In late June this year, we closed on a house in Puerto Rico in the lovely community of Palmas Del Mar in Humacao. We intended to have a place in a warmer climate where we could get away for a few weeks a year while producing positive cash flow from rental income for the rest of the year.

We had been considering buying a short-term rental property primarily for investment income. But we also only wanted to buy somewhere we would want to vacation. And although we had been thinking about the broad topic for a solid year, pulling the trigger on buying in Puerto Rico was sudden.

Our family visited Puerto Rico for spring break in March of this year for the first time. When we landed, I told a friend on the phone, “maybe we will look at some properties while we are down here.” A week later, I was making a verbal offer by phone from the airport on the way home. Buying a property certainly wasn’t on the agenda for the trip.

So, why did we choose Puerto Rico over other places for buying an investment property?

We may have arrived at a different “best place to buy” if it wasn’t also a priority for us to visit there ourselves at least a few times a year. Given that constraint, we only wanted to entertain places that were either less than a 3-hour drive or that we could get to with a direct flight from Minneapolis.

The most exciting place to us in driving distance is the Minnesota north shore, near Lake Superior. While it doesn’t do anything to help us get to a warmer climate a few times a year, fall is pretty fantastic up there. Kate and I love to see the leaves turning colors and listen to the waves crashing. However, there are currently too many short-term rental restrictions in cities like Duluth and Two Harbors and surrounding counties. We wanted a vacation property that could drive income, not just serve as a nice vacation spot.

Driving locations presumably off the list, for now, we were down to where can we get on a direct flight. I’ve spent excessive time studying Delta direct flights from Minneapolis on FlightConnections.

Minnesota winters are bitterly cold, so if we are going to do this, we better choose somewhere with consistently warmer weather. And I had already crossed most warmer climate states off my mental list of places to buy in. California is too expensive. Hawaii is too far. Arizona has no shoreline. Florida is too, umm, Florida.

With direct flight and warm weather in mind and many states off the list, the options are narrowed down to places like Mexico, Costa Rica, Belize, Jamaica, the Dominican Republic, and Puerto Rico.

Amid COVID, we had a couple Caribbean and Central America trips canceled. One was canceled out of an abundance of caution, and the other was canceled due to travel restrictions.

Concerned about a repeat, we chose Puerto Rico for our 2022 spring break partly because it’s a U.S. territory. We were confident that there wouldn’t be any travel restrictions preventing us from traveling to or especially from Puerto Rico. I like that U.S. federal laws apply in Puerto Rico, and no passports are needed to travel there.

While there is some comfort in Puerto Rico being part of the U.S., it wasn’t just about that. I like that it has a distinctly unique culture that pushes my family and me to expand our horizons when we’re there. While many who live on the island are bilingual, Spanish is the dominant language.

Since buying, I’ve tried a couple times to order from a restaurant in Spanish. I keep failing when I get asked nearly any follow-up question, but I will keep trying and pushing myself to learn. My son and I are both challenging each other on Duolingo to learn Spanish. I also may soon get the opportunity to learn Spanish at work.

Of course, culture expands far beyond just what language is primarily spoken. I consider each trip a learning opportunity. My family and I still have a lot to learn.

Five months post-closing, I ask myself at least a few times a month, “what did I get myself into?” We are too early in this journey to determine if this was a fantastic or a poor decision – especially financially. We probably overpaid for the house. I underestimated how different managing and acquiring real estate in the rest of the U.S. was compared to Puerto Rico. I didn’t anticipate several significant expenses we’d have in getting the property ready for rent. And I don’t have the data yet to know if our cap rate will be closer to the 10-12% I initially projected or if I was way off.

But we spent a week as a family there in October when things started to get colder in Minnesota, and we had a blast. I have under 5 years with my oldest before he is out and off on his own. I knew I might lose money on this endeavor, but I considered it a justifiable risk. I’ve got time to make more money. I can’t make more time for more great memories with my kids.

In the coming months, I’ll periodically write on some follow-up topics of learnings on this journey. Feel free to message me if there are topics about Puerto Rico or short-term rentals that you want to know more about!

Special thanks to my friends who helped me think through the pros and cons before buying. One of the biggest takeaways from those conversations was that no decision is permanent – even if it feels big. And there’s no better way to learn than by doing.

Photo by Ana Toledo on Unsplash

Aaron Kardell's Blog

My Puerto Rican Short-Term Rental Adventure