Buying in Puerto Rico

Buying a house in Puerto Rico is an exciting endeavor, but it’s essential to consider several factors before making such a significant investment. Here are key considerations:

1. Puerto Rico Locations: Choose the right location that aligns with your needs and preferences. Puerto Rico offers diverse areas, from urban settings in San Juan to coastal towns and rural communities. Consider factors like proximity to work, schools, amenities, and lifestyle preferences.

2. Budget: Determine your budget and secure financing, if needed. Consider not only the purchase price but also ongoing costs, including property taxes, insurance, and maintenance.

3. Property Type: Decide on the type of property you want, whether it’s a single-family home, condo, townhouse, a fixer-upper or land to build your dream home. Your choice will depend on your budget and lifestyle.

4. Legal Considerations: Understand the legal aspects of buying real estate in Puerto Rico. Research property taxes, permits, and ownership structures, as they can differ from the mainland United States.

5. Local Real Estate Market: Research the local real estate market conditions, including property values, recent trends, and expected changes in the area you’re interested in.

6. Inspection and Due Diligence: Conduct thorough due diligence, including property inspections and title searches, to ensure the property is in good condition and has a clear title.

7. Climate and Environment: Consider the local climate and environmental factors. For instance, coastal properties may be exposed to hurricanes and saltwater, so you’ll want to evaluate the property’s resilience.

8. Residency Status: Determine your residency status in Puerto Rico, as it may impact your property taxes and other financial matters.

9. Property Management: Decide if you’ll manage the property yourself or hire a property management company if you plan to rent it out or are away for an extended period.

10. Long-Term Plans: Think about your long-term plans for the property. Will it be a primary residence, vacation home, or investment property? Your goals will affect your choice.

11. Community and Amenities: Explore the neighborhood and the amenities it offers, such as schools, shopping, healthcare, and recreational options.

12. Local Regulations: Stay informed about local regulations, especially if you plan to rent the property as a vacation rental. Rules can vary by municipality.

13. Insurance: Look into property insurance, including coverage for hurricane and flood damage, which is important in the Caribbean.

14. Local Culture: Learn about the local culture and customs, as Puerto Rico has a unique and rich heritage.

15. Local Experts: Seek advice from local real estate agents, attorneys, and financial advisors who are knowledgeable about the Puerto Rican real estate market.

Buying a house in Puerto Rico can be a great investment and a wonderful lifestyle choice, but thorough research and careful consideration of the above factors are crucial to making a well-informed decision.

 Puerto Rico has a mix of local and international banks that offer a variety of financial services. Some of the most well-known banks include:

As a U.S. citizen, you can purchase property in Puerto Rico without any special permits or residency requirements. Since Puerto Rico is a U.S. territory, the process is similar to buying real estate in any U.S. state.

📝 Steps to Buy Property in Puerto Rico

1. Property Search: Engage a local real estate agent to help identify properties that meet your criteria.

2. Property Inspection: Conduct a thorough inspection, paying attention to potential hurricane damage and reviewing zoning laws to ensure compliance and protect your investment.

3. Offer and Negotiation: Once satisfied, make an offer and negotiate terms with the seller.

4. Purchase Agreement: A notary public (who is also a licensed attorney in Puerto Rico) will draft the purchase agreement.

5. Title Search: Perform a title search to ensure the property is free from liens or encumbrances.

6. Financing: If financing is needed, secure a mortgage through a local or U.S. bank.

7. Closing: The notary will oversee the closing process, ensuring all documents are in order and registering the new deed with the Property Registry

💰 Costs and Considerations

• Closing Costs: Typically range from 3% to 5% of the property’s purchase price, including notary fees, stamp tax, registration fees, and other associated costs.

• Property Taxes: Generally lower than in many U.S. states.

• Insurance: Given the island’s susceptibility to natural disasters, obtaining comprehensive property insurance is advisable.

🏦 Financing Options

Both local and U.S. banks offer mortgage products to residents and non-residents. Local banks, like Banco Popular, are familiar with the nuances of the Puerto Rican real estate market. Eligibility criteria include a satisfactory credit score, proof of income, and sometimes, proof of assets. Non-residents may be required to make a larger down payment and might face higher interest rates.

⚖️ Legal and Tax Implications

• Legal Framework: Puerto Rico’s real estate laws are based on a mix of Spanish civil law and U.S. common law. Notaries play a significant role in real estate transactions, and the island operates under a Torrens title system, providing strong assurance of clear property ownership. 

• Tax Incentives: Puerto Rico offers attractive tax benefits under Acts 20 and 22, now part of Act 60. These incentives provide exemptions on income from investments, dividends, and capital gains, making the island appealing to investors and entrepreneurs. 

• As of April 2025, Puerto Rico’s Act 60—also known as the Puerto Rico Incentives Code—continues to offer significant tax benefits to attract investors, entrepreneurs, and remote workers. However, Governor Jenniffer González-Colón has proposed substantial amendments aimed at reforming the program while preserving its core incentives.carrasquillolaw.comAP News+2Relocate Puerto Rico+2carrasquillolaw.com+2

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  ⚖️ Key Proposed Changes to Act 60 (Effective January 1, 2026)

  1. New 4% Tax on Capital Gains, Interest, and Dividends
     Starting in 2026, new applicants would be subject to a 4% tax on Puerto Rico-sourced capital gains, interest, and dividends. This replaces the current 0% tax rate for these income types.

  2. Residency Requirement
     Applicants must not have been residents of Puerto Rico for at least six years prior to applying. This is an increase from the previous ten-year non-residency requirement.

  3. Extension of Act 60
     The expiration date for Act 60 is proposed to be extended from December 31, 2035, to December 31, 2055, providing a longer window for new applicants.

  4. Grandfathering of Existing Decrees
     Current Act 60 decree holders will retain their benefits under the terms of their existing agreements. These are considered binding contracts and are protected under both Puerto Rico and U.S. constitutional provisions.

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  💼 Current Benefits Under Act 60 (Pre-2026 Applicants)

  • 0% Tax on Capital Gains: Applies to gains realized after establishing residency in Puerto Rico.

  • 4% Corporate Income Tax: For eligible export services businesses.

  • 75% Property Tax Exemption: On certain real and personal property.

  • 50% Municipal Tax Exemption: On specific business activities.

  • 0% Tax on Dividends and Interest: For Puerto Rico-sourced income.

  • 5% Tax on Long-Term Capital Gains: If assets are held for at least 10 years post-residency.

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  📌 Additional Considerations

  • Eligibility: Applicants must not have been residents of Puerto Rico for the specified period before applying and must establish bona fide residency, including physical presence, primary home, and economic ties to Puerto Rico.

  • Application Process: Involves obtaining a tax exemption decree from the Puerto Rico Department of Economic Development and Commerce.

  • Compliance: Beneficiaries must comply with annual reporting requirements and maintain residency to retain benefits.