As the old saying goes, if it were easy, everyone would be doing it. Well I guess the same can be said for owning property in the Caribbean, it is generally not cheap. Even if you are able to snap up a good deal, the cost of ownership can be more than you expect, especially if you need a mortgage. Let’s take a look at some of the expenses you will incur when owning a Caribbean property.
Financing the Dream
What will no doubt be your biggest expense will be the financing. Interest rates in the Caribbean are not what you pay at home. Even bank mortgages (assuming you can get one) are over 7% now, likely double what they are in the US and Canada. Factor in the short amortizations (usually 15 years), and you will be looking at a pretty significant payment.
If private or non bank financing is what you need, expect even higher rates however usually longer amortizations (or interest only payments) apply. Unfortunately liquidity in the Caribbean is a real issue, leading to higher rates and less financing options.
Having said that, rental rates are very good in many locations throughout the Caribbean which offset the higher carry costs of the mortgage. Whether through a management company or VRBO, you can expect a very good return on your investment if you pick the right location.
Managing Your Property
High quality property management is a must for any vacation property. Whether done through the strata corp or through a separate entity, a property manager will make sure your home is maximizing its usage and ROI. This service will not come cheap however, with some condo-hotels charging as much as 50% of the income from your unit. This is why so many condos do barely more than cover their costs.
By handling the reservations, advertising/marketing and as much of the offsite operations as you can, you can limit the amount that goes out every month. This can be the difference between you making money or carrying expenses out of pocket.
The Bills
In many Caribbean destinations, the cost of power can be a significant expense. If your guests do not recognize these issues, your bills can increase immensely. Spending money on energy saving equipment which reduce the amount of time the A/C runs (ie not while any doors or windows are open), can save you big money every month. Again, this can be the difference between your home being profitable or a drag on your finances back home.
We always recommend to new villa owners to get an energy audit and find green solutions where they exist. A small investment upfront can save you big money on the back end.
Owning a vacation property in the Caribbean is a very rewarding experience. It can also be a very lucrative venture when planned and executed properly. It is imperative however to know what you are getting into prior to making the plunge, and what you can do to make the experience as profitable as it is rewarding.
