Financing a Place in Argentina

[Fiscal]

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?

 

[nikad]

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

No

 

[Fiscal]

No

I need to be all cash?

 

[nikad]

I need to be all cash?

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

 

[Fiscal]

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.

 

[Fiscal]

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.

 

[Fiscal]

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.