Thinking about investing in the real estate market in Ecuador? In the following guest post, Jesse Bayer of Abundant Living Ecuador, shares tips for expats buying property in Ecuador. Bio at end of post.
Check our full guide to Ecuador real estate.
7 Tips for Expats Buying Property in Ecuador
1. Set Your Parameters First
Know your preferences and narrow down locations based on your parameters:
- coast vs. mountain vs. Amazon
- city vs. rural
- humid vs. dry
- dry season vs. year round rain
- expat community vs. no expats in the region
- warmer vs. cooler
These are some of the things you should think about and then narrow down and rule out regions based off of your answers to these questions.
Once you have identified areas that meet your parameters you can focus your search on those regions and cut out a lot of would be wasted time.
2. Due Diligence, Due Diligence, Due Diligence
There are no comps available in Ecuador and no title insurance. Attorneys and related professionals do not have the same level of fiduciary responsibility you may be used to elsewhere. In addition, Ecuador may represent a new language, culture and business climate to what you are accustomed to.
This puts a huge onus on the due diligence process.
Hire a trusted real estate professional and attorney and make sure the I’s are dotted and T’s are crossed.
Due diligence means:
- checking the title by requesting the ‘Certificado Simple’ from the Property Register.
- checking the zoning and any potential restrictions on land use by requesting ‘La Linea de Fabrica’ from the Municipio.
- checking the boundaries and ensuring the legal boundaries match the actual boundaries.
- checking for any water or mining concessions.
3. Understand the Market
There are no ‘comps’ available in Ecuador. Accurate sales prices are not recorded – therefore there is no aggregate data available to help you get a sense of fair market value.
You essentially have two choices on how to go about understanding the value of property in Ecuador.
- Find a trusted professional who can help you understand valuation and walk you through the process.
- Create your own ‘database’ of comps by seeing enough properties with similar characteristics in similar areas to start to understand what constitutes value in Ecuador.
Urban Areas: If you are looking in urban areas (towns or cities) gaining a handle on valuation can be fairly straightforward. Construction and lots (small pieces of land) have a basic price per square meter depending on their characteristics and level of quality/luxury.
For example if you are looking for an apartment in a populated area, by looking at 5 apartments and calculating the price per square meter of each apartment, you will begin to understand the value of apartments in the area you are looking at. Same with lots as well as houses.
Rural Areas: For rural areas and larger pieces of land valuation can be more difficult and prices can have significantly wider margins.
Land is valued based off of traits such as: location, proximity to paved road, infrastructure such as; water, electricity, access, etc., amount of flat, quality of soil and overall utility.
Focusing on an area and checking out several properties with similar characteristics can start to give you a basic idea of price per hectare in the area you are looking at.
Once you have a handle on the market and you make an offer or come to agreement on a price, the due diligence truly begins.
4. Consider Renting Before You Buy
This tip is dependent on the personality of the individual buyer and level of commitment to Ecuador – the point is to wait to buy until you are sure that Ecuador is where you want to be. Real estate is not a liquid asset.
5. Take Your Time / Keep Digging
See as much as you can: Related to the due diligence process, it is important that you see enough property that you are confident you understand both the value and characteristics/parameters of what you are buying.
6. Work With a Professional But Oversee Your Affairs Personally
It is highly important that you work with trusted professionals in the real estate purchase process.
That being said, it is also important that you are vigilant in understanding and overseeing your affairs. Make sure you understand everything, that it makes sense and that you are comfortable with the process. If you have concerns, ask questions, double check, get second opinions and only move forward when you are convinced everything is on the level.
7. Do Business Like You Would Anywhere in the World
If you are buying real estate in Ecuador, you are doing business in a foreign country. This means that it is more important to ensure that you make good decisions than if you were operating in a place you are more familiar with.
I have seen too many mistakes made by foreigners being overly trusting, not doing there due diligence and getting railroaded.
About Jesse Bayer: Jesse was a New York based real estate investor who relocated to Ecuador in 2013 and is now the Co-Founder and Managing partner at Abundant Living Ecuador, a Real Estate and Relocation Services Company based out of Loja. Jesse has prepared a free Ecuador Relocation Guide.
Read more about why Jesse decided to move to Loja, Ecuador.
Have a question for Jesse? Join him in the comments. Have a tip or lesson learned? Please share below.