Real Estate Prices In Usd And Ars - Help

[jbeas176]

I would yield to gs dirtboy but it would need to be based on the banks exchange rate to USD. all things hopefully being equal. will the banks make that kind of exchange?

 

[GS_Dirtboy]

anybody ever bought a apartment here in a "building under construction". The prices listed in US$ by the builders. Its to be paid in pesos in white or in in blue? Very confusing.

First, no bank will make an exchange for anything other than the official rate - unless we are talking Cedins or CCL's, etc. I can also assure you that the developer is not thinking Pesos at the official rate.

The price is listed in Dollars because that is a rate that the developer can plan with. He/she knows what they need to get as an ROI. Using Pesos to try to calculate ROI is practically impossible due to real inflation, faked numbers, and devaluation.

So, the exchange rate becomes a part of the negotiation. It is like buying a car from a dealer. Your first question is what is the price of the car. Their first question is whether you will be taking a loan to get the vehicle. If you are paying cash or taking a loan means different ROI's to the dealer.

If you are paying in Pesos then the question is at what exchange rate, second question is when is the closing, third question(s) are the clausulas that protect both parties from crazy exchange rate fluctuations while waiting on the sale to close, etc.

Does that make sense?

 

[wongjoh]

Our real estate agent told us that when USD prices are quoted and paying pesos, the actual exchange rate will depend on negotiation -- sometimes called "Celeste" (a midpoint between official and blue). If you pay straight with greenbacks, you can expect 10-20% discounts. So, it really is another point of negotiation.

However, with the way house prices are right now, I really question buying here in Buenos Aires. I see apartments/homes that are more expensive than in growing/nice areas in the US. One day I'll do an analysis, but my hunch is that you'd be better off buying in the US and renting here, than buying your own place here in Argentina. Us expats generally have a benefit that locals don't have and that is that we'd have the option to buy in our home countries. Plus, we have other dollar-denominated investment options like stock indices.

For now, we'll stick to renting (not that we have the dough to buy something either)

 

[Ries]

Real Estate has been a safe haven for investment here for decades- and, since there are no loans, if somebody cannot get their desired price, then they just sit on the property until they can.
So, in my mind, the market here is a lot LESS volatile than the market in the USA, for example, where, during our recession, the bottom fell out of many real estate markets, and took years to recover.
In fact, a couple of years ago, a bunch of Argentines I know were buying condos in Miami, because they were going so cheap- I know a couple of people who bought condos in North Miami, in neighborhoods that are not great, but certainly not terrible, for $25k to $35k US. They have already doubled or tripled in price.
However, by most first world standards, Buenos Aires is still incredibly cheap for what you get.
Of course, if you earn in pesos, a hundred grand is a lot of money.
And, if you have a minimum wage job in Brooklyn, you cant afford an apartment there, either.
Many cities around the world have real estate markets that are no longer priced based on local conditions- obviously, London, or New York, or Vancouver, all have such huge amounts of foreign buyers that local salaries are completely disconnected from real estate pricing.

Buenos Aires is not at that point yet, but there are a lot of buyers who buy based on more international price considerations, both extranjeros and local people who also have property elsewhere, dual citizenship, and went to colleges in the US or Europe.

In many cities in the US these days, a hundred grand will buy you a parking space. An average 1 bedroom apartment in Seattle is closer to three hundred grand, new. In NYC, six.

Regardless of what any of us might think, argentines feel that real estate is a safe investment, and local prices are a direct result of supply and demand, and of how difficult it is to get money in and out of the country.

 

[Girino]

Thanks, Ries, for your detailed post.
I am currently thinking to invest some money in real estate to have a further income that doesn't depend on my health or working hours. Earlier this year I surveyed Orlando, FL, and from my findings there are cheap houses who could turn into a steady income almost anywhere in Florida.
Of course, I am not looking to live solely on that money, but I'd do it for my own pace of mind, as well as an investment for the future.

I have no connections in the US about this kind of investment and I am basing my thoughts solely on what I read on the Internet and saw in Orlando, so if you have any resource to share to this purpose, your help will be appreciated.
What struck me is that with a relatively small investment (say USD100,000) you can buy a decent place to rent for USD800/month, which are serious money here in Argentina. Whereas in Argentina to have that kind of monthly return, you'd need to buy a USD200,000 home.

 

[pauper]

This makes sense. Thank you for the explanation!
however to save enough for a house (USD100,000 onward) I'd say you have to make more than decent money!

Yes, it is quite often indecent money.

 

[Ries]

I have owned rental properties. It has been my experience that they are more work than you think they will be, and its pretty essential that you be there, close by, to manage em. Pipes break, the wind blows trees down, tenants suddenly lose their jobs and quit paying rent, etc etc etc.

Of course its possible to make money from rentals- but its really really hard to do it long distance, especially when you dont have local contacts.

Apartments in BsAs are rentable as vacation rentals and airbnb for more income than a house in Orlando, and, you are here to hire a mudanza, or fix the leaky toilet.

Real Estate is not free money- it takes work, experience, luck, and money to make money on it.
Buy where you know the market, and know the country.

Argentina is unpredictable- anything could happen. But good departmentos in the centro, in good barrios, will, in the long term, appreciate. Quality 100 year old buildings, with good bones and nice detalles, in good blocks, may go up and down a bit, but, long term, will keep getting more valuable. Thats what I would buy, if I lived full time in Argentina.

 

[Girino]

We don't yet know where we will live next. I don't see myself here in the long run. The idea was to have an income which doesn't depend on that and sort of run itself. We thought about hiring a property manager who would take care of everything. I suppose people "investing" in Miami apartments do so, unless they jump on a plane every time there is something to fix.

 

[PhilipDT]

We don't yet know where we will live next. I don't see myself here in the long run. The idea was to have an income which doesn't depend on that and sort of run itself. We thought about hiring a property manager who would take care of everything. I suppose people "investing" in Miami apartments do so, unless they jump on a plane every time there is something to fix.

Try the stock market. Real estate is a pia unless you can be ontop of it yourself

 

[GS_Dirtboy]

That is clear thinking, Reis. I was always taught to invest where you live, unless you are independently wealthy and then you can have real estate all over the Monopoly board. I am not independently wealthy - though I'm pretty sure I was supposed to be at birth. I think there was a mix-up.

The current exception to this is if I had property here in BsAs now and was thinking about leaving Argentina I'd probably sell my property (there are specific, extraordinary advantages for non-residents who sell now) and then I'd continue to rent. Argentina can be like that crazy Latin girlfriend. She's exotic, sexy and great in bed. But sometimes the unpredictability, moody, and b*tchy attitude isn't worth the sex. She is someone you date, not marry.

However, since we are here in BsAs for the long-term (we have another 8 years until the kids are out of High School) any investments will be here. We have the guarantia in our name if we want it, we can manage the properties ourselves, we can manage the tenants ourselves, we get paid in USD either here or in our account outside of Argentina, and the operating expenses are in Pesos. We have considered investing in the US however the prices in say, Philadelphia, are significantly higher per m2 than here in BsAs. The other place we did consider investing was Orlando. You would need a property manager there. They get paid in USD and all of your expenses are in USD. And, if you ever need to jump on a plane there goes about U$1400 out of your profit margin. Maybe if it was our 5th or 6th property investment Orlando might work.

GS