The benefits of investing in Buenos Aires
As I have stated before, one of the major reasons I invested in Buenos Aires was to capture the upside appreciation of the real estate market. Prices of property are just now reaching the levels they had attained before the currency devaluation of 2001. Wow, if I could buy real estate today in California at 2001 prices! In most major US cities nationwide, housing prices have come close to doubling in that same 5 year period. In my opinion, the depressed real estate prices in Argentina are a short term phenomenon. Why do I say this? Yesterday, a 74 square meter apartment on our street, two blocks up just sold for $140,000. The apartment was in a 60 year old building and needed a complete renovation. I purchased my 75 square meter apartment in late October for $103,350! If you believe in comparables, that is a pretty exceptional return for 2 1/2 months. In my neighborhood (Recoleta), properties in the range of 75-100 SM are being snapped up the day they are put on the market -- Demand is very high. But why? I've noted before that Buenos Aires is an excellent city that has all of the amenities of any large capital city. Tourism numbers for Buenos Aires seem to validate this -- a 8% increase over last year. The upscale hotels are at capacity and have nearly a 85% occupancy rate. There is a need for short-term rental apartments to keep up with the swelling tourism and business travelers. We will rent our apartment for $150/nt, which is 1/2 the price and twice the size of a comparable hotel room. I believe I will make my total investment back in less than 4 years. In four years I also believe I will see an average of 20% appreciation per year.
Taxes
Annual property taxes in Argentina run about .75% of the fiscal value of your property. Unlike the US, you are not sent an annual property tax bill. As a foreigner, it is up to you to remember to pay this. Annually you need to have an accountant prepare your tax bill. Then you need to assign a local resident to go down to the tax office, stand in line, and pay this tax bill for you. This is where it helps to have a friend living in Argentina ;)
The capital gains tax in Argentina is 0%, yes 0%. Whether you choose to roll your profits into another property investment in Argentina or wire it out. There is a 1.5% tax called the "Transfer tax". It is 1.5% of the sales price. However, you can get this waived if you are using the proceeds and purchasing another property here in Argentina.
Labor Prices
In my last post, I discussed the work that was done to my apartment. Labor here is cheap compared to the US. The people I work with are very skilled tradesmen that take pride in what they do. To completely renovate a 1200 sq/ft apartment including a new kitchen, bath, walls, floors, electrical, plumbing, appliances, and even floorplan configuration plan to spend between $20K and $30K. Obviously, it is difficult to provide a rule of thumb, but generally, work is about 1/3 the cost of similar work in the states. I would also say that in my experience the quality of work is similar.
In my next post, I will be discussing a project I am considering -- Construction of a 10 story building in downtown Buenos Aires! Stay tuned.
As I have stated before, one of the major reasons I invested in Buenos Aires was to capture the upside appreciation of the real estate market. Prices of property are just now reaching the levels they had attained before the currency devaluation of 2001. Wow, if I could buy real estate today in California at 2001 prices! In most major US cities nationwide, housing prices have come close to doubling in that same 5 year period. In my opinion, the depressed real estate prices in Argentina are a short term phenomenon. Why do I say this? Yesterday, a 74 square meter apartment on our street, two blocks up just sold for $140,000. The apartment was in a 60 year old building and needed a complete renovation. I purchased my 75 square meter apartment in late October for $103,350! If you believe in comparables, that is a pretty exceptional return for 2 1/2 months. In my neighborhood (Recoleta), properties in the range of 75-100 SM are being snapped up the day they are put on the market -- Demand is very high. But why? I've noted before that Buenos Aires is an excellent city that has all of the amenities of any large capital city. Tourism numbers for Buenos Aires seem to validate this -- a 8% increase over last year. The upscale hotels are at capacity and have nearly a 85% occupancy rate. There is a need for short-term rental apartments to keep up with the swelling tourism and business travelers. We will rent our apartment for $150/nt, which is 1/2 the price and twice the size of a comparable hotel room. I believe I will make my total investment back in less than 4 years. In four years I also believe I will see an average of 20% appreciation per year.
Taxes
Annual property taxes in Argentina run about .75% of the fiscal value of your property. Unlike the US, you are not sent an annual property tax bill. As a foreigner, it is up to you to remember to pay this. Annually you need to have an accountant prepare your tax bill. Then you need to assign a local resident to go down to the tax office, stand in line, and pay this tax bill for you. This is where it helps to have a friend living in Argentina ;)
The capital gains tax in Argentina is 0%, yes 0%. Whether you choose to roll your profits into another property investment in Argentina or wire it out. There is a 1.5% tax called the "Transfer tax". It is 1.5% of the sales price. However, you can get this waived if you are using the proceeds and purchasing another property here in Argentina.
Labor Prices
In my last post, I discussed the work that was done to my apartment. Labor here is cheap compared to the US. The people I work with are very skilled tradesmen that take pride in what they do. To completely renovate a 1200 sq/ft apartment including a new kitchen, bath, walls, floors, electrical, plumbing, appliances, and even floorplan configuration plan to spend between $20K and $30K. Obviously, it is difficult to provide a rule of thumb, but generally, work is about 1/3 the cost of similar work in the states. I would also say that in my experience the quality of work is similar.
In my next post, I will be discussing a project I am considering -- Construction of a 10 story building in downtown Buenos Aires! Stay tuned.
posted by britownsend | 7:40 AM
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