Benefits of investing in rental property
Is buying and renting property in Cayman a good investment? I will not be living in whatever I buy. I am looking to spend up to about $500,000.
Auntie’s answer: It is always nice to see someone interested in investing in Cayman. To help you on your way, I consulted with Tony Catalanotto of Rainbow Realty, who has 13 years experience in the Cayman property market.
Noting that both foreign and local investors have been buying rental properties here for decades, he said that trend continues, boosted by the “fairly transient workforce, which in itself supports the need for residential rental properties. Approximately 50% of the Cayman workforce is comprised of expats of which the vast majority initially opt to rent a property as opposed to buying”.
Mr Catalanotto explained that there are other factors that appeal to property investors, such as the lack of annual property tax in Cayman, and landlord/tenant laws that are “fair and more supportive of a landlord than they are in many other jurisdictions”.
In addition, he said that although the rental market has experienced lulls, these have “typically been short lived and landlords can expect to enjoy a return on investment in excess of 9%”.
One other point he said investors should consider is the “ongoing buoyancy of the Cayman real estate market in general”, adding, “history shows that real estate in Cayman usually trends upwards so should over time an investor decide to divest of their rental property, they are likely to realise a fairly significant, tax-free capital gain”.
Category: Ask Auntie, Real Estate Questions
Don’t you need a trade and business license to operate more than one property as a buy to rent?
You should have asked Tony if there is a need for rental properties of that caliber. A half mil property could stay empty for a while. If I had the income to pay that kind of rental cost, I’d go ahead and buy my own.
However, I do know some who don’t spend wisely so it could happen.
If this realtor was a “buyer’s agent” he would advise of the hidden costs of such a transaction. Closing costs aren’t cheap, Gov’t stamp duty of 7-9% depending upon the location, realtor fees of 6-10% at sale, etc. If the transaction includes a US or CDN conversion there is an additional 25-45% hit for the exchange rate.
Then there is the likely pending exit of a large number of expats before the 31 Dec. change in the pension law. It will be harder to get replacements for those workers leaving with the new much tighter pension law! Also any mortgage obtained here is most likely fully variable rate, which can change at any increase in the FED rate!!
If I had that much coin to spend, I wouldn’t chance it in the current market, as there are a high number of unsold properties in that price range. Better to buy an apartment block and keep rents reasonable, while VERY carefully screening potential tenants. If one unit becomes vacant there should still be positive cash flow if the numbers are right.
One caution investors should understand is that there is a very limited pool of buyers of real estate in the Cayman market. Often it takes years to sell a property in Cayman as is evidenced by the listings on CIREBA.COM the closest thing there is to a MLS in Cayman. Often homes linger for long periods of time without price reductions, only to be pulled off for a short time, and reposted as a new listing at the exact same price. Remember too many properties are listed in Cayman Dollars which will need to be adjusted to allow for adjusted for the exchange rate between the buyers currency and Cayman Dollars. Finally, remember there will be a 7% CIG tax on your transaction. So Cayman is not a market where you can make a short term purchase and expect to make a quick profit, even in a pre-sale situation.
Also Cireba charge when you sell
here are there rates:-
Price $94,999 or under – 10%
Price $95,000 to $494,999 – 7%
Price $495,000 to $994,999 – 6%
Price $995,000 to $9,994,999 – 5%
Price $9,995,000 and over – 4%
only if you use them, I have bought and sold without an agent several times over the last 20 years with no problem