Acceptable apartment size

[EMR]

I have a probing question to ask and it is subjective. I know many expats come for a short time and many stay for a long time so needs are different, but what would be the smallest size apartment someone would live in if designed very well and very nice? For 6 months? 1 year?

If this was available for a very good price to buy would that make a difference? In other words, if it was small, but very well designed and the price was right would it be an option for some to buy in order to save the high rents expat's tend to pay and then be able to sell or rent out easily down the road?

I know there are a million variables and I am not trying to start a fuss, just interested in different opinions. Doing some research to see if smaller units at the right price point would be attractive. I am interested in this feedback for a friend.

 

[tangobob]

You do not say if your friend is single, with a partner,or has kids. These things make one hell of a difference.
A single guy could be quite happy in a studio type apartment, but I don't think that would be comfortable for a couple for more than a few months.
As for buying, unless you have a long term commitment to the place, my opinion is that it is not viable. The costs involved in buying and selling are astronomical, just check out the commisions charged by real estate agents. You are looking at a growth of at least 20% just to break even.
There are many places that are let privately by locals at quite reasonable rents, the thing to do is to find somewhere temporary and look around. By being here on the ground, so to speak, you have a much better idea and can look at any place before you commit.
My freinds stayed for twelve months and rented from adverts they saw posted on street corners and had very good deals.

 

[jp]

Expats don't pay that much more for rent. Short term rentals (6 month contracts etc) will invarably include all bills, telephone, cable tv, building fees, internet etc and will come furnished. So the rental price reflects this. Long term rentals (2 year contracts) are typically for unfurnished units, and you have to pay all bills. Factor in buying all your kitchen clobber, furniture and electronics and short term rentals often work out a hell of a lot cheaper. Stuff doesn't come cheap here, and kitting out a flat is slow, painful and pretty expensive. There are some genuinely great deals out there in the short term rental market.

I live in a loft apartment, its about 55m and I share with my other half. The kitchen is tiny, but theres a great sense of space because its a loft, its full of light, has a big living space and has stupidly high ceilings. So its fine for us. I'd say 50-60m would be the least I could live in, but it really depends on the layout. Lots of small boxy rooms will feel different to a couple of big, light and airy rooms.

There are plenty of property experts here who could better advise you on the pro's and con's of buying, but from a personal perspective - we looked at buying when we arrived to avoid paying rent for a few years. Once we'd settled we decided against it. It just didn't make sense as a strategy to avoid paying rent for a few years, there wasn't much guarantee that the property value would increase all that much given the current climate, and we were going to have to pay thousands of dollars in fees in buyers fees that we weren't going to recoup. I have lots of friends who bought here, but they are all a bit more permanent than us, expats with argentine wives and children who wanted a permanent home. Made sense complete sense for them, but didn't make sense for us. So all depends on circumstances I guess.

 

[EMR]

You make interesting points and I guess it is all very personal, in fact I just spoke a little while ago to someone who actually sent their kids to Buenos Aires to study, he in fact did buy a small apartment for his kids and did not pay rent and after 4 years, was able to sell it for somewhat higher than he paid. IN his case, he came out great, ended up saving thousands. So I do agree it all depends on each persons thought process. I also agree it depends on what your time frame and preferences are.

There is a trend happening in major cities like Tokyo, Hong King, Moscow, etc where these micro apartments are being built. About 250 square feet or 22 meters. They are designed well and many people buy them to have a spot in the city for not a lot of money. Some commute to work during the week and then leave on weekends, some use it as a vacation spot to have a place to hang their hat and rent it out while gone etc. I am wondering if this concept could work for a certain segment of the market, those who may want an investment spot for nightly rentals as well as a place to use when they visit, maybe for a student who wants to buy (like the case above) but does not want to spend a lot, or maybe for someone single, who is looking at trading space for location and affordability. Interesting questions for sure and I think lots of different points of view. I myself could never live in 22 meters but a friend of mine does in Mexico on the beach and is happy. So it all depends on the person, just wondering if anyone out there likes the concept of small spaces that could price them into the market. Thanks a ton for the feedback

 

[captdave]

I do NOT pretend to be a financial adviser of any sort but I have lived here for about 7 years and I think for most folks buying property here just doesn't make sense! Some things to consider:

1) There are essentially no mortgages here, and all deals would be done in cash. This presents several problems in itself, and tends to make ANY real estate transaction feel a little like a dope deal, with tables full of cash and armed security guys.

2) Unless you are a resident BEFORE you buy, you will be subjected to an onerous capital gains tax when you sell, assuming you can find a buyer and after you pay fairly stiff commissions and fees to effect the sale.

3) You are dealing with a country whose economy traditionally goes into some sort of crisis every 10 years or so, with a lot of people who are smarter then I saying the next one is right around the corner. The usual result of these crisis' is that nobody has any money, and the chance that you will not be able to find a buyer increases exponentially!

To me, the best excuse for buying is that you have money you can afford to lose and that you are willing to trade for the security of not having to deal with the hassles of short term rentals. Remember that the longest lease you can get on a residential property is 2 years, and since you have no way to "guaranty" your payments it is not at all unusual to be asked to come up with the full 2 years rent up front, plus deposit!

Hope this helps...

David

 

[EMR]

Dave,

I would have to respectfully take issue with many of your points based on fact, not opinion. That does not mean you are not entitled to your opinion, but I a a financial guy and although I do not live in BA full time, I have bought and sold real estate there and own an apartment etc. I will take them point by point

1. It is true that there are few if any mortgages and that it is a cash deal, this is particularly good because the market is not based on speculation, bad valuations and false pumped up values, it is a real supply and demand market which allows for orderly markets and stability in the system. You will not see values drop like in the USA where we all know what happened. The issue back in 2000 and 2001 was the peso was artificially pegged to the dollar and was not free floating, this cause a severe devaluation which also happened in Mexico. The peso is not "pegged anymore" and is free floating. Yes it can lose value against the dollar and has recently but that is based on market cycles, not the government devaluing the currency. The dollar has gained strength recently and will for the next 12 months but once the deficits and the national debt of the US get to a point where foreign countries quit supporting the borrowing, the dollar will fall and inflation will kick in the USA. That being said, the lessons learned from 2001 were to price things in dollars so the market has stability. Second, most people that do CASH deals is because they either do not trust banks or want to do this in "NEGRO" or under the table. That is not the way to do business and I have wire transferred money from the states and had it wired back and the banking system does allow for this, you just have to go to their "relaciones y comercios exteriories department and present the boleto or escritura and there is no retention if funds. Many foreigners have had problems because of really bad advice and doing things NEGRO instead of BLanco. SO you can avoid the cash deals and they can be done at banks although the money is exchanged there.

2. You are completely backwards regarding the capital gains taxes and I am happy to send you the legal references. I use BDO Becher in Argentina as my accounting firm and they are part of BDO Siedman, 5th largest firm in the world. There are NO capital gains taxes in Argentina. Foreigners do not pay any taxes on the gains from sales as long as they are done in Blanco. The only taxes that are paid on real estate transactions are the traslado de domino, sello etc which amount to 2.5% of the price for seller and buyer. This included escribano fees. That is a title transfer tax etc which you have everywhere in the world at some rate. If you are a resident, you are not taxed as long as you roll it to another property. Where people have been burned is they did it in Negro and then when it came time to sell, it was never registered properly and there is a retention of 30% of the amount for at least a year. This happens because things have been done improperly, not because that is how it is. With repsect to fees and commissions, it again depends on who you deal with, in Negro you get totally screwed everywhere. If done properly the buyer pays the commision in Argentina and usually it is 4%, so you pay 4% on the buy and they pay on the sale. In the US, seller pays 6% so it is cheaper in Argentina. You can avoid commissions if you buy direct from the owner. What fees? THe escritura is 2.5%. That is not onerous.

3. I dealt with number 3 above regarding the currency issue, again we forget the USA is in major trouble, people are losing their homes and equity has been wiped out. Whym the mortgage system. Argentines lost confidence in the banking system in 2001 and now Hard Assets and real estate are their assets of choice, that will not change and although values may not go up as they have over the past few years, blue chio areas such as recoleta, Palermo, Belgrano etc will not lose value.

I just think point 3 is defeatist and not much I can say other than I just totaly disagree and that is what makes markets.

Also, let's assume you could have bought an apartment 7 years ago and let's inflate it to 80k (cheaper back them for a 60 meter apartment) but 80k. You paid rent averaging 500 dollars a month for the last 7 years, that is 6k a year x 7 42k in rent. Let's say you bought and wanted to leave at year 7. You would have to have lost over 50% of the value to lose money. That just has not happend. The currency exchange is what did that in 2001 but not gonna happen, has not even happend in most of USA with this disaster. If it stayed the same, you made 42% on your money over the 7 years and any appreciation is gravy. So, I think the economic argument is one that different people can differ on but I think my argument is solid. I would agree if you planned only to stay 1 or 2 years renting makes sense but longer than 5, buying is a better deal.

Now, why do many people rent and not buy, they do not have the cash to buy a place outright and since mortgages do not exists per se they cannot buy.

I respect your opinion and your right to that opinion but I disagree completley with most of your points. It is a shame that many expats get bad advice or get taken advantage of because people say, that is how it is here, but I assure you, there is a way to do things right, and for most people, the promise of saving money by doing it under the table in Negro to save some money turns out to be one expensive and painful mistake to fix.

Thanks

 

[EMR]

IN the end, my question was really about space. There are different people for different things and just wondering if anyone out there like the idea of a smaller than normal space, well designed and functional for a much lower price (because of size) in the righ parts of Buenos Aires. I guess the idea is to bring affordability for others who would not be able to buy and also create a value proposition by broadening the market. Trading space for location and price. Thanks

 

[mini]

I wasn't going to answer this because I think the amount of space someone needs to live in is relative, subjective, etc. But since you had a specific question I'll answer that:

There is no way on God's green earth that I would live in a 22 m2 apartment. Never. As for buying, the chances of me buying an apartment that small are even less.

Of course, this is just one person's very subjective opinion so it's worth what you paid for it! ;o)

 

[captdave]

I don't pretend to be either an expert or an authority on this type of thing (as I stated right off inmy previous post), and my opinion is absolutely based on observation. I know many things are changing (or trying to be changed), and for that reason appreciate your corrections if you feel I spoke in error. I do think however that there are many pitfalls to buying property here that don't exist for example in the US, and have several friends who have run afoul of them.

Dave,


1. It is true that there are few if any mortgages and that it is a cash deal, this is particularly good because the market is not based on speculation, bad valuations and false pumped up values, it is a real supply and demand market which allows for orderly markets and stability in the system.
You will not see values drop like in the USA where we all know what happened.

Obviously the lunatic mortgage policies that collapsed the housing market in the US and Europe are not, in the long run anyway, a good thing, but the idea of paying cash for property (in my highly educated opinion as a boat driver and computer fixer) puts a huge limit on the owners ability to resell property. I do disagree (based on those same impeccable credentials) that the fact that you deal in cash gives ANY security against speculation, bad valuations or pumped up values.

2. You are completely backwards regarding the capital gains taxes and I am happy to send you the legal references.

Perhaps I am wrong, or at least wrong to call it a capital gains tax, but I have been told by several friends who have purchased property here that a non-resident buying property is subjected to a large penalty when they resell that does not apply if you are a resident with a CUIT number when you made the purchase. You obviously know more then I about this, and if it is true, as I believe it is, any potential purchaser should welcome your sharing any knowledge about this, as residency is not required to make a real estate purchase.

I do agree that buying "en negro" was probably not ever a good idea, and has become even worse as the government frantically digs around trying to recoup the huge amount of money they have "left on the table" by making essentially any business deal in Argentina a nightmare of red tape, bureaucracy, misinformation and corruption.

My point was that real estate transactions here are VERY different then in other countries, with many pitfalls that a potential buyer may not be aware of if they don't "do their homework" before the buy.

Saludos,

David

 

[EMR]

Thanks Mini, I appreciate the response, I would not be able to live in 22 meters either but it seems there are people that can.

Dave, There is no retention or tax other than the 2.5% escritura fee (5% which is split between buyer and seller(normally although many argentines try to stick the expat with all the bill), what you keep hearing about is either the 30% retention the AFIP forces if the deal was done in Negro and the property was not properly registered, or a tax on what they can say is rental income if you did not live there. Again, as a foreigner you need a CDI number to buy property not a CUIT and many buy without this and therefore get themselves in trouble.

IT is not difficult to buy in Argentina, just different than what we are used to in the states and as for cash, being a merket without financing and depending on real capital certainly takes out the drastic overvaluations we saw in the states.

CAsh purchases are common all over latin america and eastern Europe. I own a place in Mexico that was a cash deal (not bills in a suitcase but no mortgage) I have found it healthy. It does eliminate the ability to buy if you do not have the money but that is not a bad thing.

Mexico is a lot like Argentina in that it is primarliy cash, and you have not seen the crash you see in the US in real estate values, yes construction slows and appreciation stops but not the crash of floods of inventory dumped on the market via foreclosure or people that are upside down which is what happens in the USA.

Anyway, I have found real estate in Argentina is very similar in the way it is transacted to many latin countries and eatern european countries and although it is true it is very different than the US and WEstern Europe, I would argue the use of leverage, unregulated mortgage industry, securtization of loans and crdit default swaps (which we created in the US) made it the worst real estate market in the world and has been the cause of this global crisis. That is a fact yet we tend to still think what we know and are used to is better.

I think the problem with real estate in Argentina is not the system etc, it is as you said people not doing their homework and being taken advantage of by people they trust who know they are out of their element.

I suggest people do their homework and find good people to help them and they will be fine. I see some good opportunities relative to the world marketplace in Argentina. Glass is either half full or half empty, depends how you want to look at it.

Thanks and your last statement is correct. People need to do their homework