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Why You need to Invest in Puerto Rico Real Estate

◄ Via Direct Source Wealth ►

As a real estate investor in Puerto Rico, you should be aware of the present situation by which many assets are currently held on the balance sheet of several primary banking institutions in Puerto Rico. After the market crash of 2007 and 2008, many near complete real estate projects were transferred from the failing banks, which supplied the liquidity to the projects, to solvent banks. However, during this transition, the projects were unable to complete the foreclosure process due to mandates set by the judicial system as a result of the developers being unable to complete the project according the development according agreements set forth by the insolvent bank and thus to this day many of these assets remain on the balance sheets of the primary banking institutions in Puerto Rico.

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Why You need to Invest in Puerto Rico Real Estate

  1. 1. Why you NEED to Invest in Puerto Rico’s Real Estate Investor Information Guide Call 844-Source-4
  2. 2. Investor Information Guide to Puerto Rico Page 1Call 844-Source-4 Table of Contents Introduction to Puerto Rico ....................................................................2 Real Estate Investors Guide ....................................................................4 5 reasons to invest in Puerto Rico Real Estate ........................................8 Summary of Act 74, the Tourism Development Act..............................11 Enterprise Business Guide.....................................................................12 Summary of Act 20, the Act to Promote the Export of Services............14 Summary of Act 22, the individual Investors Act ..................................15 Direct Source Wealth............................................................................16
  3. 3. Investor Information Guide to Puerto Rico Page 2Call 844-Source-4 Introduction to Puerto Rico As a territory of the United States of America, Puerto Rico is uniquely positioned in that it has the authority to have its own Constitution and enact local laws and tax codes so long as they are not made contrary to the US Federal Laws. This affords Puerto Rico the autonomy to create incentives that surpass the capacities of most States. Such is the case with regards to Act, 20, Act 22 and Act 74. As history demonstrates, the government of Puerto Rico has always had to conceptualize new incentives to overcome overwhelming challenges, which repeatedly confront the island. With short-term and long-term sustainable debt issues, the government has a difficult proposition to ensure that its people remain productive in the global economy without warning off foreign investments. To mitigate these risks, the government has enacted new incentives to attract foreign investors to participate in the local economy of the island in an effort to create, secure, and elevate its workforce. Such is the case with Act 20, Act 22, and Act 74, which restructure the islands relationship with the real estate industry, the tourism industry and the financial industry to create a sustainable vision beyond the short-term downfalls. Today, as a result of these continuous efforts, Puerto Rico is the most innovative workforce among all other Latin American countries, according to the world economic forum.
  4. 4. Investor Information Guide to Puerto Rico Page 3Call 844-Source-4 It should be highlighted that 1.) It is not necessary to give up citizenship to the United States in order to take advantage of the tax laws in Puerto Rico. 2.) Puerto Rico is an easy destination to travel to, just a 3.5 hour flight from New York and just over an hour from Miami. There are hourly flights to San Juan and daily flights to Aguadilla. 3.) The legal system is safe and secure with many of the same familiarities in law and governance as in the upper 48. Today, the opportunities in Puerto Rico are rich and tangible. The deals are easy to understand and Direct Source Wealth makes the process turnkey. The laws are written in a comprehensive way, which allows all those seeking the opportunity to expand their horizons and bottom-line an almost effortless participation in the practicalities and benefits. However, as easy as the laws are to interpret, be aware that life and business on this Caribbean island is different than that of the upper 48, which is why you need a team on the ground you can trust and count on. Whether coming to Puerto Rico to live for 183 days under Act 22, invest in real estate under Act 74, and/or move your business here under Act 20, we hope this investor information guide will help you get started and answer some questions you may have. Please feel free to give us a call if you would like support in realizing your dreams from an experienced team residing on the island.
  5. 5. Investor Information Guide to Puerto Rico Page 4Call 844-Source-4 Real Estate Investors Guide As a real estate investor in Puerto Rico, you should be aware of the present situation by which many assets are currently held on the balance sheet of several primary banking institutions in Puerto Rico. After the market crash of 2007 and 2008, many near complete real estate projects were transferred from the failing banks, which supplied the liquidity to the projects, to solvent banks. However, during this transition, the projects were unable to complete the foreclosure process due to mandates set by the judicial system as a result of the developers being unable to complete the project according the development according agreements set forth by the insolvent bank and thus to this day many of these assets remain on the balance sheets of the primary banking institutions in Puerto Rico. In effort to secure the best projects, our team has built a robust network of individuals and institutions that possess inside knowledge of this situation. We have developed the win-win solutions needed to negotiate between the developer and bank to bypass the judicial process in order to acquire many of the near complete assets for pennies on the dollar. Whether we acquire a property from a bank or a private sell,
  6. 6. Investor Information Guide to Puerto Rico Page 5Call 844-Source-4 Direct Source Wealth has the knowledge and processes in place to handle all the key steps of the transaction. Title Search - When buying land or property in Puerto Rico, you should first conduct a title search from a credible company, such as Stewart Title. This information will provide you with the name of the current title holder, the description of the property, and any liens and encumbrances which the property could potentially have and start the process for title insurance. Our team has already experience the need to conduct the proper due diligence with this process. In Puerto Rico, it is very common for investors to bypass this process during a transaction. This can be a costly mistake as some have learned. During a transaction to acquire a 30-unit condominium project, we learned of a $300k tax lien on the property and thus were able to pull the bank back into the deal to renegotiate the deal with the settlement of the lien. Property Inspection - We have a network of reputable property inspectors to perform a thorough check of the property you are interested in buying. Most of the structures are constructed using concrete due to the existence of terminates. Many structures are not built to the same construction codes of the upper 48. You will want to ensure the property you are buying does not have any major issues which could be costly in the long run. Construction - You will need to consult with the Planning Board for a site consultation prior the purchase. You want to ensure the land is suitable for your specific need and is complaint with the specific zoning requirements. While starting on a new construction project in Puerto Rico would allow you to execute your vision, it should be noted that many outstanding visions already exist with permits in place creating a
  7. 7. Investor Information Guide to Puerto Rico Page 6Call 844-Source-4 3-5 year advantage. New construction permits are simply not a priority as many projects sit near complete or complete ready to purchase. Government Properties - There is a great opportunity to purchase government buildings, which are no longer in use and can be purchased for great prices and supported by subsidies depending on the nature of your business. For example, PRIDCO, currently has available real estate assets for industrial, commercial, and institutional uses ranging in size from 4,000 to over 100,000 square feet. Though these properties are available at great prices they can be further negotiated with approval from the PRIDCO board of directors. Local Network - Without the support of a physical team (boots on the ground) in Puerto Rico, it would be exponentially more difficult to manage your project. The relationships that we have developed are necessary to infiltrate the inner social fabric of the Puerto Rican business culture. While in the upper 48 money talks and propels the velocity of business, in Puerto Rico we find that a large portion of business moves faster by simply knowing the right people.
  8. 8. Investor Information Guide to Puerto Rico Page 7Call 844-Source-4 Direct Source Wealth Contact Network - Direct Source Wealth has taken the time to develop relationships with the agencies responsible for managing the real estate industry in Puerto Rico. Rules and Permits Administration Centro Gubernamental Roberto Sánchez Vilella Edificio Norte, Piso 9 San Juan, PR (787) 721-8282 www.arpe.org Land Administration 171 Ave. Chardón Hato Rey, PR (787) 753-9300 www.terrenos.gobierno.pr Public Housing Administration Ave. Barbosa 606 Edif. Juan C. Cordero Piso 9 Río Piedras, PR (787) 759-9407 www.gobierno.pr/vivienda Puerto Rico Aqueduct and Sewer Authority (PRASA) Avenida Barbosa #604 Hato Rey, PR 00917 (787) 620-2277 www.acueductospr.com Puerto Rico Public Buildings Authority (PBA) Centro Gubernamental Minillas Edificio Norte Piso 6 Santurce, PR (787) 722-0101 www.aep.gobierno.pr Puerto Rico Electric Power Authority (PREPA) Ave. Ponce de León #1110 Pda. 16 ó Santurce, PR (787) 289-3434 www.aeepr.com Puerto Rico Fire Department Edificio Casa Lee 2432 Calle Loíza Esq. Doncella San Juan, PR (787) 725-3444 www.bomberos.gobierno.pr Housing Department of Puerto Rico 606 Ave. Barbosa, Piso 10 Edificio Juan C. Cordero Río Piedras, PR 00928 (787) 274-2525 www.vivienda.gobierno.pr Puerto Rico Planning Board Centro Gubernamental Minillas Edificio Norte, Piso 19 San Juan, PR (787) 723-6200 www.jp.gobierno.pr Puerto Rico Industrial Development Company (PRIDCO) Ave. Roosevelt 355 Hato Rey, PR (787) 758-4747 www.pridco.com Stewart Title Puerto Rico, Inc. MCS PLAZA Suite 1207, 255 Ponce De Leon Ave. Hato Rey, PR 00917 (787) 753-1200 Tel. (787) 274-1200 http://www.stewart.com/pu ertorico/
  9. 9. Investor Information Guide to Puerto Rico Page 8Call 844-Source-4 5 reasons to invest in Puerto Rico Real Estate 1. Great Deals - After the market down turn in 2007 and 2008, many real estate assets in Puerto Rico were forced to transfer from insolvent banks to the islands’ solvent banks. Today, many of these assets exist 85-90% complete and require minimal finishing’s to perfect. These assets can be acquired for well below wholesale value, some for 50% of appraised value and much less than the cost to build, and have been constructed to US standards. The banks which hold these assets on their books have been given until April 15th of 2015 by the FDIC to settle which means private investors and large institutions are now acquiring these assets by the handful. We have locked up many of these deals for you. Call us to inquire about these deals. 2. Transparent Tax Haven - Puerto Rico is poised to become the next financial frontier as the laws enacted by Puerto Rico are incentives for wealthy investors and retirees to domicile on the island for 183 days. Act 22, known and the Individual Investors Act, provides investors the privilege of little to no capital gains tax. Outside of attracting investors to relocate to Puerto Rico, the island has created incentives for manufacturing, export services, agriculture, and tourism designed as a
  10. 10. Investor Information Guide to Puerto Rico Page 9Call 844-Source-4 full circle strategy. These laws will propel and accelerate the growth of the real estate market for years to follow. 3. Strong Workforce - The real estate in Puerto Rico isn’t just supported by wealthy investors, snow birds, or tourism. According to the world economic forum, Puerto Rico has the most “innovative” economy throughout all of Latin America. This advanced workforce, containing advanced technology experts, bio-chemical engineers, financial experts, legal experts, and so on, demand real estate with standards equal to that of the upper 48 in the United States. Due to the tax incentives offered by Puerto Rico, economic growth in manufacturing industries, the agriculture industry, the pharmaceutical industry, and the financial industry are continuing to drive global consumers to do business with the island for the long-term with a sustainable outlook. 4. Hidden Economy - While averaging out the economy of Puerto Rico makes the island appear dismal on paper, according to a study conducted by Estudios Técnicos Inc., which was commissioned by the Development Bank of Puerto Rico, the underground economy is estimated to be approximately 20 billion dollars annually. This cash is able to support the anomalies in analytics such as the city of San Juan having one of the highest prices per square foot for retail space anywhere in the world. Many Puerto Ricans like to pay with cash and one thing they love to pay with cash is rent. Generating cash-flow from a multi-billion dollar cash economy is something worth looking into. 5. Caribbean Lifestyle - The average temperature in Puerto Rico is 82 degrees Fahrenheit (28 deg. C). The beaches are among the best in the world with warm water temperatures. The people of Puerto Rico are educated in public schools in English and Spanish so getting around and finding what you need is in many cases as easy as asking. Puerto Rico moves at its own pace which is much slower than the upper 48 so the
  11. 11. Investor Information Guide to Puerto Rico Page 10Call 844-Source-4 cultural environment here is welcoming, friendly, and appreciative. At least for 183 days of the year, we invite you escape the hectic lifestyle of the upper 48 and burry your toes in the sand. Don’t think twice about doing business on the beach or from the comfort of your Puerto Rican villa. It’s easier than you think, just ask us.
  12. 12. Investor Information Guide to Puerto Rico Page 11Call 844-Source-4 Summary of Act 74, the Tourism Development Act Enacted in 2010 to stimulate investments into infrastructure, which promotes tourism. Eligibility - Leasing and purchasing benefits may apply to: Hotels, condos hotels, guest-houses, golf courses, vacation clubs, timeshares, recreational entertainment, and more. Tax Exemptions  Up to 90% tax exemption on income tax (100% in some areas)  Up to 90% tax exemption from personal property tax  Up to 90% tax exemption on municipal licenses  Up to 100% tax exemption on excise tax on imported goods. Tax Credits - Receive tax credits when renovating or expanding existing property. Investment tax credit out to 50% of the cash paid for equity. Puerto Rico has a secondary market for selling such credits. Tax Decree - The decree is a contract between the business and the government of Puerto Rico.
  13. 13. Investor Information Guide to Puerto Rico Page 12Call 844-Source-4 Enterprise Business Guide Entities - Like the mainland of the United States, Puerto Rico supports many different type of entity structures for structuring a business including: sole proprietorships, partnerships, corporations (domestic and foreign), non-profit corporations, limited liability companies, business trusts, joint ventures, international banking entities, insurance companies, real estate investment trusts, and more. Basic requirements for starting a business in Puerto Rico 1. Obtain Employee Identification Number (EIN) unless acting as a sole proprietor. 2. Register your business with the Registry of Business with Puerto Rico Treasury Department. Must be completed within 30 days of starting your business. 3. Register with the Compulsory Business Registry. Must be completed by July 15 of each year. 4. Obtain a business license from the municipality in which your business is conducting business 5. Obtain a use permit. Complete Inspection with Fire Department. Basic Labor Laws Minimum wage $7.25/hr | 8 hour work days | 40 hour work weeks
  14. 14. Investor Information Guide to Puerto Rico Page 13Call 844-Source-4 Safety Laws - All employers who are a part of a commercial outfit are required to establish health and safety regulations set forth by OSHA. Helpful Contact Information Puerto Rico Manufacturer’s Association (PRMA) Edificio Centro Internacional De Mercadeo St 165 Torre 2 Suite 702 Guaynabo PR 00968 (787) 641-4455 www.industrialespr.org Rules and Permits Administration Centro Gubernamental Roberto Sánchez Vilella Edificio Norte, Piso 9 San Juan, PR (787) 721-8282 www.arpe.org Treasury Department of Puerto Rico Edificio Indendente Ramírez Piso 8 Paseo Covandonga San Juan, PR 00906 (787) 721-2020 www.hacienda.gobierno.pr Puerto Rico State Department Calle San José Viejo San Juan, PR (787) 722-2121 www.estado.gobierno.pr Department of Labor and Human Resources Edificio Prudencio Rivera Martínez 505 Ave. Muñoz Rivera Hato Rey, PR (787) 754-2119 www.dtrh.gobierno.pr Puerto Rico Fire Department Edificio Casa Lee 2432 Calle Loíza Esq. Doncella San Juan, PR (787) 725-3444 www.bomberos.gobierno.pr
  15. 15. Investor Information Guide to Puerto Rico Page 14Call 844-Source-4 Summary of Act 20, the Act to Promote the Export of Services Enacted in 2012 to attract foreign capital in effort to establish Puerto Rico as an international service center. Eligibility - Investment banking, marketing, public relations, advertising, economic, technological, human resources, information consulting, professional services, computer programmers, and more. Tax Exemptions  4% income tax rate  Up to 60% municipal license tax exemption  100% tax exemptions on dividends and profits from export services Tax Decree - The decree is a contract between the business and the government of Puerto Rico for up to 20 years.
  16. 16. Investor Information Guide to Puerto Rico Page 15Call 844-Source-4 Summary of Act 22, the individual Investors Act Enacted in 2012 to attract new residents to Puerto Rico by providing a income tax exemption. Eligibility - Must become a bona fide resident of Puerto Rico (non-US citizens welcome). Must live in Puerto Rico for 183 days a year. Tax Exemptions  Up to 100% tax exemption income tax to Puerto Rico on dividends  Up to 100% tax exemption on income taxes  Up to 100% tax exemption on capital gains Tax Decree - The decree is a contract between the individual/company and the government of Puerto Rico until December 31, 2035.
  17. 17. Investor Information Guide to Puerto Rico Page 16Call 844-Source-4 Direct Source Wealth Contact Direct Source Wealth today for your FREE strategy session with one of our Turn-Key Real Estate Consultants. Our phone number is 844-Source-4, or 844-768-7234. Website: DirectSourceWealth.com We are located in Puerto Rico and would like to welcome your visit with us in person. Call us today at 844-Source-4

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