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As Puerto Rico investments heat up, investors should be cautious

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Puerto Rico is yet again landing on the radar of investors across the U.S. and world. This has been primed by the U.S. Congress allocating over $20 billion in funds, following 2017’s Hurricane Maria. In addition, according to the former president of the Puerto Rico Chamber of Commerce, Kenneth Rivera, the bankruptcy debt restructuring of Puerto Rico’s debt is set to end by the end of this year.

These facts, along with local tax incentives, a growing inventory of land, including luxury properties, and an idyllic climate have made Puerto Rico a hot topic at many brokerages.

Economic picture

According to the Department of Economic Development and Commerce, the Puerto Rico Incentives Code has been a wild success for the island. They claim that it has led to $2.5 billion in real estate investments and over 20,400 jobs.

Brokerage selling points

Because of the amount of cash flowing into the island, brokers may be framing investments as multiple emergency situations becoming opportunities, especially as many investors are flush with cash after this past year or so’s stock market bull-run.

Plus, for those willing to reside on the island for part of the year, there are multiple tax incentives written into the Puerto Rico Incentives Code that are designed to lure off-island investors. Brokers may claim that strategic investing in the island can allow them to make money off depreciated assets that are, currently, much cheaper.

Not for everyone

While these investments have become hot topics at brokerages across the U.S., investors should be wary of brokers pushing these investments, except for those investors that are able to invest in highly speculative, risky investments. Remember, the government is still going through its bankruptcy process and the infrastructure is severely dilapidated due to hurricanes and a lack of maintenance, not to mention increasing crime rates and economic collapse.

Broker misconduct

For those that have made investments into the island, and then lost their money, they may have a claim for broker misconduct. Depending on how the broker sold the investor on the investment, and the investor’s unique investor profile, these investments may not have been appropriate. As a result, the broker may have committed misconduct by steering clients to inappropriate, risky investments.