6 Reasons to Invest in Puerto Rico’s Real Estate
Written by Ricardo Álvarez-Díaz
ABOUT THE AUTHOR | Ricardo Álvarez-Díaz is the founder and principal of the architectural firm Álvarez-Díaz & Villalón, with offices in Miami and San Juan, Puerto Rico.
PUERTO RICO OFFERS MANY DIFFERENT BENEFITS THAT INVESTORS SHOULD TAKE ADVANTAGE OF.
Whatever your business, chances are, there is a demand for it in Puerto Rico. From housing to hospitality, the Island is filled with real estate opportunities. Here are six reasons to invest in Puerto Rico’s real estate.
1. STRATEGIC LOCATION
Puerto Rico’s strategic location makes it a great place to conduct business. Its strong ties to the U.S. means that regular direct flights are available to many major U.S. cities. It’s only a 2.5-hour flight to Miami and a 3.5-hour flight to New York. There are also direct international flights to Caracas, Madrid, Frankfurt, London, and Panama City, among others.
Due to its location between the Caribbean Sea and the Atlantic Ocean, Puerto Rico is perfect for accessing markets throughout Latin America and the Caribbean.
2. CURRENCY & LEGAL PROTECTION
Puerto Rico is an unincorporated territory of the United States, and its unique affiliation to the United States provides several advantages for investors and people looking to relocate their businesses to the Island.
Since the U.S. dollar is Puerto Rico’s official currency, it creates significant savings for investors in the U.S. when transferring capital in and out of the island. But beyond that, being a U.S. territory also facilitates official processes based on U.S systems under Federal Law, meaning significantly more legal protection than other countries in Latin America.
3. PROPERTY RIGHTS
Puerto Rico ranks in the top 15 globally, in protecting property rights, trailing behind some of the world’s strongest economies, including Finland, Singapore, Switzerland, and the United Kingdom.
4. AFFORDABLE HOUSING NECESSITY
According to the United States Interagency Council, thousands of Puerto Ricans face homelessness on the Island. The natural disasters that have passed through, namely Hurricanes Irma and María, have significantly damaged around 250,000 houses and destroyed 70,000 homes.
Five years later, the housing crisis has barely seen an improvement. The tax breaks that have attracted investors from the mainland have caused housing costs around the Island to skyrocket, leading to growing gentrification and unaffordable housing for Puerto Rican citizens. For these reasons, there is a huge market demand for affordable housing developments all around Puerto Rico.
5. HIGH DEMAND FOR HOSPITALITY
Besides the huge necessity for affordable housing in Puerto Rico, there’s also a high demand for hotels since there are not enough rooms for hospitality guests. It’s estimated that to address this hotel shortage, the current number of available hotel rooms on the Island needs to duplicate within the next five years. This calls for more hospitality investments and development projects on the Island.
6. OPPORTUNITY ZONE INVESTMENTS
Because of Puerto Rico’s unique relationship with the United States, there are several programs and incentives the government has put in place to attract national and international investors to the Island to create jobs and generate economic development. One of these programs is called Opportunity Zone Investments.
This tax rule allows investors to defer their capital gains taxes by reinvesting their capital gains into qualified opportunity funds, driving business investments toward low-income or economically distressed areas of the country. With this program, investors can reinvest any realized capital gains into these funds to defer taxes they owe on their gains, potentially significantly reducing their tax bill down the road.
In Puerto Rico, more than 95% of the Island qualifies as an opportunity zone, meaning you can invest almost anywhere on the Island and qualify for these incentives.
AN ISLAND OF REAL ESTATE OPPORTUNITIES
This wonderful Island is the right place for long-term real estate investments, especially in the housing and hospitality industry. Puerto Rico’s real estate is an asset that can provide needed diversification to any real estate development portfolio.