Purchasing property as a foreigner

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Re: Purchasing property as a foreigner

Post by admin » Sat May 12, 2012 5:09 pm

The trick to buying property in Chile, for purely investment purposes (vs. living), is to get ahead of the crowd from Santiago. That takes time, and is more art than science. Once you get the swing of it however, the next "it" place will be pretty obvious. From there you have to cherry pick the distressed properties in that area (e.g. auctions, new parcels on the edge of urban areas, quick sales). That often comes down to being at the right place at the right time, and doing a lot of homework. Mostly persistence.

Yea, you can buy something at market, or just under market, and over say 5-10 years do o.k. with say a 10% to 20% return a year. However, if you want real asset appreciation (50% or better), that takes some skill.

The problem is for most gringos, that is more time and money than they are willing to spend, or even know how to spend. It is something you need to live in Chile for a long time to get the swing of it.

You also need to fight your gringo real estate intuitions. I have seen way too many gringos, thinking like gringos, believe they found the next "it" place and 10 years later are still waiting. It might very well be the next "it" place for Chileans, they just fail to judge the real speed of development in a particular area because they are believing development happens like it does in the States, Canada, or Europe.

For instance, too many gringos get caught looking at the scenery in a rural area like Chiloe or the Patagonia, and assume that Chileans will catch on at any moment and want the same view. Most Chileans with money, hate being anywhere remote for very long. I have taken Santiago Chileans out in the country, not more than 30 mins from a town, and they have a look of horror on their face like they are going to break their leg and never be found. For investment targeting the Chilean market, I would never buy anything more than say 5-10km outside some sort of urban area.

Home appreciation is marginal at best in much of Chile, because the homes are marginal at best. Some places might see some big rises in value (e.g. Puerto Varas), but they are mostly exceptions. When home values increase, it is typically because there is real living demand, not summer home demand. Even then, raw property and new home almost never equal the market price. Even crap homes are twice the value of property + cost of building. Again, depends where, and what.

Still, for most gringos, buy something YOU like and will use first. Forget about trying to guess the market until you have been here a long time.

As for the great investment in the States, you know if you crunch the real numbers, most of those "great deals" have been complete investment losses over the last 30-40 years. When you add property tax paid+ depreciation+inflation + mortgage costs (if you have one), among rural properties in the States and many urban properties, almost no one in the U.S. owning property right now is ahead of the game. Perhaps in the center of particular urban areas, but for the most part, real estate in the U.S. has the illusion of value; but, I am sure plenty of people will continue to throw good money after bad. Guess everyone will just have to pray for another bubble.

I have a bunch of theories as to why real estate stays so consistently high in Chile. Real estate is a no brainier investment for most Chileans, because it is straight forward and easy to understand. If you hold property in Chile for at least 1 year before selling, there is personal no income tax on it. While you own it, in most of Chile property tax is really low to none existent. So it is completely possible to buy a property for say $10,000 US, hold it for 5-10 years, pay no property tax on it, and then sell it with 10% or better appreciation a year. If you bought a comparable piece of property in the States, you would likly not get a 10-20% appreciation per year, but would get a property tax bill to not only eat away at your margins but the investment principle too. Don't forget your income tax and so on after you sell it, closing costs, real estate agent fees, and so on, and so on. Ask, what is your true total cost of ownership?

So, on the face of it land in the United States might be cheaper by price tag, but not in a total cost of ownership sense.
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avaseer
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Re: Purchasing property as a foreigner

Post by avaseer » Wed Oct 03, 2012 7:44 am

Finally made it over, will be here for the next 3 or so months, and will be actively looking into all factors involved and areas. I will try and write a good summary towards the end for my opinions and personal experiences so hopefully other green gringos can get a good idea of whats involved.

Not to say this board has not been helpful, as it has been my primary source of information aout what it is like and is the best tool i have found so far besides experience, but i hope my experiences will give others a decent idea aswell

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Re: Purchasing property as a foreigner

Post by ABIII » Thu Oct 04, 2012 11:58 am

admin wrote:The trick to buying property in Chile, for purely investment purposes (vs. living), is to get ahead of the crowd from Santiago....

...

The problem is for most gringos, that is more time and money than they are willing to spend, or even know how to spend. It is something you need to live in Chile for a long time to get the swing of it.

You also need to fight your gringo real estate intuitions. I have seen way too many gringos, thinking like gringos, believe they found the next "it" place and 10 years later are still waiting. It might very well be the next "it" place for Chileans, they just fail to judge the real speed of development in a particular area because they are believing development happens like it does in the States, Canada, or Europe.
...

Home appreciation is marginal at best in much of Chile, because the homes ar

Still, for most gringos, buy something YOU like and will use first. Forget about trying to guess the market until you have been here a long time.
...
I have a bunch of theories as to why real estate stays so consistently high in Chile. ...

some great advice there admin!

Santiago is so full of money and prices are so high that even young people there are looking at land in places they like (emphasis there). in their own words, many young people want to replicate what their grandparents did with Zapallar, or their parents with Cachagua.

And yes, sadly Pucon has gone downhill
we looked at it as a place to live, but the off season and it being a one industry town were risks we didn't want to take
at one point, it was a perfect combination of its landscapes and interesting people. there was a lot of promise in the air, but people trying to make a quick buck (both locals and outsiders) did it little good
Based in Chile - 1990
Lake District - 2009

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Re: Purchasing property as a foreigner

Post by Donnybrook » Thu Oct 04, 2012 12:45 pm

ABIII wrote:
admin wrote:The trick to buying property in Chile, for purely investment purposes (vs. living), is to get ahead of the crowd from Santiago....

...

The problem is for most gringos, that is more time and money than they are willing to spend, or even know how to spend. It is something you need to live in Chile for a long time to get the swing of it.

You also need to fight your gringo real estate intuitions. I have seen way too many gringos, thinking like gringos, believe they found the next "it" place and 10 years later are still waiting. It might very well be the next "it" place for Chileans, they just fail to judge the real speed of development in a particular area because they are believing development happens like it does in the States, Canada, or Europe.
...

Home appreciation is marginal at best in much of Chile, because the homes ar

Still, for most gringos, buy something YOU like and will use first. Forget about trying to guess the market until you have been here a long time.
...
I have a bunch of theories as to why real estate stays so consistently high in Chile. ...

some great advice there admin!

Santiago is so full of money and prices are so high that even young people there are looking at land in places they like (emphasis there). in their own words, many young people want to replicate what their grandparents did with Zapallar, or their parents with Cachagua.

And yes, sadly Pucon has gone downhill
we looked at it as a place to live, but the off season and it being a one industry town were risks we didn't want to take
at one point, it was a perfect combination of its landscapes and interesting people. there was a lot of promise in the air, but people trying to make a quick buck (both locals and outsiders) did it little good
We have always avoided Pucón in February because it is a zoo, but this past summer it was the only window we had for crossing to Argentina so we booked at the cabins we have always stayed in. The place looks like a high security prison now: bars on the windows, an alarm on the door. Pucón has grown and grown and does not look the better for it.

picalena
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Re: Purchasing property as a foreigner

Post by picalena » Fri Oct 05, 2012 9:27 pm

Donnybrook wrote:
ABIII wrote:
some great advice there admin!

Santiago is so full of money and prices are so high that even young people there are looking at land in places they like (emphasis there). in their own words, many young people want to replicate what their grandparents did with Zapallar, or their parents with Cachagua.

And yes, sadly Pucon has gone downhill
we looked at it as a place to live, but the off season and it being a one industry town were risks we didn't want to take
at one point, it was a perfect combination of its landscapes and interesting people. there was a lot of promise in the air, but people trying to make a quick buck (both locals and outsiders) did it little good
We have always avoided Pucón in February because it is a zoo, but this past summer it was the only window we had for crossing to Argentina so we booked at the cabins we have always stayed in. The place looks like a high security prison now: bars on the windows, an alarm on the door. Pucón has grown and grown and does not look the better for it.
Hey now! We have that cool new bypass! And the Unimarc is open now! And. Um.

Ok, so they are already tearing up the cool new bypass to put in a huge pipe they probably could have put in before. And I hear there are plans for a bike lane, so they will be tearing it up again for that.

And the Unimarc is, you know, even more pricey than the previous monopoly supermercado.

But, hey! We have a lake, and a volcano. What more do you need?

And one thing we have noticed since March is that EVERYTHING is for sale this year. Criminey. I mean, I know it was always all for sale anyway, but now there are actually signs up for everything.

pl
A woodsman was once asked, “What would you do if you had just five minutes to chop down a tree?” He answered, “I would spend the first two and a half minutes sharpening my axe.” - Dubious source on the internet

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Re: Purchasing property as a foreigner

Post by admin » Fri Oct 05, 2012 10:43 pm

The pucon real estate market is shark infested waters. Lot's of slime ball agents from Santiago, and a few local ones, poaching each other's properties. They love to put up like 10 signs on one property, and they don't even know the owner of the property. We have nearly prosecuted one or two for trying to blackmail our clients.

Also I get the sense, due to the raging economy, that the formally new rich, that have been rich a while now, are finally getting the memo that Pucon is not "the place" in southern Chile any more and are looking to get out from their investment there. That only took them like 20-30 years, but it was bound to happen sooner or later. Perhaps if they leave, and take their partying teenagers with them, Pucon might recover in another 10 years.
Spencer Global Chile: Legal, relocation, and Investment assistance in Chile.
For more information visit: https://www.spencerglobal.com

From USA and outside Chile dial 1-917-727-5985 (U.S.), in Chile dial 65 2 42 1024 or by cell 747 97974.

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