Published on and written by Cyril Jarnias
Amid a tourism boom, aggressive tax incentives, and extreme climate vulnerability, the Puerto Rican second home market has become one of the most scrutinized in the real estate world. The island, an unincorporated territory of the United States, boasts a rare combination of assets: a tropical climate, use of the U.S. dollar, a legal system familiar to Americans, no passport required for U.S. citizens, and, crucially, a tax arsenal designed to attract capital and wealthy new residents.
Behind the postcard image, Puerto Rico’s real estate market presents challenges: prices are high, pressure from short-term tourist rentals is affecting residents, and hurricane risks as well as climate change impacts are essential factors to consider in any purchase decision.
A Market Driven by Economic Recovery and Tourism
Puerto Rico is emerging from a dark decade: a long recession between 2006 and 2017, a public debt crisis around $70 billion, a near-sovereign bankruptcy, followed by massive destruction from Hurricanes Irma and Maria in 2017. Yet, by 2025, economic signals have become surprisingly positive again.
By the end of 2024, over 100,000 people were employed in the leisure and hospitality sectors in Puerto Rico, a record.
Tourism, a pillar of the second home market, has exceeded its pre-crisis levels. In 2022, travel and tourism-related revenue reached $8.9 billion, 39% more than the previous record in 2019. In 2024, accommodation revenue reached $1.95 billion, with about 7.3 million hotel room nights. Short-term rental platforms (Airbnb, VRBO, etc.) have played a central role in this boom.
The number of short-term rental listings in Puerto Rico in 2023, compared to about 1,000 in 2014, illustrating a massive market transformation.
In this context, real estate began a spectacular recovery. After years of stagnation, prices have taken off:
| Key Indicator | Recent Value | Comment |
|---|---|---|
| Average Island Price | ≈ $150,000 | Average across all segments |
| Median Sale Price Q1 2025 | $290,000 | +32% year-over-year |
| Price Index (FHFA) Q4 2024 | 247.63 points | Historical Average: 165 |
| Increase Q4 2024 (inflation-adjusted) | +24.7% | Record since 1995 |
| Annual Change Q1 2025 | +11.6% | Following +22% in Q4 2024 |
Analysts estimate that, despite this surge, properties remain undervalued by 40 to 60% compared to other U.S. coastal markets like Miami, Dallas, or Orlando. This explains the appetite of domestic and foreign buyers for second homes.
A Tax Framework Tailored for Investors and Wealthy Residents
The main driver of high-end demand boils down to two words: Act 60. This tax incentive code, adopted in 2019, consolidated and extended prior provisions (notably Acts 20 and 22). It targets both export services businesses and individuals willing to become residents of Puerto Rico.
For Individuals: The Equivalent of a Tax Haven Under U.S. Jurisdiction
For “individual investors” who obtain an Act 60 decree and become “bona fide” residents of the island, the benefits are spectacular:
– 100% exemption from Puerto Rican tax on interest and dividends from local sources
– 100% exemption on capital gains generated after relocation (including on crypto assets)
– Preferential treatment of unrealized capital gains recognized before relocation: taxed at the federal rate if realized within ten years, then at a fixed 5% rate until January 1, 2036.
To benefit from this regime, one must: reside on the island for at least 183 days per year, move their tax home there, not have been a resident in the previous 10 years, and purchase a property locally within 2 years of approval. This property must become the primary residence for the entire duration of the benefit.
Additionally, there is a mandatory annual donation of at least $10,000 to Puerto Rican charities, with a portion dedicated to fighting childhood poverty. The individual decree is generally valid until December 31, 2035, although a bill passed in 2025 provides for a possible extension until 2055 and the introduction of a 4% levy on certain passive income for new entrants.
For Businesses: A 4% Tax Rate and Massive Exemptions
For businesses, especially in exported services (finance, consulting, IT, etc.), Act 60 largely follows the principles of the former Act 20. Companies that obtain a decree can benefit from:
Main tax benefits offered to support business activity.
Application of a fixed corporate income tax rate of 4% on eligible income.
Total tax exemption on dividends distributed to shareholders.
Up to 75% exemption on property tax for assets used in the company’s activity.
Up to 50% exemption on certain applicable municipal taxes and fees.
Decrees are typically granted for 15 years, renewable once for an equivalent period. This regime contributed to the creation of about 33,000 jobs between 2012 and 2017 and continues to attract high-net-worth profiles: hedge fund managers like John Paulson, crypto investors like Michael Terpin, influencers like Logan Paul, as well as a less publicized cohort of startup executives, consultants, and traders.
Direct Consequence: A Mandate to Purchase Real Estate
Because Act 60 mandates the purchase of a primary residence within two years, it acts as a demand pump for the residential market, especially in the upper segments. Many newcomers don’t settle for just one property: they also acquire a second home for personal use or to rent out as tourist accommodation. This trend particularly affects the island’s most “premium” areas.
The New Epicenters of Second Homes
Puerto Rico offers a mosaic of micro-markets, each with its own dynamics. For anyone considering buying a second home, the first question is often geographic: where to invest, and for what strategy (personal use, seasonal rental, long-term appreciation)?
Dorado, the Ultra-Luxury Showcase of the North Coast
About thirty minutes west of San Juan, Dorado has become the symbol of Puerto Rico for billionaires. Gated communities, an 18-hole golf course, five-star concierge service, and the presence of the Ritz‑Carlton Reserve make it the unofficial headquarters for part of the new tax elite.
The numbers are staggering: the median transaction price is around $1.3 million, and some villas trade above $20 or $30 million. A record sale of $37 million was recorded in 2022, followed by another at $20 million in 2024. In the most exclusive pockets, the price per square foot exceeds $4,500, above many comparable areas in Florida.
Flagship communities (Dorado Beach, Dorado Country Estates, Sabanera, Villa Dorado Estates) combine enhanced security, direct beach access, top-tier private schools, and sports facilities. For second homes, demand focuses on both large family homes and high-end condos that can be rented year-round or short-term.
Condado, Ocean Park, and the San Juan Waterfront
In the heart of the capital, Condado stands as the urban Saint‑Tropez. Lined by the beach, dotted with boutique hotels, restaurants, and luxury shops, Ashford Avenue serves as the showcase for the very high-end apartment market. The price per square foot there ranges between $3,000 and $4,000, with an entry point around $800,000 for a well-located property. A penthouse sold for $13.4 million in Condado in 2024 set a new high for the capital’s condos.
In Puerto Rico, Ocean Park, a residential neighborhood, attracts buyers seeking beach villas or small buildings to convert into seasonal rentals. Meanwhile, Old San Juan, a UNESCO World Heritage Site, is coveted for its colorful colonial architecture; renovated apartments there are particularly sought after by investors betting on high-value tourist rentals.
More broadly, the median transaction price in San Juan is around $234,000, but this figure masks wide disparities between popular neighborhoods and prime segments.
Palmas del Mar, the Vast Planned Resort on the East Coast
In Humacao, on the east coast, Palmas del Mar spans 2,750 acres and approximately 3,400 homes. It features a marina, golf courses, an equestrian center, private beaches, a trail network, and 24/7 security. Median prices for houses and villas range around $750,000 to $775,000.
The project targets an affluent North American and Puerto Rican family clientele, looking for a second home for vacations or gradual retirement. These properties have strong potential for seasonal rental, with gross returns typically between 6% and 9% for well-managed furnished rentals.
Rincón, Surf Capital and Short-Term Rental Laboratory
In the west, Rincón has established itself as the island’s “surf city.” A relaxed atmosphere, beaches, spectacular sunsets, and an international community of surfers and digital nomads: all the ingredients are there for a very dynamic second home market.
The median sales price is around $300,000, with an increase of about 7.5% year-over-year and an average time on market of 36 days. The property typology is varied: concrete houses on the waterfront, hillside villas, small beachfront condos, cottages with separate rental units.
Rincón is also a textbook case for short-term rentals. Gross returns for properties operated seasonally can reach 8% to 15%, depending on location, renovation quality, and management. This profitability potential attracts many investors who turn inns or small houses into Airbnb-style rental portfolios.
Satellite Islands: Vieques and Culebra, Scarcity and High Prices
To the east, off the coast, Vieques and Culebra represent another face of second homes: isolation, protected nature, limited infrastructure, but beaches ranked among the world’s most beautiful (Flamenco Beach in Culebra, bioluminescent bay in Vieques).
Supply is inherently very limited, which has the effect of inflating prices.
| Island Market | Median Sales Price | Particularities |
|---|---|---|
| Culebra | $565,000 | Very limited inventory, strong demand, iconic beaches |
| Vieques | $324,000 | Bioluminescent bay, access by ferry or plane, tight supply |
For a second-home buyer, these islands combine strong seasonal rental potential, but also logistical constraints (transportation, maintenance, supplies) and significant exposure to weather hazards and coastal erosion.
Other Emerging Hubs: Isabela, Aguadilla, Río Grande, Carolina
Along the northwest coast, Isabela and Aguadilla are gaining momentum. The former stands out for a more affordable entry point (median price around $170,000) and an environment conducive to surfing and hiking. The latter benefits from the presence of Rafael Hernández Airport (BQN) and an emerging aerospace hub, with an offering mixing subdivision homes, condos, and newer buildings.
Río Grande, east of San Juan, benefits from proximity to the El Yunque rainforest and luxury resorts like the St. Regis Bahía Beach. The median transaction price around $480,000 reflects a mix of small vacation apartments and high-end villas.
Carolina, the island’s third-largest city and home to Luis Muñoz Marín International Airport (SJU), has a median home price of about $460,900, with strong demand for oceanfront condos in Isla Verde.
The Explosion of Short-Term Rentals, Driver and Time Bomb
One of the most striking phenomena for the second home market is the rise of short-term rentals. This segment, initially marginal, has changed in scale and nature: from a supplementary activity for individuals, it has become a sector dominated by professional or semi-professional operators, sometimes managing dozens of properties.
Available figures for 2025 and 2026 show the scale of the movement:
| City (2025) | No. of STR Listings | Avg. Monthly Revenue | Avg. Nightly Rate | Occupancy Rate |
|---|---|---|---|---|
| San Juan | 3,913 | $3,213 | $223.95 | 54.0% |
| Carolina | 2,175 | $3,055 | $198.69 | 54.9% |
| Rincón | 1,134 | $3,049 | $262.94 | 42.9% |
| Río Grande | 617 | $4,334 | $370.53 | 45.3% |
| Dorado | 276 | $4,334 | $469.65 | 44.8% |
In parallel, yield rates appear robust. At the island level, average gross yields are around 5% to 7%. In the capital, apartments show an average gross yield of about 5.3%, with variations ranging from about 2.6% to 7.8%. In Isla Verde, a sought-after neighborhood in Carolina, average yields exceed 6%.
Annual gross yield that villas or condos in seasonal rental can reach in Puerto Rican tourist sub-markets like Condado, Dorado, Rincón, or Palmas del Mar.
But this success has a social cost. Work by the think tank Center for a New Economy shows that a 10% increase in the share of housing dedicated to short-term rentals in a neighborhood is associated, the following year, with:
– an increase of approximately 7% in median rent
– an increase of approximately 23% in median sales price per square meter
– an almost negligible increase in transaction volume (+0.1% only)
In other words, second homes converted to tourist use tend primarily to increase prices and reduce availability in the housing stock for permanent residents, without truly invigorating local sales activity.
Facilitated Access for Foreign Buyers, But Demanding Procedures
For a non-resident investor or individual interested in a second home in Puerto Rico, the legal framework is relatively welcoming. The island does not reserve real estate ownership for its nationals: foreigners, including non-Americans, have the same property rights as Puerto Rican citizens or U.S. residents.
The system, however, is based on civil law inspired by both the Spanish code and U.S. law, with a strong emphasis on land registry publicity. Any property transfer must be formalized by a public deed signed before a notary (who is necessarily a licensed attorney) and registered at the Registro de la Propiedad. Title deeds are searchable online via the Karibe platform, for a small fee.
The purchase process involves an offer (purchase agreement or option), payment of a 5% to 10% deposit, a due diligence phase, obtaining financing if necessary, then signing the final deed. Both spouses must be present at closing, unless a prenuptial agreement grants financial autonomy.
Transaction costs for the buyer – attorney and notary fees, stamps, registration, title insurance – typically represent 1% to 2% of the price. The seller generally bears agency commissions, around 4% to 6%. Total round-trip fees (purchase then resale) are around 5% to 8%.
Access to Credit Possible But Not Always Simple
Non-residents can apply for mortgage loans from local banks (Banco Popular, FirstBank, Oriental, etc.), mainland U.S. institutions, or international private banks. Classic options – conventional loans, FHA, VA, USDA, non-QM financing, securities-backed loans – exist, but requirements are stricter for foreigners.
Loan-to-value (LTV) ratios for non-residents generally range from 65% to 80%, requiring a down payment of 20% to 35%.
The credit market remains underdeveloped on a macroeconomic scale (about 9% to 10% of GDP), but residential loan volume is gradually increasing, while foreclosures dropped by (about 50% over the first three quarters of 2024). Many high-end buyers still prefer cash purchases, which explains why about 35% of transactions are conducted in cash.
Climate and Insurance Risks: A Now Central Parameter
Any serious analysis of the Puerto Rican second home market must integrate the island’s vulnerability to climate change. According to the NGO Germanwatch, the territory is the one most affected worldwide by extreme climate events in the recent period, with a climate risk index of 6.67.
Hurricanes Maria (2017) and Fiona (2022) reminded everyone of the brutality of these hazards. Maria, a Category 5 hurricane with winds reaching 175 mph, destroyed or severely damaged more than 300,000 to 400,000 homes, nearly one-third of the housing stock. An estimated 725,000 households – nearly 60% of occupied units – reported damage. Fiona, more modest, nevertheless caused flooding, bridge collapses, and massive power outages.
Climate data shows a clear progression of risks:
Puerto Rico’s climate is undergoing rapid and pronounced changes: an average temperature rise of about 2°C in a century, exacerbated by the urban heat island effect in San Juan. There is an increase in extreme heatwaves, days above 90°F (32.2°C), and very hot nights. Sea level rise is accelerating, from 1.7 mm/year on average since 1900 to about 3.2 mm/year since the 1990s, with projections of +0.5 to +1 m by 2100. Finally, an intensification of the most powerful hurricanes is expected, with stronger winds and heavier rainfall.
Concretely, for a second-home owner, this means:
In exposed coastal areas, homeowners insurance comes with higher premiums, particularly for wind and flood coverage. Deductibles for natural disasters are often a significant percentage of the insured value. Installing protections like hurricane shutters, reinforced roofs, drainage systems, generators, and water reserves is almost mandatory. Particular attention must be paid to location, as some coastal sectors, like in Rincón, are receding by about one meter per year due to erosion.
Local and federal authorities are investing heavily in resilience, whether in dune reinforcement, mangrove restoration, power grid modernization, or the deployment of solar panels and batteries, but the residual risk remains significant. The electrical infrastructure, entrusted to LUMA Energy, remains criticized for its frequent outages, even outside hurricane season.
For insurers, the rise of these risks is already translating into higher coverage costs, and potentially a gradual withdrawal from certain overly exposed coastal markets. Second-home owners thus have an interest in factoring into their calculations not only the current cost of the premium but also its probable long-term trajectory.
Social Tensions, Affordable Housing Shortage, and Gentrification
While second homes and tourist rentals have contributed to reviving the economy and public finances, they also exacerbate social divides. Puerto Rico has a poverty rate of about 40% to 50%, significantly higher than any U.S. state, with a median household income around $21,000, roughly one-third of the mainland average.
In this context, the rapid rise in real estate prices (+22% between 2018 and 2021, then another jump of 22% in the fourth quarter of 2024 and 11.6% year-over-year in early 2025) weighs heavily on local households. There is both a surplus of properties sold above their appraised value, often intended for tourist rentals or temporary residents, and a glaring deficit of affordable housing. Waiting lists for social housing programs and Section 8-type vouchers are lengthening.
After Hurricane Maria, studies showed that the impacts on the real estate market were not socially neutral. In some severely damaged neighborhoods, prices and rents increased due to investors buying up distressed properties to renovate and resell in more lucrative segments. Conversely, other areas became depopulated and saw an increase in vacant housing.
A detailed analysis of households affected by Maria also reveals that renters and low-income households are significantly more likely to suffer major damage or the destruction of their homes. The risk of “major or destroyed” damage for a renter is more than 17 times higher than for an owner, and the probability of total destruction is multiplied by 4 to 5. The poorest households are also more exposed, and the combined effect of “renter + low income” further aggravates this vulnerability.
Some elected officials have proposed increasing taxes on home sales over one million dollars, or raising taxes on tourist rental income. These surtaxes are unfair on the grounds that Airbnb owners already pay lodging taxes.
Christina Rivera, Real Estate Agent
Recommendations are emerging to better regulate short-term rentals: creation of a mandatory public registry of properties, tax treatment as businesses requiring licenses and inspections, increase in the lodging tax (currently around 7%, some suggesting raising it to 9‑11%) to fund affordable housing or community projects. Several bills have been introduced, but the framework remains relatively flexible.
A Market Both Attractive and Complex for the Second-Home Buyer
For a potential buyer, the signals from the Puerto Rican second-home market are therefore ambivalent. On one hand, the arguments are strong:
Discover the main assets that make Puerto Rico an attractive real estate destination, combining legal security, tax opportunities, and quality of life.
Secure property ownership under U.S. law, use of the dollar, no restrictions for U.S. citizens, and procedures well-known to mainland financial and legal institutions.
Despite recent increases, prices remain lower than in many U.S. coastal areas, with an island-wide median between $150,000 and $200,000.
Property taxes generally below 1% of value. Possibility to benefit from major incentives via Act 60 if domiciled, as the entire island is designated an Opportunity Zone.
Growing tourism, served by numerous airlines. Decent occupancy rates with gross yields between 5% and 8% for well-positioned properties.
Warm climate year-round, renowned beaches (Flamenco, Luquillo…), unique natural sites (El Yunque rainforest, bioluminescent bays), and rich cultural life in San Juan.
On the other hand, several factors demand caution and a long-term strategy:
The real estate market faces high climate and insurance risk, with rising costs and uncertainty about future coverage. Social and political tensions exist around tax incentives and short-term rentals, which could lead to regulatory adjustments. Infrastructure, notably electrical, remains fragile despite renovation programs. The market is in a transition phase, moving from speculative growth to a more qualitative logic, with increased investor selectivity.
Towards a More Selective and Resilient Second-Home Market?
Available projections suggest that the Puerto Rican real estate market, valued at about $346 billion in 2025, could reach nearly $390 billion by 2029, with an annual growth rate around 3%. The residential portion, already representing about $265 billion, will remain the core of this market, and second homes and tourist accommodations will occupy an important place within it.
This is the percentage increase in construction costs over four years, making it difficult to produce new housing below $800,000.
The market thus seems to be entering a phase of maturation, where simple real estate speculation is giving way to more integrated strategies: combining second-home purchase, personal use, reasoned rental, consideration of climate risk, and participation in local life. Several signals point in this direction: rise of sustainable tourism projects, dune and mangrove restoration supported by NGOs like Surfrider or Vida Marina, strengthening of building codes, massive deployment of solar energy, increased reflection on the link between tourist development and residents’ housing access.
For candidates for a second home in Puerto Rico, investment must now integrate a dimension of social and ecological responsibility, in addition to aesthetic and financial criteria. This territory, while offering opportunities, is fragile and demands increased vigilance from investors.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
