Crowdfunded Argentine Real Estate

[misnowmer]

Has anyone by chance looked into crowdfunded Argentine real estate via Crowdium? It's like Fundrise for the US. If you did, please share what you learned. I just found out about them today.

 

[lamarque]

They are well known but i haven't try them.

 

[misnowmer]

It looks like they offer good returns. I'm not sure though if the returns they are calculating take inflation into consideration.

 

[earlyretirement]

The most important part of that website is the one where it says that they don't guarantee to get anywhere near their estimates of ROI. No way these days they can produce that type of ROI that they are predicting. Also, most projects in Argentina take MUCH longer than they say it will take and it costs much more than they estimate due to the crazy inflation.

Plus, in the event that the builder goes belly up and bankrupt you really have no recourse at all. Unfortunately the judicial system doesn't work in Argentina so you're pretty much screwed on these types of projects.

I once bought into a new project development and obviously they were over 1.5 years late. At the end, the developer basically told all the owners in the building that we all had to pay 25% more vs. the price we agreed upon. Everyone was furious but they said the other option is they will just declare bankruptcy and we could take them to court. And that's a multi-YEAR process. It was cheaper and quicker to just pay more.

I've also had court cases where I had a clear cut case. Took 3 years to get in front of a judge and then once it did.... surprise surprise the judge was bought off or there was clearcut fraud saying a date of the trial was changed and we never showed up so we lost. The summons notice that the date was changed we NEVER signed and it was forged. Typical day in the life in the Argentine judicial system.

 

[earlyretirement]

It looks like they offer good returns. I'm not sure though if the returns they are calculating take inflation into consideration.

Well do NOT trust what they SAY they produce. Let me give you another example. So back many years ago there was a developer that built a high-rise in Palermo Hollywood called Palermo Hollywood I and II. The developer had this great idea to basically turn the units into an investment where they would manage the property, take care of tenants and take care of all your taxes.

I had a friend that bought into that project. The building turned out well but when they went to get their rental proceeds, the management company would never pay it. Then when they went to go sell their property, it turns out this management company NEVER paid any of their taxes (property taxes or rental taxes). They too claimed of amazing returns. And in the end, they basically just said, "sue us" because they knew that it would take YEARS to get in front of a judge.

The truth of the matter is that if it sounds too good to be true then it typically is anywhere in the world but especially Argentina where nothing works, it's plagued with corruption and inflation is out of control.

 

[lamarque]

Well you have to check the company, The company belong to the group Newling Capital, the owners are Manuel Estruga and Damian Lopo, the CEO is Mariano Nejamkis the former founder and CEO of ZonaProp.com. But of course that dosn't really say nothing.
About the project in particular, i would say is quite solid, i have a friend working in vaca muerta, salaries there are astronomical starting from 50-60.000 pesos per month the lower lower of the positions and almost 90% of the people there are single males without families so with a lot of spare money to spend, so renting, restaurants, prostitutes, and drugs sell a lot in that place. I checked the renting price and is around the same amount as they claim with a steady growing path.
Now the problems of what is not properly explained on the investment, they claim a ROI of 25-35% in 2 years, that makes a return between 12.5% - 17.5% per year in dollars, but that is over the investment, not the real ROI, because if you check the details you have expenses and commissions that goes from 7%-10% of the initial investment (they only calculate the ROI of the original investment without considering the commission and cost involved on the transaction), so the real ROI considering the higher possible commission is 14%-23% and the lower possible commission is 17%-26% that is over a period of 2 years, letting you a return per year of 7%-11.5% to 8.5%-13% per year, that is a very probable ROI for this type of investment, my father buy lands and construct on them and he obtain ROI in dollars superior to 30-40% a year, but of course he do it by himself and he knows perfectly where to buy, how to deal with successions, and everyone in the region that wants to sell something goes to him so he is already well placed in Patagonia plus he has his lawyer studio placed on the region.
The biggest problem in Patagonia is the lack of work force, you have to pay a lot more than anywhere else in the country for a person to do the same construction job, and most of the people that work in construction are always busy unless you manage to have a group of people that work only for you.
That is my insight on the the topic, in any case you have to check yourself always the numbers and the small letter, the laws for crowdfunding are advancing and once the CNV start regulating them it would be ready for an explosion, today they release a new law for crowdfunding, i need to read it later on this day, but until now it depends a lot on the contractor, there where a lot of very successful projects like the boat parking in Tigre that where excellent investments but of course there where projects that where not so successful or shady contractor as well.

Hope this helps to clarify a little bit the scenario, but the best you can do is to do your own research, i cannot do a deeper research in this moment to busy with other things at the moment.

 

[earlyretirement]

Well you have to check the company, The company belong to the group Newling Capital, the owners are Manuel Estruga and Damian Lopo, the CEO is Mariano Nejamkis the former founder and CEO of ZonaProp.com. But of course that dosn't really say nothing.
About the project in particular, i would say is quite solid, i have a friend working in vaca muerta, salaries there are astronomical starting from 50-60.000 pesos per month the lower lower of the positions and almost 90% of the people there are single males without families so with a lot of spare money to spend, so renting, restaurants, prostitutes, and drugs sell a lot in that place. I checked the renting price and is around the same amount as they claim with a steady growing path.
Now the problems of what is not properly explained on the investment, they claim a ROI of 25-35% in 2 years, that makes a return between 12.5% - 17.5% per year in dollars, but that is over the investment, not the real ROI, because if you check the details you have expenses and commissions that goes from 7%-10% of the initial investment (they only calculate the ROI of the original investment without considering the commission and cost involved on the transaction), so the real ROI considering the higher possible commission is 14%-23% and the lower possible commission is 17%-26% that is over a period of 2 years, letting you a return per year of 7%-11.5% to 8.5%-13% per year, that is a very probable ROI for this type of investment, my father buy lands and construct on them and he obtain ROI in dollars superior to 30-40% a year, but of course he do it by himself and he knows perfectly where to buy, how to deal with successions, and everyone in the region that wants to sell something goes to him so he is already well placed in Patagonia plus he has his lawyer studio placed on the region.
The biggest problem in Patagonia is the lack of work force, you have to pay a lot more than anywhere else in the country for a person to do the same construction job, and most of the people that work in construction are always busy unless you manage to have a group of people that work only for you.
That is my insight on the the topic, in any case you have to check yourself always the numbers and the small letter, the laws for crowdfunding are advancing and once the CNV start regulating them it would be ready for an explosion, today they release a new law for crowdfunding, i need to read it later on this day, but until now it depends a lot on the contractor, there where a lot of very successful projects like the boat parking in Tigre that where excellent investments but of course there where projects that where not so successful or shady contractor as well.

Hope this helps to clarify a little bit the scenario, but the best you can do is to do your own research, i cannot do a deeper research in this moment to busy with other things at the moment.

Definitely it IS possible to make money with real estate but my point was all of the unknowns, possible delays, legal issues, etc. But no doubt you can make good returns if you are patient. I remember back in 2003, I bought several units in a high rise in Palermo when it was still a hole in the ground. The project finished about 2 years later than they said it would but you could pick up studio apartments for about $50,000 and by the time it finished, I sold a few units for $120,000 @.

Out of all the things to invest in Argentina, I still think over the long term, real estate is one of the safer investments in the country. Previously, no one trusted the banks but this is changing.

 

[Ceviche]

lamarque,

what are your recommended investestments in Argentina.

if its real estate, what kind of real estate? small apartments worth 35-40 K? or agricultural - if so where and how etc?

 

[lamarque]

lamarque,

what are your recommended investestments in Argentina.

if its real estate, what kind of real estate? small apartments worth 35-40 K? or agricultural - if so where and how etc?

I cannot recommend an investment to someone i don't know, it all depend on your risk profile, how much money you can invest, how much you depend on that money, your personal knowledge on the field of investment.
For real state i'm more familiarized with certain regions of the country that will experiment a rise on the rent regardless the country situation, is always good to look for places in where there is limited space for construction, and some particularity that produce a rise on the demand, for example a new university is establishing in the place, normally if there are land available and you have the money to acquire them, that will make a great investment, but of course that is not so easy, specially not in Buenos Aires, at the moment there is a place in Rio Negro that is of particular interest to me, a second factor to take into account is that we can see that the availability for loans to buy your house is starting to appear, but that is a long shot for now but a very important one, until the situation stabilize not many people will take the loan.
In the agricultural sector, if you have the knowledge you could rent some lands and start with grain or soy, if you don't have it you could pay a commision to some company that make the work for you, i'm mostly familiarize with grain and alfalfa rotating every 3 years with tomatoes in the south of Buenos Aires, and feedlots in Patagonia. A great business all this past years was to plant your own grain in La Pampa and transport the grain down south from the fito sanitary Patagonian barrier where the price of meat is higher, there you could transform that grain into meat by feeding the cows. But that business that was great for the last 10 years is not so lucrative anymore because the grain has rise in price and the meat has not followed at the same speed, and probably this year the Patagonian sanitary barrier is going to disappear as the rest of the country will share the same free of vaccination and free of aftosa status, so that will bring Patagonia to compete with the lower prices from Buenos Aires.
In the stock market was a great year, but now is most likely going to stabilize and slow down the growth, there are still some great assets to buy but is not the same as last year where anything you could acquire was a good deal and they now depend more on how the rest of the year follows, an easy thing to do is to buy lebacs until the end of the soy harvest and then cover yourself with some other instrument denominated in something solid that get some shield toward dollar fluctuations, you could go to some bond in dollars like bonar X 2017, or you could switch to the real state market.

In any case there are to many different alternatives to the one that look, but you should go with some instrument or investment that you feel more comfortable width, the more familiar you feel with the field in which you invest the less prone you are to make expensive mistakes.

A tip to buy land, is to always look for the public land selling, try to see who else is going to present in the bid and if there are few interested persons try to cut a deal before hand to split the land so you don't over push the starting price.