Real Estate Sales Financing a Place in Argentina

[DipOtomano]

Greetings And Happy New Year,

I have a question about financing a property in Buenos Aires, as I’ve gotten mixed information from various sources. I am looking to invest in a place (half year for my personal use, the other half AirBNB or use of other family members), and while I could buy a decent place in cash, I would be able to get a larger place in a more desirable building if the possibility of financing (even on a short term basis, actually this would be ideal) it were available to me.

One real estate office told me that it is possible for a foreigner to obtain financing if the down payment made is large and that the financing is done directly through the builder and real estate office.(?)

I’ve also seen a gazilion ads that say something along the likes of 30 porciento de adelanto + paga en 30 cuotas, leading me to believe that this means 30 percent of the asking price in cash and that they would do a short-term ‘mortgage’ of 30 payments (?)

Is this correct and if so, does it work kind of like the car payments work here where they don’t actually give you the property until you’ve fully paid all of the quotas in full?

Thank you in advance.

 

[DipOtomano]

Surely someone must have some info...?

 

[RichardOne]

Call on the Phone RE/MAX in Palermo and find out what properties they have listed where the Seller can offer financing , see if you Qualify, and find out the type of lien on the purchased Property? They sure have all the answers..! Good luck

http://www.remax.com.ar/propiedades-en-palermo/Default.aspx?Lang=en-US

 

[Mart]

Real Estate deals generally are quite complex here so your best bet is talking directly to the property. The norm is still in cash but there are always creative ways to structure.

 

[SometimesX]

You can buy an apt that is being built with 30 percent down and the rest in even payments until the project is finished . Usually it’s between 24-36 months from the start. When the building is finished it must be paid off.

 

[Frisel]

You can buy an apt that is being built with 30 percent down and the rest in even payments until the project is finished . Usually it’s between 24-36 months from the start. When the building is finished it must be paid off.

How do you qualify for the mortgage? Can it be done on US income?

 

[NigjeFs]

How do you qualify for the mortgage? Can it be done on US income?

No

 

[Frisel]

No

I need to be all cash?

 

[NigjeFs]

I need to be all cash?

Sometimes you can pay 50% and then some payments. This is a private deal usually.

 

[Frisel]

Sometimes you can pay 50% and then some payments. This is a private deal usually.

How do Argentinians afford homes if the average income is $1000-$1500 a month?

 

[earlyretirement]

NO, mortgages there for non-resident foreigners are non-existent. Even a private deal is VERY rare that a Porteño allow you to finance. Since the judicial system there is NON-FUNCTIONAL and the tenant laws are very difficult to get someone out once they are living in a property, 100% cash transactions are the norm.

I'm not sure where you're getting this information that non-residents can leverage with loans down there but whoever told you that doesn't understand the system down there. What someone else mentioned about putting down a down payment and making payments and then a balloon payment when it's done is only applicable to new construction properties. Even then it's not leveraging (borrowing funds). You're just spreading out payments of your own funds until the property is finished. And keep in mind on new constructions they ALWAYS are late. Typically at least a year past when they say it's going to be done. Sometimes longer.

On some high-rise properties that I purchased in Buenos Aires it was as late as almost 2 years after they originally said it would be done.

The only ways that I've seen foreigners "leverage" and buy down there is taking out loans in the USA or their home country via cash out refinance of a property they already own in the USA that they have equity in. Home equity line of credit. Or transferring retirement funds into a self-directed IRA and then setting up an LLC to purchase properties down there.

Honestly, if you can't afford to buy a property outright in Argentina, I don't believe leveraging is a good idea. Nothing is really easy in Argentina. Not efficient, tons of red tape, no working judicial system.

On a self-directed IRA, you're not really leveraging your money. You're just using existing retirement funds to purchase. However, I'd argue that there are a LOT better real estate investments out there in other countries. However, some people really just love Buenos Aires and want to spend a considerable amount of time there, have family there or other reasons. But as an investment property it's not a great investment.

If you think you can easily Airbnb it and make a lot of money you're wrong. Previously yes it was easy but the market is flooded with tons and tons of properties. Property managers are mostly horrible and many out right con artists. Utilities can be a pain to deal with (cable, internet, gas, etc). Unless you have a larger, special or unique property with little competition the rental yields aren't great.

How do Argentinians afford homes if the average income is $1000-$1500 a month?

The 'typical' Argentine isn't buying real estate at these prices. You have to remember that although Buenos Aires metropolitan area has about 13.5 million people, there are only about 3 million people in the Capital (Recoleta, Palermo, Barrio Norte, Belgrano, Puerto Madero, San Telmo, etc). The vast majority of people out of the 13.5 million are poor or very low income. Take the 3 million people. Say 10% of those people are wealthy. That's 300,000 people with vast amounts of money. Some of it generational wealth.

I personally know many many friends that don't really work. Their families have vast amounts of money and they have never really held a real job. Their families own vast real estate portfolios so they, their siblings, their family all live in properties that were inherited or purchased for them. The one thing that all wealthy locals have in common is they almost ALL own several properties and most of those in Buenos Aires.

The wealthy outside of Buenos Aires in other parts of Argentina still come back and mostly invest in the Capital instead of investing in their backyard. Add in the fact that the banking system is broken, they can't trust the government and most people just stick their cash into real estate. You have to remember that previously many Argentines hid their funds offshore outside of Argentina but many governments and banks these days share information with many countries so the concept of hidden "off shore" banks these days don't really exist to the extend they used to.

So many wealthy locals would rather just invest in real estate in Buenos Aires vs. putting it under their mattress. Add in some foreigners (not as much buying from them as before but it still is a good amount of sales each year).

You can't think that the typical Argentine is buying at these prices. It's not the typical Argentine.

I would agree with others that real estate is expensive in Buenos Aires. But then again I'd argue that it's expensive in many parts of the USA right now as well. And the biggest difference is in the USA it's mostly all leveraged money. You have this horrible situation where banks are back to giving almost no money down loans. I heard about some places that are only requiring 1% down and allowing FHA loans. In Argentina at least it's almost all 100% cash and no debt. Sure, they started giving out loans in the last few years but it was still with huge down payments and it's a very small percentage of the overall owners that bought with 100% cash.

I'm not saying that justifies the prices because I don't believe it does. But at least that part of the market is true as people are buying with cash not leveraged debt.

 

[Frisel]

Why do foreigners bother buying homes to begin with over renting? The second home I rent for my wife when we are in Argentina is 12,500 pesos a month. It seems like a equivalent home to buy would be at least $350K US.

 

[earlyretirement]

Why do foreigners bother buying homes to begin with over renting? The second home I rent for my wife when we are in Argentina is 12,500 pesos a month. It seems like a equivalent home to buy would be at least $350K US.

Well foreigners are NOT a large % of the buying now. They were many years ago after the crash but not these days. As mentioned, it's mostly wealthy locals doing the buying. I sold several properties in the past year or so and it was all locals buying not foreigners. The cheapest of the properties was $230,000 US dollars. At least in my experience, all of the people that purchased my properties brought back their funds from overseas with Macri's amnesty program. I believe they paid a 10% penalty and had to put it into real estate.

As mentioned, there are better investments out there. Although not a great investment, you still typically can buy a property in a nice area and still get at least 4% ROI which many locals are happy with just to have the stability.

For example, I own some properties that I paid much lower many years ago but it might cost $200,000 to $210,000 to purchase. Then add in furniture, the 4% realtors fee, 2% to 2.5% Escribano's fee, 1.8% Stamp tax, various fees to wire in the funds to Argentina. And you might have about $240,000 US invested all in. Even today I can rent that property on a long term 1 or 2 year lease for around $1,000 to $1,200 US per month. I have the tenants paying all the utilities, HOA expenses. I pay ABL which is reasonable and a few hundred $ per year. So the investment at today's prices might yield around 4% to 5% ROI.

Some you can make more some less. But I know many local friends down there that is happy with that 5% ROI that is very stable. They don't rent in pesos and have some predictability.

As to the foreigners, most that I know that are buying really has NOTHING to do with an investment. They are wealthy, they like real estate, they LOVE Buenos Aires. They spend a significant amount of time each year there and they like it enough where they want to have a place there. But it's all relative. $350,000 US might be a lot to you but to others it's not much. Many are happy as long as they can cover their expenses just renting out on AirBnb. (Typically you can easily rent it enough to pay your HOA, property taxes, ABL, utility bills). So for these foreigners it's not about generating income more so then it is having a personal property they own in a city that they love.

My banking friends told me that something like $140 BILLION came back into Argentina with the amnesty program. I'm not sure of the exact amounts. But several banking executives told me that there is still a LOT of money that still can be invested from that. I'm not sure of what the cut off is but I would guess that it depends how much of that has been put to use already purchasing real estate. If there is still billions of dollars out there that will eventually go into real estate, it's important to see what the cut off date is before they have to utilize those funds. Because billions of those funds has been driving up the market the past few years since Macri did the amnesty.

If any of you has specific information on how much came back, how much has been invested already, etc. I'd LOVE to read about it. I haven't found any public source with this information and it would be incredibly information to read about that info. Thanks in advance.

 

[Frisel]

Very fascinating. Thank you.

 

[earlyretirement]

Very fascinating. Thank you.

De nada. Yes, the local dynamics is fascinating. Much of it doesn't really make sense if you don't understand the history down there and how things work. But also you have to understand the dynamics and fundamentals of having a country with NO functional banking system, no real judicial system, no real efficiency, high levels of corruption and scams.

What else is safe to invest in in Argentina besides real estate? Really nothing. The only thing I'd invest in Argentina is land or bricks. Nothing else and that's speaking from owning several companies there. Pretty much everything else is a huge liability. Have a company? Have employees? Liability. Liability, Liability. The tax laws don't make sense. The employment and labor laws don't make sense. That's why you don't see people investing in businesses or start-ups for the most part. (A) They don't want employees working in white; (B) the taxes are so high that if you paid all of the taxes the you legally have to pay it leaves almost no net income.

I own companies all over the world but Argentina is the only country where my salaries were doubling every 3 years! Think about how crazy that is (and sounds). It's almost impossible for a business owner to have any kind of predictability or stability. Take that same mentality for locals.

I believe with the amnesty (https://www.reuters.com/article/us-argentina-tax-amnesty-idUSKBN17630O and also https://www.reuters.com/article/us-...llion-in-tax-amnesty-government-idUSKBN14M17A ) they also had a choice besides real estate to invest in a business. But no one really trusts businesses so real estate is the one thing they understand. One thing you also have to keep in mind is the majority of wealthy locals probably still have hundreds of billions of dollars outside of Argentina. If/when they bring it back they too will probably invest it in real estate vs. other assets/investments. So this is also a wild card. Again, not the typical local buying real estate there.

No real MLS system there but the closet thing to it is sites like: https://www.zonaprop.com.ar One of my friends a few years ago started this company - https://www.properati.com.ar Which I believe recently got acquired. Interesting seeing the prices in various neighborhoods and you can use the search engine to see specific properties in specific neighborhoods or also new construction projects. Good luck.

 

[Frisel]

Wow thanks for the links. Rents in BA seem crazy high! A lot of places there are $6K plus! For perspective, I live in a 2 bed/2 bath brand new luxury building with doorperson in a major US city, and pay $4000. The "second home" I rented for my wife in her hometown in Argentina is only 12,500 pesos.

 

[earlyretirement]

Wow thanks for the links. Rents in BA seem crazy high! A lot of places there are $6K plus! For perspective, I live in a 2 bed/2 bath brand new luxury building with doorperson in a major US city, and pay $4000. The "second home" I rented for my wife in her hometown in Argentina is only 12,500 pesos.

You're certainly welcome. It's all about the sharing of good information. Yes, definitely rents can be insane there especially if you're making pesos. It can be obscene. But that's also why you also see people that like to own properties here.

That's not to say that you can find good deals. For example, I have lots of local friends that own several properties and they take a lower rent or give a special deal to people that they personally know or friends of friends vs. renting it for more to a perfect stranger. Also, furnished rentals you can typically make a much greater ROI (even accounting for the furniture/electronics expenses) vs. owning an empty apartment. A similar property like you rent in the USA furnished can fetch as much as $2,000 US per month in Buenos Aires. I have several friends that own in luxury newer buildings with doorman and it's furnished and they are getting $2,000 US per month but I do believe they are paying monthly HOA dues which might be $200 per month, ABL fees and water (which is included in their HOA dues). This is on a two year lease.

There are many large corporations that will rent out nice places in newer buildings that are furnished. I mostly do long term leases to corporations that works out well. The only thing is to make sure they are in US dollars for the rent. One long term client I was dealing with pesos. And I put in a 25% a year inflation adjustment but with this latest major devaluation they are getting an amazing deal now in US dollar terms.

That website link I gave you, as you can see you can also look up rentals so you can get a real sense of what places are going for. There might be some negotiation but typically not more than 10% lower and many owners will hold firm on their asking prices. It just depends how motivated they are. And I'm not sure where your wife is but prices drastically fall once you get outside of the nice areas of Buenos Aires wealthier areas.

 

[Frisel]

Between Palermo, Recoleta and Puerto Madero, is one neighborhood considered nicer than the others? Or are they all roughly the same (other than Puerto Madero is newer buildings and highrises)?

 

[earlyretirement]

Well Puerto Madero is easily the most expensive area. It's a newer area and mostly high-rises that are modern. It's also the safest area as they have their own police force there. The locals might argue that it's the "nicest area" but I personally find it has no real soul and too sterile. It doesn't feel like Buenos Aires to me. Also, monthly HOA fees are insane here! I have some friends that own really high end apartments here and some of them are paying over $1,000 US per month in condo fees alone! A few with 2 bedroom apartments are paying $600 US per months in HOA fees.

Recoleta doesn't have too many newer high rises. Older properties for the most part. Palermo Soho has a few high-rises but not as many as Palermo Hollywood. Soho is zoned so no more more high rises there for the most part. I really enjoy both Recoleta and Palermo. Recoleta is nicer and less gritty vs. Palermo Soho/Hollywood. In those areas you will see more graffiti vs. Recoleta which is a shame. I have a friend that owns a beautiful house in the heart of Soho and she has to repaint it every few months from vandals just spray painting. You don't see that problem in Recoleta in the nice areas.

A really creme of the crop area for me in Recoleta is the quadrant of Libertador/Libertad/Ayacucho/Quintana if you look on Google Maps. Really upscale and posh high end area. But all older more prestigious properties there. No newer high-rises but quality of life is super high.

In Soho I really love quadrant of Armenia/Honduras/Malabia/Guatemala or a few blocks outside that area. In Hollywood I like Guatemala/Bonpland/El Salvador/Juan B. Justo. I own properties in all of these areas and they are awesome areas and rentals do well in them.

Nice high-rises in Soho are really great as there is so many restaurants, cafes and shops in the area. Palermo Hollywood as well has TONS of restaurants. I guess it just depends on what is important for you. I wouldn't live in Puerto Madero because it's too far away and traffic can be a nightmare getting to/from there as they are working on construction in the area. I like how central Recoleta is but I don't think you can go wrong anywhere in Recoleta or Palermo. Palermo Chico (Barrio Parque) is also a really high end area. Not cheap but they have some newer high rises there as well. I actually personally prefer over near Soho or Hollywood just because I like a livelier area where I can walk out my door day or night and tons of places to eat and drink, etc.

Me personally I don't like San Telmo to live. Nice to visit but too gritty for me. I read a few posts where people said they live there and enjoy it but there is a reason it never really got as popular as Palermo or Recoleta. Still seedy at night in many areas. It's not to say you couldn't have a good life there but I just prefer more upscale areas vs. San Telmo.