Puerto Rico's deepening economic troubles have punished investors and made life hard for many locals. But one group has been encouraged by the opportunities it sees: real-estate investors.

A rising number of private-equity firms and property managers have been buying or developing high-end hotels and luxury residences. There have been about $1 billion in upscale-property deals on the island over the past couple of years, local investors say, even as the island's economy has fallen into a tailspin and analysts raise the specter of default.

Some see their investments as longer-term bets on Puerto Rico's eventual turnaround, and on tourists' willingness to overlook the island's credit concerns. Others are betting that changes to Puerto Rico's tax code, which eliminates most taxes on investments, will lure thousands of wealthy U.S. citizens to buy homes on the island and establish residence.

"No one ever checks the balance sheet of the place where they are going on vacation," says Mark Lipschutz, chief executive of CPG Real Estate LLC, one of the biggest property owners in Puerto Rico. At the end of 2012, CPG opened the ultraluxe Ritz Carlton Reserve in Dorado, on the north coast just west of the capital San Juan, and it expects to break ground by year-end on Dorado's beachfront with a 350-room J.W. Marriott, plus 40 timeshare units.

The hotel business on the island is booming, with valuations nearly back to levels last seen before the global recession, investors say. About 4.2 million people visited Puerto Rico for the fiscal year ending in June 2013. That is nearly 1 million below the 2008 peak, but the numbers have been rising.