RE investments profitability

fifilafiloche

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pericles said:
I highly recommend this property as a hostel as it is apt professional and the location is superb. The price of the property will guarantee a incredible return of over 15 percent per annum if you set it up to take advantage of the tourist and backpacker market. Added plus very quiet as it is contrafrente
Isnt that yield negative if you withdraw the 30% per anum inflation? :eek:
 

mini

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fifilafiloche said:
Isnt that yield negative if you withdraw the 30% per anum inflation? :eek:
Not if the price is in US$. There is a currency fluctuation risk. However, the inflation issue is negated by buying & selling in US$, thus why people buy & sell their apartments in US$.
 

fifilafiloche

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You mean that the depreciation of the Peso against the dollar is 30% per year? From my poor memory, the datas i get over the 3 last years is less 7% a year dollar appreciation against 30% inflation. The difference of 23% is a minimum needed yield to keep the same buying power on your dollar invested in Argentina. while living there And since you earn money, you certainly need to contribute to the infrastructure : taxes paid lower a yield that is already insufficent to cover inflation.

So basicly, you are gambling, counting on value gains to keep up with inflation. If Argentina follows the international housing crisis, you will add losses to losses.

My two naive and undereducated centavos.
 

perry

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Fifilanoche I believe that you do not understand economics . Buying a property is a protection for most people from the devaluation of their currencies be it american dollars or argentine pesos. Anyone who brought a property in 2006 and sold it today has made much more money on their investment than those who kept their monies in a bank in american dollars. For example the USA dollar has depreciated 30 percent against the Euro and over 50 percent against the Brazilian real while in dollar terms property prices went up in those years over 40 percent in the better neighbourhoods.

Property investments are best kept small and looked at for a 7 year term . If you keep it simple you will certainly keep your monies safe and also have free rent.
 

fifilafiloche

Registered
Thanks for the compliment, Pericles ;)

I m naive, this is why i ask questions to grown and knowledgeable people like you :p

From your point of view, there has been no housing crisis since 2006. This is an outstanding but interesting statement.

Speculation fed by american funds in capital towns all over the world which forced locals out of the centers of activity is something totally natural and to be encouraged. Another interesting debate.

Imho, which obviously differs from yours (i dont make a living off that activity), when an investment yields are negative in real terms, its liquidity nul due to a complex and ever changing tax and juridical environment, the risk is not being rewarded. This might be the reason why the wealthiest argentines prefer to keep their cash away from their own country.

Regarding the free rent argument, once again, it s a question of cost of oportunity. The money stuck in that risky investment could have yieled much more on liquid investment vehicules with similar risks. For example, B bonds in the US or in Europe at the begining of this year that were yielding up to 30% due to the lack of liquidities on the market (credit crunch).

It s all a question of timing. Imho, B As at that time is not very attractive for both international and local investors. Japanese investors that invested on their real estate market in the 90s might testify that housing can be a serious cash trap for a long period of time.

But thanks for your insight, there is always something to be learnt from different points of views, especially when they are free of personal interests.:rolleyes:
 
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