How to calculate the actual, not “marketing”, profitability of purchasing and renting real estate in the Dominican Republic? Read and fill out the form.

The Dominican Republic is a tourist paradise, attracting a record number of visitors – over 11 million tourists in 2024, with forecasts for 2025 indicating as many as 12 million. Popular destinations such as Bavaro/Punta Cana, Cap Cana, Las Terrenas, and Bayahibe/La Romana attract investors seeking opportunities to profit from short-term rentals. On paper, everything looks splendid: developers promise 8 to even 15% return on investment annually, and the property can also be used as a personal holiday apartment. However, the true profitability is often lower, as taxes, commissions for platforms like Airbnb, cleaning costs, management fees, and vacancy periods must be taken into account.

Why do holiday rentals tempt investors?

• Good earnings during the high season – in winter (November–March), occupancy can reach 80–95%, and daily rates are high.
• Income in hard currency (USD) – most reservations are made in dollars or euros.
• Flexibility – you can use the apartment yourself when it is vacant.
• Potential increase in value – properties in tourist resorts are appreciating dynamically.

How NOT to fall for “paper” profitability?

Developers often present only projected profitability, which are calculations based on assumed rates and occupancy. In this article, I demonstrate how to methodically and realistically calculate the profitability of your investment in the Caribbean paradise that is undoubtedly the Dominican Republic. I invite you to read the content of this article… and then to fill out the Form, which will allow me to prepare an individual, personalized indicator analysis for you.

1. Market environment – simplified preliminary analysis:

• Property Tax (IPI): 1% on the value exceeding 10,190,833.00 Dominican pesos in 2025 (approx. 166–172 thousand USD – depending on the exchange rate).
• CONFOTUR (Law 158-01) can exempt an investor for up to 15 years from IPI, property transfer tax (3%), and in some cases also from income tax – which realistically improves ROI by 1–3 percentage points over a 10–15 year horizon.
• Withholding Tax: payments abroad for non-residents – 27% (18% for Canadian residents); rental payments to individuals in the country – 10%. Check how they affect your NOI and cash flow.
• Fideicomiso (Law 189-11) – a popular vehicle for structuring projects and protecting assets; worth considering for multi-unit/developer investments.

• 11 million visitors in 2024 and forecasts of 12–12.5 million in 2025 indicate a further expansion of the demand base, including strong growth in cruise traffic. This stabilizes occupancy and ADR rates in key tourist clusters.
• Tourism accounts for approximately 15% of GDP and over 10 billion USD in annual revenue, making the sector strategic and government-supported (e.g., through the CONFOTUR law).

Conclusion: demand is structural, not just seasonal – but your profitability will depend on taxes, operating costs, management, and actual occupancy rates.

2. How to calculate it (actual, not “marketing” profitability):

Key indicators:

• Expected rate of return (developer, “gross”)

→ ignores taxes, vacancies, commissions, and CAPEX, so treat this as an upper limit.

• NOI (Net Operating Income)

NOI = Gross Revenue – Operating Expenses (excluding debt and income tax)

• Cap rate

• IRR (Internal Rate of Return) – accounts for cash flows over time, taxes, financing costs, and exit strategies; it is the best tool for comparing projects with different risk profiles and horizons.

Costs you MUST include

1. Platform commissions (Airbnb/Booking/VRBO): usually 3–15%.
2. Management: 20–30% of gross revenue (or a lower fee + success fee with dynamic pricing).
3. Cleaning/maintenance: 20–60 USD per stay (or “guest pays” model).
4. Vacancies: 15–40% annually (depending on location, seasonality, and pricing).
5. Taxes and withholdings (see section 1).
6. Insurance, utilities, internet, CAPEX reserves (replacement of appliances, furniture every 4–6 years, etc.).
7. Financing (interest) – outside NOI, but affects cash-on-cash.
   (Optionally, CONFOTUR reliefs can zero out IPI and part of the income tax for up to 15 years).

3. New / significant legal and tax frameworks that change your ROI:

3.1. IPI – Impuesto al Patrimonio Inmobiliario (Property Tax)

• 1% on the value exceeding 10,190,833.00 Dominican pesos in 2025. (approx. 166–172 thousand USD). Below the threshold – no tax.
• Properties in projects certified by CONFOTUR: IPI exemption for up to 15 years.

3.2. Property Transfer Tax

• Standard 3% of the property value upon purchase.
• CONFOTUR: exemption from this tax.

3.3. Income Tax and Withholding Tax

• Payments to non-residents abroad: 27% WHT as final tax (18% for Canada). In the case of older projects (secondary market), so-called inflation adjustment (Law 11-92) significantly impacts the reduction of this tax.
• Rental payments to individuals in the country: 10% WHT.
• CONFOTUR projects may include income tax (PIT/CIT) exemptions for up to 15 years – analyze case by case (project status, DGII interpretation).

3.4. Fideicomiso (Law 189-11)

• Allows a project to be “packaged” into a trust – separation of assets, easier financing, greater transparency for institutional investors. Used by developers, among others, but also in private investor structures (asset protection, succession).

4. Conservative case study – how to calculate “hard” ROI:

I have adopted hypothetical assumptions; these are not market data – they serve solely as an illustration of the methodology:

• Purchase price: USD 250,000
• ADR (average daily rate): USD 150
• Occupancy: 65% (approx. 237 nights)
• Gross revenue: 237 × 150 = USD 35,550
• Platform commissions + PMS: 12%
• Management: 25%
• Cleaning: covered by guest (neutral for owner)
• Vacancies included in 65% occupancy
• IPI: none (property in a CONFOTUR project)
• WHT: non-resident investor – 27% of taxable income (simple example, without cost shields).

Step 1 – NOI (excluding income tax and debt)

• Operating costs (12% + 25%) = 37% × 35,550 = USD 13,154
• NOI = 35,550 – 13,154 = USD 22,396
• Cap rate = 22,396 / 250,000 = 8.96%

Step 2 – Tax (e.g., simplified WHT 27%)

• 27% × 22,396 = USD 6,047
• Cash flow after tax = USD 16,349
• Cash-on-cash (without debt) = 16,349 / 250,000 = 6.54%

Step 3 – IRR

• Add: closing costs, CAPEX over a 5–10 year horizon, sales scenario (e.g., 2–5% annual value appreciation), and consider tax savings from CONFOTUR. In most analyses, the IRR for holiday rentals in the Dominican Republic, after accounting for all items, ranges from 6–12% net (indicative range, dependent on tax structure, financing, and supply in the micro-location). Always calculate your own model – do not rely on “averages”.

5. Holiday rental vs. long-term rental – updated perspective on risk and profit:

*Indicative ranges based on market practice and typical cost structures; exact values require an individual model.

6. Checklist: how to minimize risk and legally “deliver” profitability:

1. Check if the project has CONFOTUR and what specific exemptions it covers (IPI, transfer tax, income tax, import duties on materials, etc.).
2. Calculate three scenarios (base, pessimistic, optimistic) with different occupancy, ADR, and management costs.
3. Determine the tax structure (resident/non-resident, company vs. individual, WHT 27%/10%).
4. Consider fideicomiso (Law 189-11) – for a larger portfolio or development project.
5. Diversify reservation sources (Airbnb, Booking, VRBO + own website with booking engine) – this reduces commissions and the risk of algorithm changes.
6. Implement dynamic pricing (Revenue Management) and operational automation (PMS, channel manager).
7. Build CAPEX reserves (min. 3–5% of revenue) – furniture and appliances wear out faster than in long-term rentals.
8. Monitor regulatory risk (e.g., local resolutions regarding STR, additional municipal taxes, changes in WHT rates or IPI threshold).

7. Conclusion: net cash flow, tax shields, and operational discipline matter:

The “marketing” 8–15% is only true when:

• the project has CONFOTUR reliefs,
• operations are professionally managed,
• and your model analysis includes real taxes, WHT, vacancies, and CAPEX.

Focus on NOI, IRR, and cash-on-cash after taxes – not on the brochure-advertised gross ROI presented in developer brochures.

8. How to increase your chances of profit?

1. Choose the best location – close to the beach, airport, and restaurants.
2. Hire a professional manager – although it costs 20–30% of revenue, a good manager can significantly increase occupancy.
3. Invest in appearance and equipment – a modern apartment with great photos sells better.
4. Diversify reservations – use several platforms (Airbnb, Booking, VRBO) and consider your own website.
5. Calculate several scenarios (base/bear/bull), – optimal, optimistic, and pessimistic, to know what profit you can realistically expect.

Do you need to calculate your model (considering your tax residency, ownership structure, and financing)?

Fill out the form, the link to which is below. It contains the most necessary information that will allow me to prepare specifically for you a scenario variant (base/bear/bull), a tax model with or without CONFOTUR, a fideicomiso/company/individual structure, and a pricing strategy for a specific location and guest segment.

Do not delay, make smart and well-thought-out decisions, protect your capital – fill out this form: https://forms.gle/mzhyghFD9g9imL4v9

Within 48 hours, you will receive a ready-made analysis in an Excel spreadsheet via email, which will certainly be key information for making property purchase decisions or for evaluating already made purchasing decisions.

Call or write to me:

Leszek Gimel

+1 829 499 97 98 (WhatsApp preferred)

leszek@casa-dominicana.com