The financial strategist warns that a property can become a liability if it does not serve a defined purpose, lacks profitability, or its costs exceed the expected benefits
SANTO DOMINGO – For decades, owning property has been one of the most widespread expressions of financial security. Owning a house, an apartment, or a plot of land is often interpreted as synonymous with wealth. However, according to Maggly Uzcátegui, a strategist specializing in capital creation and wealth protection, buying real estate does not automatically constitute a good investment.
Before signing a contract, reserving a unit, or taking out a loan, the specialist recommends asking a question that can determine the entire transaction: What is the purpose of acquiring this property? “It’s important to know how much capital the person has. Second, what they want to achieve, that is, whether it’s a property for personal use or to generate income,” explains the founder of Advisor by Maggly.
A person might buy a property to live in, to vacation, to preserve their capital, to wait for future appreciation, or to generate rental income. Each purpose requires a different strategy and responds to particular conditions of liquidity, profitability, and risk.
The problem arises when the word investment is used to describe any real estate acquisition, without first assessing whether the property will generate income or contribute to wealth growth, he emphasizes.
“You can have an asset that becomes a liability because you have to pay for maintenance, condo fees, and management, and it's locked up,” the strategist warns. This doesn't mean that owning a property for personal enjoyment is a bad idea, but rather that you should be clear about its purpose and the expenses it will generate.
Uzcátegui points out that some of his clients own properties in destinations such as Punta Cana or La Romana that remain unoccupied for much of the year because their owners prefer to reserve them for family enjoyment.
In these cases, the acquisition is a conscious decision based on the financial capacity to cover the costs, not necessarily on the expectation of generating profit. “They have the means to do it and they decided to do so,” Maggly Uzcátegui points out.
Profitability
When the goal is to generate income, the evaluation should begin by determining how much capital is actually available. The calculation cannot be limited to the down payment or the sale price, but must consider the expenses associated with the property during its acquisition, operation, and maintenance.
These commitments are compounded by the cost of financing. The executive believes the Dominican Republic remains an attractive market for certain investors, but points out that interest rates can significantly alter the projected return when the purchase is financed with debt. “The rates are a bit high. So, you need to know what the real return will be if you're going to leverage debt,” she says.
Interest, insurance, taxes, maintenance, condominium fees, administration, repairs, and vacancy periods must all be included in the analysis. Only after deducting these costs is it possible to determine if the property will generate the expected return and if that return compensates for the invested capital and the risks assumed.
Avoid constructed projections
The founder of Advisor by Maggly, who has over 14 years of experience in the international financial sector, also recommends avoiding projections based on ideal scenarios. For example, assuming near-constant occupancy for vacation or short-term rental properties can lead to an unrealistic income estimate.
Instead, he proposes developing conservative scenarios to determine if the property will remain sustainable even if occupancy rates fall below those projected during the sales process. If the results subsequently exceed this projection, it will represent an additional profit, but it won't be essential to sustain the operation. “There's a logistical and security aspect to it; you can't just buy something for the sake of buying. You have to do a pre-evaluation first and work with realistic figures,” Uzcátegui states.
Protect capital
Due diligence doesn't end with the property's characteristics and location. Before purchasing a property, especially one under construction, it's also necessary to investigate the developer, their track record, and whether they have delivered on time for other projects.
The materials used, construction timelines, contractual terms, and responsibilities assumed by each party must be included in the evaluation. Buying off-plan involves different risks than purchasing a completed property, so the developer's reputation, experience, and financial stability become crucial for protecting your investment.
Uzcátegui also suggests estimating expenses that haven't yet been established. If, at the time of purchase, the cost of administration, maintenance, or condominium fees is unknown, excluding these commitments from the projection can create an unrealistic expectation of profitability.
The alternative is to work with reasonable estimates and build different scenarios until you have the final figures. “You have to factor in the associated costs so you don't have abstract ideas in your head, but real numbers,” he emphasizes.
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