Owning A Vacation Home In The Bahamas

Research shows that The Caribbean is again seeing an increase in travellers since the start of the Covid-19 pandemic. Studies show that international travellers from Canada, US and UK are feeling optimistic and safe about traveling as a result of multiple vaccine rollouts. This great news suggests that there is growth among the targets in the addressable market for vacation rentals.

If you’ve consider off-shore investment opportunities that yield 8-10% returns; purchasing a vacation that can be rented out to tourist – in a tourism driven economy – is one of the finest options.

If you’re a frequent traveler yourself and find most of your time spent on tropical getaways with family, it is probably the right time for you to also think about owning a vacation home. Having a second home in a tropical paradise to regularly visit can give you a sense of exclusivity and privacy instead of constantly staying at hotels or resorts.

Most vacation homes come with a price tag anywhere north of $500,000 but the many benefits of owning one often make it worth the splurge. In the Caribbean, you’ll find that prices vary depending on a number of different factors. The Bahamas is one of the top nations where shrewd buyers are scoping for second home options due to its exquisite property offerings and investor-friendly laws. Making sure this major financial decision is the next best step for you can be overwhelming to figure out.

This is an ultimate guide by BE Luxury Collection to expertly inform you on all that you need to know about owning a vacation home in the country considered paradise.

Why The Bahamas

Famous for its gorgeous sceneries, The Bahamas is a stunning gem. Before you lock down on a vacation home investment, it is absolutely important that you purchase a property in a place that is perfect to relax and unwind any day of the week. The Bahamas embodies just that. This island destination comprises of some of the most beautiful beaches in the world with clear turquoise waters and pristine sandy shores. Aside from possessing spectacular views in almost every direction, the country is also one mainly driven by tourism. Finding the demand for your vacation rental almost won’t be a challenge at all. The country is always inviting visitors and visitors are always in search of place to live. Booming websites like Airbnb and VRBO provide you with clever tools and resources to make the short-term renting process quite easy. Another positive thing is that even if the rental market was to experience a downward shift, essentially, this would be a great place for you to enjoy life with family and friends while occupying your home. In the archipelago, you’ll stumble across an array of renowned attractions and even splendid leisure activities like fishing, snorkeling, golfing, hiking and more. To add onto the irresistible reasons why The Bahamas should be your choice to invest in, it should be highlighted that property options are abundant. With over 15 unique family islands as well as hundreds of private islands and cays, you’ll certainly score a development that optimally fits your budget, needs and lifestyle. Lastly, Bahamian legislation is said to be pro-landlord. Landlords are allowed to freely negotiate rental amounts without government interference to determine values. For vacation homes rentals specifically, landlords are also able to charge fees like a reservation fee.

Best Vacation Home Communities

Once you’ve decided that The Bahamas is the way to go, it is crucial to evaluate potential areas to purchase your vacation home in. A general rule of thumb is to assess safe, peaceful and reputable Bahamian communities because this a long-term financial investment that you’d like to appreciate and see much success from. Some of the best vacation home communities include:

  1. Lyford Cay (New Providence)
  2. Albany (New Providence)
  3. Ocean Club Estates (Paradise Island)
  4. Old Fort Bay (New Providence)
  5. Palm Cay (New Providence)
  6. Delaporte Pointe (New Providence)
  7. Sandyport (New Providence)

Most, if not all of these neighborhoods share something in common. They are secure gated communities that feature well-designed ocean-front or canal-front vacation properties. In these areas, you won’t be investing in just a home itself. You and your guests can luxuriate in prime amenities like swimming pools, clubhouses, sport courts, fitness centers, golf courses, and even boating marinas. They are also located in ideal districts that would grant you swift access to lovely beaches, diverse fine dining restaurants, impressive shopping centers and prestigious schools.

There are also other islands apart from New Providence and Paradise Island that host stellar communities. If you’re looking to have a home in some place that’s even more serene and uninterrupted, the family islands should be your investment route. In the remarkable Exuma & Exuma Cays, you’ll discover sumptuous cottages, villas, and houses in quaint sites. In Grand Bahama, home of the second city, listings are situated in areas quite similar to those in Nassau to accommodate a sweet escape. The Abacos offer sophisticated large-acre properties in a number of amazing settlements while Eleuthera & Harbour Island hold modern bayside Caribbean-style developments.

Purchasing Costs

As mentioned earlier, purchasing a vacation home can come with a hefty price tag. Estimating and assessing all of the costs of owning one should be at the top of your to-do list. This is done to be sure that you can afford the investment. Vacation homes in The Bahamas are averagely priced around $2.5 million BSD. You may see a price within the range of $10 to $20 million BSD if you are looking to purchase a property that is extremely luxury and expansive. For smaller homes, cottages, and condos, it may cost you between $350,000 – $500,000 BSD. There are different price-points to match the pockets of different investors. Financing for vacation home properties can be achieved through lending institutions. Local banks in The Bahamas offer mortgages in BSD and USD to help borrowers purchase real estate. If you’re planning to borrow, financial planners advise that you receive a pre-approval from a bank before you start searching for properties. Of course, lending institutions will have their own charges and fees, so it is important to also take that into account. Other costs associated with obtaining a vacation home would be:

  • Appraisal Fees: It is a requirement that buyers pay for an appraisal to be done on all bank financed properties. Advisers also recommend getting an appraisal for all property purchases. The cost of an appraisal is averaged at $400 + VAT but increases based on property size.
  • Stamp Duty: There is a graduated government tax imposed on property conveyances called Stamp Duty. The tax rate is 5% for all property transactions valued at $100,000 or less and 10% on all property transactions valued at $100,000 or more. The purchaser is responsible for ½ of this tax.
  • VAT: Another tax called Value Added Tax (VAT) is charged at 12% on real estate services, including appraisals, legal work, commissions and insurance.
  • Legal Fees: As a buyer, you will also need legal representation by a Bahamian attorney. Therefore, attorney charges should also be added in.
  • Real Property Tax: This tax is another tax required by law. The first $250,000 on owner occupied residential property is tax exempt. Property owned by Bahamians in the Family Islands is exempt from this tax as well. If owner/occupied properties are valued between $250,000 and $500,000, the rate is 3/4 of one percent. For owner/occupied properties over $500,000 but not exceeding $5,000,000, the tax rate is 1% of the market value. Any owner/occupied property priced over $5,000,000 has a ½% tax rate of the market value. There is now a ceiling of $50,000 in tax on an owner-occupied home. For more info on real property tax, visit our buyer’s guide.

Property Management Costs

Owning a vacation home is one thing, but maintaining it and managing it is another. If you live outside of The Bahamas, you’ll most likely have to outsource a company or individual to manage your property. Aside from having that task, they also act as a liaison between you and your tenants. In essence, they can handle everything in your absence. As the homeowner, you should expect to encounter costs that cover the many services that property management agencies provide. Here are just some:Cleaning and preparing your home for guest arrivals

  • Cleaning and closing up your home securely after the departure of guests
  • Completing day-to-day errands
  • Hiring and managing temporary staff: chefs, baby sitters, tutors etc…
  • Setting up travel within the Bahamas for guests (road transpiration, charters, planes and boats).
  • Dealing with government entities
  • Organizing events
  • Supervising construction jobs
  • Forwarding your mail and payments
  • Handling property inspections
  • Hurricane preparation
  • Grounds maintenance
  • Utility and property tax payments
  • Advertising/Marketing
  • Monthly reporting

In the Bahamas, there are many companies to help with property management. Reach out to BE Luxury Collection to learn more about their luxury services. Equipped with a team of committed and experienced lifestyle managers, they cater to their clients in every aspect and strive to enhance their day-to-day lives while fulfilling their biggest dreams.

Return On Investment

Real Estate is a valuable and safe investment. They tend to appreciate faster than any other asset. Vacation homes set for short-term rentals yield an even stronger return. One of the key ways to measure the success of your property is to determine its ROI (Return on Investment). At the end of the day, you want to ensure that the revenue you are making from your vacation home can offset all of your costs. ROI paints that clear picture of potential returns after all expenses are paid out and lets you know how truly profitable your investment will be. To calculate ROI, you can use the formula: (Annual Rental Income – Expenses and Costs) / the Property Price. You can also compute the ratio between the property’s net income and its market value. Financial specialists say a good ROI for vacation rentals is 15% or more. It is no secret that gaining healthy profits from a vacation home rental is highly possible in today’s world. However, determining what your rate of returns would look like before jumping all into it is wisely recommended. It gives you a chance to compare properties before acquiring a specific one and it increases your potential for the success you’re hoping for.

Vacation homes in the Bahamas are appealing investments with experts at BE Luxury Real Estate advising their clients to invest in one if it matches their needs. They are mainly suitable for the frequent island vacationer who wants to continue creating cherished memories with family & friends. As we still in a pandemic, it is not far-fetched to think about how much better another possible lockdown would be in your own beachside home. It can also be a money maker for any investor looking for an opportunity to bring in sustainable profits. With more and more travelers beginning to explore the world again, it can also be turned into an income-generating stream when placed on rent. If you’re serious about purchasing a vacation home on a beautiful Bahamian island, contact a team member at BE Luxury today to help you find your trophy property.