Like any other investment, buying real estate in Ecuador poses a certain level of risk. You could end up losing your money if you are not careful. Buying a property is usually a big expense – even if you are buying from a country that costs much less than what you will encounter back home. If you end up losing on the transaction, it will hurt your overall finances. Sometimes, the setback could cost you a lifetime’s worth of savings.
Obviously, you want to avoid this scenario as much as possible. The best way to do that is to find out the risks involved in buying real estate in Ecuador so you can avoid them. The gains of investing in a property is too great for you to skip the opportunity just because you are scared of the risks. Find out what the possible risks and problems will be and create a plan that will help you avoid or minimize your losses just in case they do happen to you.
Risks that you need to consider before investing in a property in Ecuador
In order to identify the risks that you will face, you have to understand the difference between buying a property in your home country and here in Ecuador. Not only will you have different price ranges, you also have to deal with different processes and laws. You need to consider the homebuying culture in Ecuador so you can take advantage of it. Some people call it buying real estate in Ecuador just like a local. That is usually how you can get the best deal out of your real estate investment.
Here are 3 important risks that you should be on the lookout for when buying a property in Ecuador.
Paying for a “Gringo” price.
The first risk is paying for a gringo price. Gringo is a term used in Ecuador to describe expats. When we say you are at risk of paying a gringo price – that simply means paying more than what the locals would. This is not to say that Ecuadorians will swindle you out of your hard-earned money. But they do have a notion that expats have more money than they do and they will quote a bloated price when you are offering to buy real estate in Ecuador. What you can do – to avoid paying more than what you should, is to negotiate. Always negotiate the price in Ecuador. Whether you are buying a house or a piece of meat in the local market, make sure that you negotiate the first price that will be quoted to you.
Failing to consider your tax obligations.
When you invest in a real estate in Ecuador, you may have to pay taxes in both fronts – your home country and of course, in Ecuador. Starting from the purchase itself, you have to pay taxes already (e.g. transfer tax at 1% of selling price). In case you intend to use the property to have rental income, you need to pay income taxes for that as well. The property tax that you have to pay in Ecuador is also an expense that you need to consider. Make sure you are aware of all these obligations so you can incorporate them in your budget.
Buying with a tourist state of mind.
This risk simply involves buying a property that turns out to be far from your expectations. If you buy with a tourist state of mind, you are usually blinded by the tourist attractions around you. Although Ecuador is a great place with a beautiful views around and the low cost of living, you have to open your eyes to the reality that this is a developing country. If you intend to live in the property you just bought in Ecuador, make sure you can adapt to life in this country. Otherwise, you might end up packing your bags prematurely and be in a hurry to sell of your property so you can go back home. Understand what your life will be like before you purchase a house in Ecuador.
Buying a real estate in Ecuador is a commitment. Do not think that the low price makes it a low risk investment. It is still costly. Make sure it is worth every cent and that you are prepared for all the obligations of being a homeowner in Ecuador.
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