to tourist standards: a complete kitchen, appliances, air conditioning, quality mattresses, textiles and decoration. The cost of furnishing a one- or two-bedroom apartment to holiday rental standards can amount to a significant figure that many investors do not include in their initial plan. It is worth asking the developer for quotes for furniture packages, as some offer this option, and comparing them with independent local suppliers.

Property insurance

Taking out insurance for your flat is both a recommendation and, in many cases, a requirement of the community or of the bank itself if there is financing. The insurance should cover damage from weather events (hurricanes and floods are a real risk in the Caribbean), civil liability and, if you rent it out, it is common to add specific cover for tourist use. The annual cost depends on the value of the contents and the cover chosen, but it is a recurring expense that should be included in your expense forecast.

The rental management commission

If you do not reside in the Dominican Republic, the logical step is to delegate the management of holiday rentals to a local company. These services usually charge a commission of around 20% to 30% of the rental income, and include tasks such as promoting the property, managing bookings, guest check-in and check-out, cleaning and basic maintenance. Cleaning costs per stay or service charges passed on by the manager may be added to this commission. When calculating the estimated return on your investment, this commission is a decisive factor: a gross return of 10% can become a considerably lower net return once all these expenses have been deducted.

Practical tips before buying

To finish, we summarise some recommendations that could save you unpleasant surprises:

• Prepare a complete budget that includes not only the apartment price, but also lawyer, notary, registration, insurance, furniture and the first year’s community fees.
• Prioritise projects covered by CONFOTUR, for the direct saving on the ITBI and for the associated tax benefits during the exemption period.
• Ask in writing for a breakdown of the maintenance fees and which services they cover, so you can calculate your real net profitability.
• Consider off-plan developments with flexible payment plans, which allow you to spread the outlay during construction and reduce the need for external financing.
• Always work with an independent local lawyer who can verify the project documentation and the title deed.

A good example of this last point is