Since all of the houses are paid for in cash argentina is truly a very unique market. The basic rules of real estate still need to apply. Here are a couple of them to see if your buying is a wise investment.
- In real estate you make your profit when you buy…not when you sell. So buy carefully!! Incidentally real estate agents make their profit when they sell something!!!! They always want you to buy. Real estate agents are just like black jack dealers in Vegas. The blackjack dealers are always whining about their tips and real estate agents are always crying about their commissions. You can switch them both around and no one will notice. Each can do the others job no problem.
- How much to pay for something? This applies to run of the mill homes or condos with nothing special…view of the ocean or a nice park. Take the yearly rental value of the property, subtract all expenses…..building fees …taxes…repairs …ect. Then add a zero. So if you have a property that you rent or can rent for $1000 a month and u rent it for 12 months you have $12,000 in rents. Then let’s say you have $1500 in repairs and expenses. That leaves you with $10,500 add a zero and the property is worth $105,000. That is the most you can pay for it. This will give you a 10% cap rate which is what you should expect if you are managing it yourself. If it is an investment property then you take your yearly rent subtract the expenses and then multiply it by 6. with the same scenario as before this you would pay only $63,000 for the property.
Now if you are going to be living in BsAs for say 5 years then you need to do some math. If you plan on staying that long then you may very well want to buy something. So long as you can sell it!!!! If you are going to pay $1500 a month in rent well that is $75000 right there. And everyone knows that you do not get rent back. Even if you sell the property at a loss so long as your expenses come out to less than the $75,000 then it can be a good investment.
Now BsAs property is being held as a long term investment by there owners. These people are not speculators. Since you do not have a lot of speculators, and maybe you do, the prices seem to be too high for the rents. This is probably a result of people under valuing their rent as to avoid out of pocket expenses.