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The idea of investing in real estate or buying a second home in Aruba is tempting. As one of the most popular vacation destinations in the southern Caribbean with a lot of exciting activities and awesome places to visit, Aruba has a diversity of property market offering everything from sprawling luxury residences to affordable beachfront condos. However, investing in real estate is not always easy as most people think – since it is not just about you invest in your property. You need to consider your options as well as the benefits and drawbacks to make a wise decision.
If you’re considering investing in real estate in Aruba, but you’re wondering “what are the advantages and disadvantages of buying a second home in Aruba,” then you’ve come to the right place. In this post, we at Ben Real Estate are going to show you the pros and cons of buying a second home in Aruba to help you make the right and a well-informed decision.
- According to the GlobalPropertyGuide, Aruba has the third-lowest price per square footage in the Caribbean. That makes its real estate and investing in a second home in Aruba more affordable than investing in other Caribbean islands.
- Aruba’s strict local mortgage rules prevent any kind of problem even from the very beginning of the home buying process.
- Foreigners can own a property or a second home in Aruba.
- Aruba has low property taxes with garbage pickup included in it. You can also take advantage of the tax breaks for homeowners.
- It is your home so you can go in anytime you want, host your guests and cook any food that you like, anytime you want. If you’re a vacationist, this is even more beneficial as you can visit Aruba with your friends and family anytime you want without the need for any reservation or additional lodging charges.
- You can decorate the home anyhow you want and carry only small luggage when traveling down to Aruba since all you need is already in your home.
- Aruba has a large tourism sector with numerous unique, rugged landscape and beautiful beaches to explore. That means you have a high-income generating potential when you use your home as an investment by reselling it or renting it out. You may even use the proceed of your investment (especially rent) to cover your mortgage.
- You have the freedom to choose your desired home location. That means you can buy a second home near your favorite vacation spot and explore Aruba to your heart’s desire since.
- The value of properties rises on a controlled, steady pace. That makes unrealistic gains and short term virtually impossible.
- You would have to pay for your home maintenance. You have to spend time and set aside funds for routine and unexpected home maintenance expenses to keep your home in good condition.
- Your home is not a liquid asset. If you need to sell it due to job relocation or other reasons, selling your home for as much money as you like or as quickly as you want might not be possible.
- There is no guarantee that your home will not lose its value over time.
- It requires cash investment, which means that you have to use your savings for closing costs, down payments, and other homeownership expenses.
- Finding the most reliable real estate agency in Aruba can be a challenge since Aruba has a seemingly uncontrolled growth of real estate agencies.
- The yearly property tax is usually based on the selling price. However, it is determined by the tax office. This is revised every 5 years.
- Property tax for individuals is 0.4% and for company owned properties the tax is 0.6%
- Closing Cost:When buying a home, the following cost will be incurred by the Buyer.
- These closing costs are approximately 6 to 8 percent of the selling price.
- The closing costs are calculated as follows:
- Transfer tax, (one-time tax), six (6) percent of the purchase price of the property
- Notary fees transfer deed: two percent of the selling price approximately.
- Notary fees mortgage deed (if applicable): one percent of the selling price approximately.
Above are the benefits and disadvantages of owning a second home in Aruba. While owning a second home on the beautiful happy island can be a wise choice, finding an extremely reliable real estate agency in Aruba to help you find your dream home and advise you all step of the way can be a daunting task. That’s why we are here to help.
Ready to buy or invest in Aruba? Contact us now, and we will make your dreams come true!
FAQs
Cons
- Additional expense. There may be additional expenses involved in getting from one property to the other. ...
- Lack of Variety for vacations. If you like variety in your travel, owning a second home can limit your travel opportunities. ...
- Limits on VRBO: Some popular vacation areas limit vacation rentals by owner.
Purchasing a property in Aruba
| As buyer you can expect the following additional cost: |
|---|
| Closing cost: | 3% over the value below Afl 250.000 6% over the value above Afl 250.000 |
| Notary fees for transfer deed: | approximately 1% of purchasing price |
| Notary fees for Mortgage deed if applicable: | approximately 1% of purchasing price |
1 more rowIt is considered one of the best places to invest in the Caribbean. Aruba enjoys one of the highest living standards in the Caribbean (USD 26,000.00 per capita), with minimum levels of poverty and unemployment, thus a very low crime rate.
What is the difference between a second home and an investment property? ›
A second home is a property you buy to use primarily as a vacation space for part of the year. An investment property is a home you buy when you want to earn rental income, and not use the property yourself.
Is a 2nd home a good investment? ›
A second home can also act as a buy-and-hold investment — real estate does tend to appreciate in value over time — and be a valuable asset to pass on to heirs. Financial benefits aside, a second home can offer a place to have quality time with your family and ensures that you always have a vacation destination.
Can a second home be a tax write off? ›
Mortgage interest paid on a second residence used personally is deductible as long as the mortgage satisfies the same requirements for deductible interest as on a primary residence.
How much are property taxes in Aruba? ›
Land taxes in Aruba are relatively low, and are usually based on the value of the property (house and land combined). The first US$33,707 is tax free, and after that the tax is 0.4% or $4 per $1000 of value.
Can a US citizen get a mortgage in Aruba? ›
Can Non-Residents buy property in Aruba? Yes, foreigners can buy property in Aruba and the Government of Aruba welcomes investment from overseas buyers. There are no restrictions on foreign buyers acquiring real estate in Aruba and the buying process for foreign buyers is the same as Aruban citizens.
What is the transfer tax in Aruba? ›
A transfer tax (overdrachtsbelasting) of 3% is levied on the transfer of real estate with the value of Afl. 250.000 or less, and 6% on the transfer of real estate with the value of more than Afl. 250.000. Furthermore there is a Real Estate Property tax (grondbelasting).
Where is the best place to retire in Aruba? ›
Oranjestad. Combining colorful buildings and turquoise waters with many attractions and family-friendly things to do, Oranjestad is a great place to retire. The capital city of Aruba is especially perfect for retired individuals who want to take their families with them.
Market Overview
(In mid-2019, the median price for a house in Aruba was about 580,000 Aruban florins, or about $321,000, according to the Central Bank van Aruba.)
How long can you stay in Aruba if you own property? ›
EXTENSION OF STAY UPON ENTRY
They have property in Aruba, i.e. a house, condominium, apartment, time-share, apartment or a pleasure yacht moored in Aruba with a length of at least 14 meters measured from the water line. They must show proof of ownership of the property for a stay of up to 180 days.
Are mortgage rates on second homes higher? ›
Mortgage rates are somewhat higher on second home mortgages — by as much as 0.5 percent, 0.75 percent or 1 percent more. This is in part to compensate for the risk of a second home, which you're much more likely to walk away from if you weren't able to make payments compared to your primary residence.
What are the pros and cons of a second home mortgage? ›
Second mortgages are often used for items such as home improvement or debt consolidation. Advantages of second mortgages include higher loan amounts, lower interest rates, and potential tax benefits. Disadvantages of second mortgages include the risk of foreclosure, loan costs, and interest costs.
How many houses can one person own? ›
Conventional mortgage guidelines suggest lenders can approve a mortgage if you own up to 10 financed properties. That total count includes your primary residence and homes with owner financing or hard money business loans.
How many rental properties is too many? ›
Don't get in over your head. Some real estate investors enjoy great success with one or two rental properties, while others own dozens. There's really no preset number of properties you should limit yourself to. Rather, you should think about your capacity to manage those properties.
What is the disadvantage of a two story house? ›
Drawbacks of a two-story house:
The stairwell takes up square footage that can't be used for much else, and you may have to drag things like laundry or the vacuum cleaner up and down the stairs.
