Buying in Roatan
Showings
The best thing you can do as a buyer is to do your homework with my guidance, before setting up your showings. Visit the island, know the areas you may be most interested in, watch the MLS activity, and know the market. Make a list of your personal "must-haves", then go on to prioritize your list of "wants". Then, to get the best results, create your own portal login on the Roatan Flex MLS. You can then search by location, price, type of house, amount of land, number of bedrooms, waterfront or ocean view, and narrow down that criteria. You can save your searches, notify me of properties that interest you, and have the latest listings emailed to you. Then, when we are ready to go look, we have an amazing list of homes that are your "top picks".
In Roatan, many properties are vacation properties, so showings can require a little more juggling, and plan to allow 24 hours or more before we can get in to see a listing. If a property is occupied by vacationers, we may need to work our showings around the property's rental schedule, and be a bit more forgiving of the presence of suitcases, beach towels, and other evidence of rental occupants. Unlike listings in North America, the property owner is commonly off-island, and the property has a caretaker, property manager or watchman keeping tabs on it. The listing agent will likely be present at the showing to assist in answering details about the property such as land boundaries, presence of a cistern, sewer, power sources, etc. Keys are generally not left in a key code box, but rather, held by the listing agent. Ask lots of questions. The listing agent knows the most about the home so use their knowledge while they are there.
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If you are interested in buying real estate in Roatan, I would love to help amke the process easy. Click below to ask questions and begin your journey to investing in paradise.
Internet Searches
Because many buyers of real estate in Roatan are moving here from other countries, most buyers search for their homes via the internet to preview what is available, narrow their search, and keep tabs on the market. Just like anywhere, we have our busy and slow seasons, fluctuations in inventory, changes in home price values, and other variables. The best place for you to start is by setting up a portal login on the FlexMLS, which is the largest, most reputable MLS on Roatan. It is maintained and managed by the Roatan Real Estate Association, whose members are known to hold themselves to the highest level of standards and have reviewed each listing for accuracy. You will have an opportunity to search all listed properties and easily compare them. Most of the listings have many photos, some have copies of surveys, Virtual Tours and Google Map features. This is the MLS that I personally subscribe to, and have the greatest confidence in. That being said, it is absolutely possible for me to assist and represent you in buying property you find on a different MLS or For Sale By Owner, but the largest, most dependable inventory of homes will definitely be found on this MLS. Just be warned: if you just randomly Google search "Homes for Sale in Roatan", you will likely get a lot of ads, paid lead generating sites, and old, expired listings. Save yourself a lot of headaches and use a reputable agent, brokerage and MLS search.
Flex MLS Link - Click Below
Who can buy property in Roatan
Obviously, Honduran citizens can buy property in Roatan. That is a given. But, because Roatan is a growing and wonderful place to invest, vacation, retire, and run a business, it is becoming a perfect place for foreigners to purchase property as well. Foreigners, as individuals, can own up to 3000 square meters (approximately .74 of an acre) of land per investor. In order to purchase more than .74 acres of land, a Honduran Corporation must be formed. A Honduran corporation is easily formed with the help of a qualified lawyer at a cost of about $2,000.00.
It may not be a bad idea to place your purchase into a corporation regardless of size anyway. It is slightly more expensive, but there are several advantages. Firstly, no one knows who the shareholders are of your corporation you put it under. Secondly, if the homeowners die and the property is in a corporation, then a letter can be left in the care of an Attorney transferring it directly to another party. If you don't have a corporation, you should have a Honduran Will indicating where your property should go, otherwise it will have to go through probate. Foreign wills are not recognized in Honduras. Essentially without a Honduran will or having the property in a Corporation, the property often goes to the first relative that stakes a claim on it.
When purchasing land in Honduras, it is imperative to have a good understanding of the documents associated with having a clear title. To protect this investment, a qualified Real Estate Broker, a Honduran Notary and a Honduran Lawyer should assist with reviewing the documents. Keller Williams Roatan has all of those people on staff, and can make your buying process very smooth.
Flex MLS Link - Click Below
What about buying land?
Honduran legislation allows foreigners to purchase up to 3,000 square meters (approximately 0.72 acres) of land within 40 kilometers of the country’s borders or coastlines. In other words, an individual foreigner can only own slightly less than three quarters of an acre on Roatan. Any area in excess of that is reserved to Honduran citizens or corporations formed entirely by Hondurans. There are legal options for purchasing land in excess of 3,000 square meters, so be sure to consult with your attorney. The law also states that if you buy an undeveloped piece of property, you must begin to build within three years of purchase or pay a fine equal to 20% of the purchase price for each year that you do not make any improvements to the property. This law has not been enforced in the past, but you should plan to keep the property maintained (chopped) and it is also good advice to fence the property immediately after purchase. Prior to closing, make sure the owner has all of the corner markers in place so the boundaries are very clear. If you want to purchase a larger property, you will have to form a Honduran corporation. When you form a corporation, you maintain control over the property by naming yourself administrator. There are currently no building restrictions on corporate properties. In either case, a qualified attorney must be retained to carry out the paperwork. Expect to pay approximately 5-6% of your purchase for closing costs plus other expenses such as corporation formation fees and mortgage expenses. There are different ways to form a Honduran corporation that will allow you to buy more than three quarters of an acre of property. Your legal counsel will provide you with the best advice. Many new land holding corporations are formed as a two-tier structure, or a piggyback corporation. The pair would have an investing corporation that owns the land and a holding company that holds the corporation
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Can you tell me a little more about forming a corporation?
In a two-tiered corporation structure, that means that the property is owned by an investment corporation (for example, Jim & Carrie Investment Company). In Honduras, each corporation must have at least two shareholders. So one share is issued in the name of a Honduran (he/she signs the back and surrenders it when it is issued to become a bearer share) and 249 shares are owned by a holding corporation (for example, Jim & Carrie Investment Company). With that structure, the actual company holding the property will be formed entirely by “Hondurans.” One will be an actual Honduran citizen and the other will be a Honduran corporation. The Holding company has two shareholders as well, which can be non-Hondurans. These shares are often split equally between two partners, with each having 125 shares. The companies each have at least one administrator who can be a non-Honduran. If there is more than one administrator, then you have the choice of structuring it so they have to sign together to make any changes or to move any assets in or out, or it can be structured so that they can sign independently, without the other having to be present. The above structure gives the buyer the most control and is completely in compliance with the Honduran laws and constitutions. This is an example of what a two-corporation structure looks like: ABC HOLDING COMPANY, S.A. John Doe (U.S. citizen) = 50% Jane Doe (Australian citizen) = 50% ABC INVESTMENT COMPANY, S.A. ABC Holding Company, S.A (considered a Honduran citizen) = 99.60% (249.5/250) Juan Perez (Honduran citizen) = 0.40% All legal entities (citizens, corporations, etc.) must possess an RTN Number (Registro Tributario Nacional or Tax Filing Number) to carry out any kind of business or legal Roatan Life Real Estate 41 transaction in Honduras, including the purchase of property. Therefore, if you’ve formed Investment and Holding companies to buy land, all the individual members of all the corporations formed must have their own individual RTN. Additionally, each company as a legal entity must also possess one. Your lawyer should include acquisition of RTN numbers when you form a company. Simply having an RTN does not permit you to work in Honduras, but it is a requirement for forming a corporation. Permission to work is an entirely different matter.
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Money, Money, Money
Paying for property, as a foreigner in Roatan is way different than in North America. Honduran banks do not generally provide loans to foreign investors, and North American banks do not want to finance property outside of North America. This is why if you choose to purchase in Roatan, cash is king. Sellers, for the most part, want it all at the time of closing. Occasionally, but rarely, you will find a seller willing to finance you for full-price offers with 50% down and a 1-3 year land contract at 5 to 10% interest. Generally it is best not to do this unless you are absolutely sure that the money will be paid long before the time period is up. It is easy for the seller to get the property back if you don't pay on time and everything you paid for will be lost. You are not entitled to get anything back. Most buyers take out a personal loan, home equity loan, or sell their home/investments and use their equity for their Roatan purchase.
When you make an offer on a home, and it is accepted, your earnest money is generally 10% of the purchase price and is paid immediately upon acceptance of your offer. It is held in an escrow account until closing. It should be understood that that money is non-refundable with very few exceptions, and it goes toward your final purchase price. You are now within an official contract and we move to get documents ready in order to be set to close. Closings typically occur 30-90 days after an offer is accepted, and the buyer should indicate that desired date within their offer to purchase.
You as the buyer get to choose your own Honduran closing attorney.
For the closing, you will be charged fees for: Conveyance of Title, registry at the Roatan Municipality, Registry fees at the Property Institute, the Municipal Catastral Certificate Inspection, Transfer Tax of 1.5%, Bar Association Stamps (1.5 lempira per 1000 lempiras), and the establishment of a personal and corporation RTN, if needed. The buyers' part generally adds up to about 6 to 6.5% of the total price. (The seller pays all commission on the sale of the property). Every final real estate transfer must be witnessed by a Honduran notary to make it legal. Your final monies need to be sent to the Brokerage a week prior to close.
Prior to the day of closing, all utilities, HOA fees, property taxes and other fees the seller might owe are prorated and paid by the seller at closing, so you enter to the property ownership with a clean slate. You are then responsible to get the utilities and HOA set up in your name from that point on.
The actual closing is usually very fast. All parties or their representatives need to be present. If you can't be present you have to give legal right for someone to sign on your behalf through an International Power of Attorney in order for you to have someone else sign for you.The application time to get a POA is around 6 weeks, so you MUST be aware of that and make your plans well in advance for closing. At the closing, the notary reads through the contract so that everyone understands what they are signing. You will receive contracts in Spanish and in English, so there is no confusion. You will be asked to ink your thumbprint and follow with a signature, and then the keys are yours!
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What about property taxes?
Property taxes in Honduras are very low compared to many countries. A rule of thumb for calculating property taxes is estimating about $4 in taxes per year for every $1,000 of property value. Occasionally, assessments have levied on both corporate and individually owned properties, in order to pay for improvements at the municipal. These assessments have been less than $100 per year. There is some discussion of placing a $300 per year tax on all corporations, which would include land-holding corporations. Property taxes are paid annually in August at the municipal offices in Oakridge or in Coxen Hole. If you pay in January through March of each year, you receive a 10% discount on your total owed. Taxes are levied based upon the deeded value cost or catastral value, whichever is greater. The catastral value is what the municipal declares the property to be worth. The municipal can adjust this value in years ending in zero or five, although occasionally the government opts to make a change in other years and back-date it to the appropriate year ending in zero or five.
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What about capital gains taxes when I do sell?
Capital Gain Taxes should be considered when you buy property in Roatan that you eventually plan to sell. Under ZOLITUR (the Free Trade Law), Capital Gains Tax in the Bay Islands was reduced from 10% to 4% of net profit. This is in effect whether you are selling the property under a personal name, from a corporate name, or if you are transferring an entire corporation and all its assets. The tax is calculated on the amount of provable net profit you receive as a seller. For example, you can subtract the initial amount as stated in the title and closing documents, the initial closing costs, any permanent improvements like roads or structures built on the property, property taxes, and commissions on the sale. To establish the cost of the improvements is to pay ZOLITUR to have the improvements evaluated by their official appraiser. Due to the wide range of construction quality on Roatan, appraisals may come out above or below the actual cost of the improvements. It is a good practice to provide the appraiser with construction plans and a detailed description of the improvements prior to the appraisal. Receipts and building contracts serve as valid documents for the assessment.
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What about estate planning for this property?
You should carefully consider estate planning for your new investment. In all likelihood, your future heirs live in another country, and may have little or no experience with business in Honduras. Speak to your Roatan attorney about your individual situation and how to best handle estate planning. If your title is in your own name, you will need to create a Will naming your heirs. In the event of death, the Will can be presented to local judicial authorities to authorize the transfer of assets. If no Honduran Will is available, local laws governing inheritance will assign your property to your closest relatives. In most cases, your children being the closest relatives in Honduras. However, your spouse is entitled to 25% of your assets. Although your spouse does not automatically inherit 25% of assets if there is no right of survivorship, a spouse with no other means of income may claim a 25% spousal aid (cuarta conyugal) but will have to do so by means of the civil court. United States Wills and rulings are valid in Honduras after the proper legalization process has been completed. In some cases, a ruling from a foreign Probate Court can be submitted locally in Honduras to prove inheritance rights. If a corporation holds your property, a transfer of bearer title stock certificates can be arranged, or even incorporated into a Will or other authenticated document. Commercial law, which governs the transfer of corporate stock, is considered private and does not require government intervention, allowing the parties to designate their own conditions and stipulations. The end result of this is: if your property is held in a corporation, transfer of assets at the time of death can be more convenient, but less rigidly enforced. Whichever situation you might be in, it is important to get as much information as possible prepared for your heirs, to ease their potentially sudden introduction to Honduran investment. Keep copies of title documents, and prepare written statements of your foreign assets, along with contact information for your local real estate professional or attorney.
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