Mortgage/Buying in BA?

[shady]

First off - I should introduce myself. I am a US citizen who recently spent a few few weeks in BA. I absolutely love it & am seriously considering relocating there. However, in the meantime, I have a rather general ? about buying. I'm seriously considering buying an apt in BA to be used as a rental property most of the year (except for when I'm there). I'm aware that 99% of the real esate transactions are done in cash. Does anyone know if you can get a mortgage in the US to buy a property in Argentina?
Obviously I'll be speaking with some banks here but thought some of you might have gone through this. Thanks

 

[Harold]

If you have equity in your US property, you should be able to extract a large part of that equity and use it for pretty much anything you want. You would have a mortgage or lien on your US property. It would not be placed on the Argentine property. The Argentine property would not be part of the security or collateral on the loan. I doubt that any US lender would lend the purchase money on Argentine property.

 

[bigbadwolf]

You don't want to rush in where angels fear to tread. I've been parsing the numbers every which way, and I can't quite make them click. The ideal area for short-term dollar rentals is Recoleta, and perhaps parts of Palermo. The problem is they're pricey (expect to pay $2000 a square meter in Recoleta). They will be rented sporadically, and there's the inevitable wear-and-tear and expenses (e.g. maintenance fees). You might make some money off property price appreciation, but remember things are awfully volatile here (in every sense), and the Recoleta and Barrio Norte property market has been rising a bit too much a bit too fast (because of foreigners buying). I'm thinking of buying a place here myself, but I'm prepared to lose money, and I have few illusions about rental income.

 

[bigbadwolf]

Are Recoleta property values really up to $2,000 a meter?
Regarding the original question, no US lender is going to finance a property in Argentina. You could, however, get a home equity loan and use it to buy property in BA. I would not tell the lender why you are borowing the money.
Rentals? If the property is a good one, in good condition and very well set up, it may have good rental potential. I agree with the previous writer that you can not count on the rental income as Argentina is unstable. Inflation is a serious problem and if it goes on as it is, tourism will fall off in time and the rental dollar-based rental market will follow.
I am interested, by the way, in the views of expats on inflation. When will it start to influence your decision to stay here?

This is what estate agents are telling me (e.g. Reynolds). This applies to some choice properties -- but these same properties were going for $1400 a sq.m. a year ago. If you look around, you can still get properties at $1500 a sq.m. in Recoleta, but it may not be choice property. Bloody foreigners.;-)
I'm staying in Recoleta, in a choice 1-bedroom apartment opposite the Alvear Palace Hotel. I'm paying US $600 for the month. I can see the rental schedule online, and I can see that it's rented only sporadically.
There are simply too many ifs and question marks too reliably calculate return on investment, whether in equity or in rental income.
If inflation continues, then sooner or later the Argentinian peso will have to realign itself against a basket of the leading currencies (US dollar, euro, yen). Kirchner needs to keep the peso weak and inflation down (which I think he's trying to do): this will ensure healthy economic growth for as long as he can sustain a weak peso amd low inflation. The problem is workers clamoring for pay increases, and a populist government that by its very nature is ill-equipped to resist such pressure. To be fair, workers are ill-paid or not paid on time, and they're seeing they're seeing the purchasing power of their meagre pay packets being eroded every month.

 

[shady]

I'm not looking to get rich on a rental property My theory is that it would be for me to live in down the road but in the meantime, I might get some rental income out of it.
And yes, I realize the risk of buying but given the real-estate market where I live (NYC), the prices in BA are a steal.

 

[bigbadwolf]

You'll see that I've introduced a new thread regarding inflation, so further responses to this issue might be better addressed there. Could you explain what you mean by a reallignment of the pesos based on a basket of currencies? What I see is a fairly stable 3-1 rate vis a vis the dollar along with a good deal of inflation that is edoding the tourist dollar.

The general rule regarding property is: the larger the flat, the lower the price per meter (large flats being harder to sell). Reynolds deal with foreigners a great deal. Have you compared their prices with other estate agents? Also, have you checked out the rentals of property owned by Michael Koh (he has an article posted on this website)? He seems to have a high occupancy rate. From what I gather he is very dedicated to quality service.

The line of reasoning goes as follows: suppose an Argentinian company makes something for one peso and sells it for 40 US cents abroad in a competitive market. It make a profit of 7 US cents. Now suppose that because of inflation, it eventually costs two pesos to manufacture that product. The company has to sell it for at least 66 cents, but finds it impossible in a competitive market. At the same time, imports become relatively cheaper. In the long run this is untenable: the peso has become overvalued because of domestic inflation, and what occurred in 2002 occurs again -- namely a devaluation of the peso. The other major economies -- Europe, Japan, and USA have low inflation, so with the passing of time, their currencies become undervalued with respect to the Argentinian peso.
I'll check out Michael Koh.

 

[bigbadwolf]

The government is going to great pains to maintain the exchange rate at close to 3-1, is another devaluation likely?

No, it's not imminent. There's no current account deficit; in fact I think Argentina has a healthy foreign exchange reserve at the moment, and is building it up further as Argentinian exports are competitive and imports are expensive.
The scenario I've described would take years to play out. The 10% inflation rate would have to be maintained for, say, three or four years before it started to become uncomfortable (i.e. the peso became overvalued). I seriously doubt that Kirchner can reduce inflation below 10% because of worker demands and rising energy prices; if he can keep it at 10%, that itself would be an achievement of sorts.
Because I'm largely ignorant of Argentinian economics, I don't know the causes of inflation here: is it driven by wage increases for workers, or is it driven by uncontrollable increases in factor prices (e.g. raw materials, energy), or by the private sector wanting to make a bit more profit, or by a combination of all three?