Real Estate

Owning a Piece of Paradise

The Caribbean is a magical place with its beauty, laid-back lifestyle, and friendly people. So it's not surprising that many island visitors desire to make it their home away from home. After all who hasn't dreamed of owning a vacation home in the Caribbean? If you are ready to take the plunge and make your dream a reality, here are some things to keep in mind when buying real estate in the Caribbean.

Find the right Caribbean island for you

Before you purchase your own piece of paradise on a Caribbean island, spend an extended amount of time on the island. Each island has its own personality and you want to make sure that the island is in sync with your needs and preferences. Get to know the residents and merchants and ask them what it is really like to live on the island. Consider what type of island suits you. If you are a British subject, you may prefer an island like Barbados that has a strong connection to Britain. Likewise, Americans may decide on an English-speaking American territory. Those wanting seclusion and privacy may choose a less commercial island.

Resist buying real estate on a "hot" Caribbean island solely because it is a popular tourist destination. The popularity of vacation sites waxes and wanes and you don't want to own property on an island that is hot to today but totally unsuited to you and your personality.

"Don't succumb to ‘Palm Tree' fever," advise Lew and Kim Spruance, owners of property on Virgin Gorda. "Take the time to understand the customs and traditions of these islands." The Spruances know of what they speak. The couple bought their property on Virgin Gorda after bareboat chartering throughout the Caribbean islands between St. Thomas and South America for a number of years. "We spent five years researching the BVI through a local realtor and read everything we could get our hands," say the Spruances. Barbados property owner Keith Dickinson followed the same strategy. "We spent five years in a row on vacation to Barbados and grew to like the island and the people," says Dickinson. An Englishman, Dickinson saw Barbados's British ties as an asset. "We saw Barbados as the perfect place to invest in property," says Dickinson. "We found the people very friendly. The government has always been stable and promotes property ownership from outside of Barbados. The legal system is based on UK law, security is not an issue, and English is spoken here. Barbados also has good communication links to the rest of the world."

Your dream property in the Caribbean

Once you've decided on the perfect Caribbean island for you, you're ready to find the property that is right for you. When searching for your dream property, here are a few tips for selecting real estate to keep in mind. "Don't focus on beachfront property only," advise the Spruances. "It carries a higher price without many benefits. For sure, one can often step off the deck onto a beach but one also buys into a nearly guaranteed attack of mosquitoes and sand fleas, particularly at dawn and dusk." Most beaches are public, and anyone can use them, sometimes to the detriment of your property. "A "belonger" may decide to place a boat, trailer, or whatever on the beach nearby, let it rust away and there is absolutely nothing you can do about it," say the Spruances.

Instead of concentrating on a beachfront location, the Spruances recommend going for the breeze. "Purchase Caribbean real estate that faces Southeast to north so you are exposed to the trade and/or north wind. This assures breezes for your home at all times, and practically eliminates mosquito problems. If you buy with a little height in mind you will have breezes and a view."

Those wanting to build their own home sometimes find it difficult to find a desirable piece of land on a small island. One option is to buy property with an existing home and then renovate that home. This is the strategy the Spruances used, "We opted to purchase an older home on fee simple property. We bought with ‘location, location, location' in mind with the plan of removing the old house and building a new one." They transformed what was once a small 1,800-square-foot block house with a Ferro-cement roof into a gorgeous, 4,000-square-foot home.

Some property owners, like Keith Dickinson, choose to purchase a condominium in a developed community. "Our condo is part of a brand-new complex. We have a fantastic property in an ideal location that is even better than we have hoped," Dickinson says of his Barbados getaway.

Financial details with Caribbean real estate

Before signing on the dotted line, do your financial homework. Make sure you can afford your ideal property without relying on rentals or property appreciation. If the island's tourism or real estate market suffers, you want to make sure you don't want to feel the pinch.

You'll want to know what fees are associated with the real estate transaction, such as transfer taxes, stamp taxes, insurance, and residency fees. Some islands such as the British Virgin Islands and Anguilla require that non-residents apply for a Non-Belongers License before they can own property. If you do plan to rent out the property, ask if you can do short or long term rentals yourself or if you must use a property management firm to handle rentals.

Find out what all your costs will be. Figure in the additional yearly costs of insurance, maintenance, sewer, water supply, utilities, extermination, taxes, and repairs. There are other costs besides the obvious legal and real estate fees, especially if you choose to rent out the property. "You will have to cover costs of maid service if you rent," says Dickinson. "Electric is not cheap, and there are Internet connection fees, monthly TV cable fees, gardening costs, telephone costs (local calls are free but calls to UK are very costly), and the cost of a local agent to manage the property when you have renters or are not in the property." And of course there are also the costs of provisioning and furnishing your property to consider.

Caribbean real estate requirements

Keep in mind that each island has different requirements for its real estate transactions. In the British Virgin Islands and Anguilla, non-residents are required to apply to the Government of the British Islands for a Non-Belongers License (sometimes called an "alien landholder's license") before they can purchase property. This includes a background check so be prepared to supply two character references from an employer and a public official such as a notary public, a financial reference, and a police certificate stating that you are of good standing. Along with these materials, you must submit at least four successive newspaper advertisements that give the property description and property price of the real estate you wish to purchase. There is a $50 fee for each person or company named on the application as well as a fee of $150 per person or company named in the license. All properties are purchased through an agency, and the buyer pays a 10% earnest deposit to the agent as an indication of the intent to purchase the property.

The sales agreement includes a condition that the sale is contingent on approval of the Non-Belongers license. After you receive Non-Belongers license it should take 30 days for the sale to go through. However, obtaining the Non-Belongers license can take from 12 to 18 months. If you choose to buy property in the BVI and need financing, you must obtain your mortgage from a BVI financial institution.

On Barbados, The Central Bank of Barbados must grant permission to any non-Barbados resident who wishes to buy property on the island. An off-shore bank can approve a mortgage for a property on Barbados, and it is best to have your financing secured before you enter into a binding agreement. The buyer must employ a licensed Barbados attorney to search the register of title to establish title to the property before the sale takes place. The buyer and seller sign a binding contract, and the seller's agent holds the 10% deposit until the sale is completed. When the transaction is complete, the balance of the purchase price is paid and the buyer takes title to the property.

Most non-Barbados residents purchase the property through a company that is must be registered to do business in Barbados, but can be incorporated outside Barbados. The seller pays the stamp tax and transfer tax. The buyer must pay his own legal fees, which range from 1.5% to 2%. The annual land tax ranges from 0.2% for properties under $350,000; to 0.7% for properties between $350,000 to $700,000, and 1% for properties over $850,000. Property owners who plan to rent their proporty must apply 7.5%VAT tax to the rent they collect.

US citizens buying property in US territories such as Puerto Rico or the USVI find that the real estate process is basically the same as in the continental US. A new incentive for business development has been a boon for the USVI real estate market. US companies with Industrial Development Corporation benefits can shelter up to 90% of corporate income tax for 10 years if the principals live in USVI. This has resulted in a demand for four- and five-bedroom luxury homes.

Leave it to the professionals

Most property owners advise using a local Caribbean realtor and lawyer. "One absolutely needs a realtor when purchasing property, as well as an attorney," say the Spruances. "The escrow process takes both with professional training." A lawyer will take care of applying for the required licenses, such as the Non-Belongers License, and can help make sure everything is done in a timely manner. Working with a local attorney makes it easier to navigate through the real estate process specific to that island. "You are 5,000 miles away and you need to ensure that you have competent local Bajans looking after your interests," says Dickinson.

Expect the process to take time. "One needs to have patience," says Dickinson. "Legal matters are not as speedy as in the UK." Obtaining licenses can take time, as can the real estate transaction itself. In the British Virgin Islands, "the major hurdle is obtaining a Non-Belongers license from the government," say the Spruances. "This can take anywhere from twelve to eighteen months due to background checks and government bureaucracy. But if dealing with ‘island time' presents a potential buyer with a problem, they shouldn't consider buying here anyway as ‘island time' is one of the main attractions in the BVI." Dickinson concurs, "Things will not happen quickly! You need to have patience!"

Living the dream

On the whole, most Caribbean property owners have found the reality to be as wonderful as their dream. "The dream is even better than we expected!! We consider our condo as ‘home' now rather than our property in the UK," says Dickinson. "The sooner we can live in Barbados the better." The Spruances feel the same. "Ours has been a positive experience. We have had a smile on our faces nearly all the way."