San Juan Condado/Miramar/Ocean Park

A discussion of the buy to rent model in San Juan (Condado/Miramar/Ocean Park) neighborhoods is presented below. To simplify the analysis, only a direct cash on cash, gross and net calculation is presented. For a more thorough financial model, please comment or e-mail a private message. The following is a 1 Br/1 Ba condominium with no utilities included for sale for 82,000 USD in the neighborhood of Condado, San Juan in the Parque Condado building. Approximately 700 square feet of space with living room, kitchen, 1 bedroom, 1 bathroom, and a balcony. The common area fee is approximately 85 USD.

The following is an apartment for rent in the same neighborhood with the same amenities. It is the best comparable of a current unit for rent similar to the above. The rent is $650 and does not include any utilities but does include a parking space.

Allow property taxes to cost 1.5% of purchase price (or assessed value) and insurance to be 1% of purchase price (or assessed value). Further, allow management fees to be 10% of gross income. We will not include leverage, appreciation, vacancy, or any other variable to simplify the analysis. In this case the model of rent to buy, on a pure cash basis, is as follows:

		Units
Purchase Price (USD)	82,000	USD
Monthly Rent	650	USD
Taxes	1230	USD
Insurance	820	USD
Management Fees	780	USD
Annual Gross Income	7800	USD
Annual Net Income	4970	USD
Annual Net Cash on Cash Return	6.0609756097561	%

The net cash on cash return is slightly more than 6%. This, of course, does not account for the tremendous appreciation potential. You speculate on appreciation so any increase in price is purely a bonus. However, in the case of Puerto Rico, the upside could be massive and the downside is less of a risk since price levels are already so low. How low can you go? Given you have a net return of 6%, the possibility to cover a mortgage and crank up the ROE (return on equity) is present if one can secure a mortgage of less than 6%. This is possible through a US bank given the FED announced it will likely not raise rates until the end of the year. If the math works, do it.