{"id":38726,"date":"2014-08-10T23:51:12","date_gmt":"2014-08-11T03:51:12","guid":{"rendered":"https:\/\/www.escapeartist.com\/?p=38726"},"modified":"2020-08-24T05:28:02","modified_gmt":"2020-08-24T09:28:02","slug":"ecuador-real-estate-value-the-ecualux-definition","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/ecuador-real-estate-value-the-ecualux-definition\/","title":{"rendered":"Ecuador Real Estate Value – The EcuaLux Definition"},"content":{"rendered":"

Redefining Value in Ecuador<\/span><\/strong><\/p>\n

Warren Buffett, dubbed the \u201cOracle of Omaha\u201d, succinctly stated a sage piece of investment advice: \u201cPrice is what you pay. Value is what you get.\u201d\u00a0 Odd how often this message is distorted when delivered to the \u201cretail investor\u201d – that\u2019s you and I.\u00a0 The deceptive message almost always delivered, whether directly or in a more surreptitious manner, is that \u201ccheap is good\u201d.\u00a0 It preys on our senses.\u00a0 Truthfully, sometimes \u201ccheap\u201d is, well, just \u201ccheap\u201d.\u00a0 We are going to look at a hidden market for Ecuador real estate investing, which represents surprisingly great value, for the astute investor.<\/p>\n

Everyone is rushing to Ecuador because they hear about the great values.\u00a0 It wouldn\u2019t surprise me to find that the dated \u201c$50,000 beach house\u201d myth is still being perpetuated by someone, somewhere.\u00a0 Not even double that price gets you a genuine, move-in ready beach house, but the myths prevail.\u00a0 The hype surrounding the \u201cEcuadorian value\u201d story really needs to be distilled to its very essence – folks aren\u2019t here looking for value, they are looking for \u201ccheap\u201d.\u00a0 Unfortunately, many are ending up with just that.<\/p>\n

For example, 10 years ago\u20267 years ago\u2026maybe even 4-5 years ago, buying an oceanfront condo, in a 25+ year old building, while paying $75,000 – $130,000, was a \u201cgood value proposition\u201d.\u00a0 You could renovate the property and pull out significant \u201csweat equity\u201d capitol from the deal upon resale.\u00a0 However, the story most investors never get told straight, because it is a little \u201cscary\u201d, is that \u201cgood deals\u201d are not static, rather the market is constantly shifting. Economic factors, inventory factors and buying patterns all change over time.\u00a0 In Ecuador, there is a sea swell of change occurring right now, dramatically impacting investment patterns and what represents \u201cgood value\u201d, over the next 5-10 year investment horizon.<\/p>\n

While not the central topic of this piece, I will devote a few more words, by way of contrast, on the aforementioned \u201c25+ year old condos for rehab \u201c topic, because I think some investors and homebuyers are going to get financially hurt\u2026sooner, rather than later.\u00a0 Ten years ago, even 5 years ago, there was nearly no new construction being built on the Ecuadorean cost.\u00a0 Yes, you heard that correctly.\u00a0 Despite all the hype, nothing was happening at ground zero.<\/p>\n

 <\/p>\n

Today, whole different story.\u00a0 Literally dozens of projects are being actively built, with even dozens more sitting at local municipality Planning Department offices.\u00a0 Will they all get built, especially the ones still in a \u201cplanning stage\u201d? No, of course not.\u00a0 That is why one needs to be careful and fully vet any off-plan real estate projects.\u00a0 However, enough of them will be built to impact the market.\u00a0 A great many of these new construction projects are targeting the $150,000 and under buyer market.\u00a0 That\u2019s a whole lot of brand new inventory headed to market, targeted at that buyer class.\u00a0 For example, in Salinas, a developer named Ivan Cobos puts up what seems like a brand new tower per year, with quality common areas and amenities, as well as modern finishes, for under $125,000. The units are on the smaller side, but they pack a great deal of wallop for in that small package.<\/p>\n

So, if you are still buying a run down, 30 year old condo, in an oceanfront building with limited amenities and worse upkeep\u2026what is your true upside?\u00a0 Even if you buy in at $80,000 and put in only $20,000 worth of renovations, you are still out of pocket $100,000.\u00a0 Even if you try to sell it for just $125,000, let alone $150,000, you bump into the Cobos\u2019 buildings and similar, sparkling brand new, under $150,000 condos, all across the coast.\u00a0 What do you think your resale demand looks like?\u00a0 Even if your unit, post renovation, is bigger and better, you still have to schlep potential buyers up a rickety, coffin-sized elevator, passed the peeling paint and odor of mildew, all so you can show them a unit in a building lacking any quality amenities.\u00a0 Marketable? With enough patience and time, anything is marketable. There truly is a buyer for every investment.\u00a0 However, good value?\u00a0 I think not.\u00a0 Cheap\u2026yes, but good value in today\u2019s market reality? Definitely, no.<\/p>\n

Then where is the current value opportunity in the Ecuadorean real estate market?\u00a0 Think luxury.\u00a0 In fact, think \u00fcber luxury.\u00a0 Yes, you heard correctly.\u00a0 The value is in the luxury end of the market. What? How? Has he lost his mind?\u00a0 Well, I misplace a lot of things, but hopefully not my mind.\u00a0 Remember, we are talking \u201cvalue\u201d, not \u201ccheap\u201d.<\/p>\n

The luxury end of the Ecuadorean real estate market, which we are defining as $250,000 and above, is completely flying below the investor radar screen.\u00a0 Well, for most investors, but not our investors.<\/p>\n

 <\/p>\n

Ecuador has gorgeous, oceanfront luxury, residential home estates and dramatic penthouse and luxury condos, with panoramic vistas of the Pacific Ocean.\u00a0 All are selling for a fraction of what they would cost, just south of the border, in Peru or north of the border, in Colombia, for similar product.\u00a0 Note that we don\u2019t make the ridiculous comparisons to the USA market or even Mexico.\u00a0 Still, right here in South America, the neighbouring countries around Ecuador trade at a significant premium to similar luxury real estate in Ecuador.\u00a0 Ironically, I can definitely present a better growth and value story for Ecuador, over Peru, and while Colombia offers exceptional growth perspective, the value side of the story still favors Ecuador.<\/p>\n

Why is this occurring in a country as beautiful as Ecuador, with all of the makings for a premium resort community destination? Simple – that is just not where the buzz has been.\u00a0 The buzz has been surrounding the cheap properties, not the exceptional value properties.\u00a0 There are large tracts of oceanfront land, with 4,000 sf, 5,000 sf and 6,000 sf homes, selling at between $80 sf\/$125 sf across Ecuador.\u00a0 That is for move-in ready, luxury estates.\u00a0 Compare those prices to your home country or Peru and Colombia.\u00a0 An interesting opportunity to say the least, if you want to acquire genuine value today and hang on for stupendous growth over the next 5-10 yeas, conservatively.\u00a0 The sharp rise in luxury prices could occur in as little as 3 years, given the aggressive tourism campaign undertaken by the current Presidential Administration of Rafael Correa. Ecuador is definitely arriving on the radar screen of international home buyers and investors.<\/p>\n

Let\u2019s take a look at some realistic and conservative comparative numbers for oceanfront real estate, so you can best understand why I am so excited at the luxury market opportunity, here in Ecuador.<\/p>\n

Cheap Model Property \/ for Rehab:<\/strong><\/p>\n

Acquisition Price: $\u00a0 90,000
\nRenovation Cost: $\u00a0 20,000
\nTotal Cost<\/em>: $110,000<\/p>\n

Resale Price: $150,000
\nGross Profit: $\u00a0 40,000<\/p>\n

Rough ROI 36.36%<\/p>\n

Basic calculation, without the frills and some added costs, as well as possible rental benefits.\u00a0 However, a very reasonable thumbnail sketch.\u00a0 Not bad, depending on over how many years.\u00a0 Certainly respectable by the standards of many other investment vehicles in today\u2019s volatile investment market.<\/p>\n

Moderate Model Property \/ for Rehab:<\/strong><\/p>\n

Acquisition Price: $130,000
\nRenovation Cost: $\u00a0 35,000
\nTotal Cost:<\/em> $165,000<\/p>\n

Resale Price: $250,000
\nGross Profit: $\u00a0 85,000<\/p>\n

Rough ROI 51.51%<\/p>\n

Again, not bad at all.\u00a0 Added costs, but added return, plus the opportunity for better investment rental yield, since this property category tends to attract a healthier and more upscale rental market.<\/p>\n

Luxury Model Property \/ Move-in Ready<\/strong><\/p>\n

Acquisition Price: $500,000
\nRenovation Cost: $\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 0
\nTotal Cost:<\/em> $500,000<\/p>\n

Resale Price: $1.5 million
\nGross Profit: $1,000,000<\/p>\n

Rough ROI 200%<\/p>\n

Interesting, no?\u00a0 Sure, your acquisition costs sky-rocket.\u00a0 No doubt, not for everyone. Not everyone has half-a-million dollars just laying about and I certainly understand.\u00a0 Still, we strive to be all things, to all readers, so broad cross-section of investment and lifestyle opportunities need to be presented.<\/p>\n

 <\/p>\n

The investment yields a thumbnail, conservative return of 200%!\u00a0 No, I have forgotten the time value of money.\u00a0 I am getting to that.\u00a0 When do I see this appreciation occurring? Definitely in the next 5-10 years, perhaps as early as 3 years.\u00a0 That\u2019s realistic. So, the question you have to ask yourself is – and let\u2019s use the more conservative time frame – can you buy and flip enough \u201cCheap\u201d category or \u201cModerate\u201d category properties, over a 5-10 year period, in order to beat the simple, relaxed, sit back and hold strategy of the luxury market.\u00a0 My analysis suggests not a chance for the \u201cCheap\u201d category. The throughput speed of sales is too slow, in order to get the required ROI.\u00a0 You either sacrifice speed of sales or you sacrifice ROI which leads to a deterioration of your 5-10 year ROI.<\/p>\n

You have an outside chance – and that is just how I view it – in replicating something close to the Luxury end market ROI, with the \u201cModerate\u201d\u00a0 category of real estate, but it is going to be very tricky and you absolutely need a very aggressive real estate professional working for you.\u00a0 With the \u201cModerate\u201d category, the problem isn\u2019t throughput speed of sales, because if you select the right property and perform a quality renovation, there is a ready market available for your product.\u00a0 The catch with the \u201cModerate\u201d market rehab strategy is that too many of my industry colleagues over sell the potential of certain assets in this price range.\u00a0 Not all $160,000 – $175,000 condos are the same.\u00a0 You have to buy the right building, the right location, with the right amenities, in order to make the \u201cModerate\u201d strategy work. Also, the units have to enjoy \u201cgood bones\u201d – right layout and quality of original construction.\u00a0 Otherwise, this strategy flies like a lead balloon, as astute market buyers spurn your offering.<\/p>\n

The problem with the \u201cModerate\u201d real estate strategy, beyond what is already mentioned, is that so few properties of sufficient quality are available on the market at any one time.\u00a0 The inventory for \u201cModerate\u201d real estate rehab, of true substance and quality, is very low at anyone time.\u00a0 If anyone tells you differently, pull out the \u201cred flag\u201d. So even if you argue, as I do, that this strategy has a \u201cchance\u201d at matching the \u201cLuxury\u201d market strategy ROI, odds are you will be chasing fewer opportunities, with a bevy of competitors driving up the costs, if the seller is represented by a quality real estate professional.\u00a0 You have to hire a real estate professional that i fluently bilingual and willing to \u201cbeat the bushes\u201d for new inventory.<\/p>\n

With the \u201cLuxury\u201d<\/strong> strategy, you gain several ready advantages:<\/p>\n

1)\u00a0\u00a0\u00a0 <\/b>Reasonable inventory;<\/p>\n

2)\u00a0\u00a0\u00a0 <\/b>Limited current competition (You are getting in early);<\/p>\n

3)\u00a0\u00a0\u00a0 <\/b>No renovations costs or headaches (for the most part – a few exceptions);<\/p>\n

4)\u00a0\u00a0\u00a0 <\/b>Exceptional rental rate yields;<\/p>\n

5)\u00a0\u00a0\u00a0 <\/b>Fastest appreciating market segment, projecting forward 5-10 years.<\/p>\n

 <\/p>\n

I recognize this real estate product isn\u2019t for everyone.\u00a0 Let\u2019s be more brutally candid, as is my bent. This type of real estate product isn\u2019t for most.\u00a0 However, if you have the financial wherewithal, the luxury end of the real estate market in Ecuador is having a fire sale.\u00a0 Not compared to silly examples for comparison, like Southern California or Shanghai, but relative to realistic neighboring countries, like Peru and Colombia.\u00a0 The time to buy is now – and that is not something I state lightly or often.<\/p>\n

With an eye to this burgeoning marketplace opportunity in luxury real estate across Ecuador, Zen Global, my flagship real estate company, has added the EcuaLux brand of real estate product and services.\u00a0 It is intended to source and bring to market only luxury end real estate assets.\u00a0 The current plan is for additional product opportunities of note, which will expand access to the luxury real estate marketplace to more buyers, to reach our client base by end of 2014 of 1st Quarter 2015.\u00a0 Keep an eye out for new developments, right here on the pages of EscapeArtist Ecuador.<\/p>\n

In the meantime, take a look at just a limited sample of current luxury real estate offers we are presenting within Ecuador, by clicking on the EcuaLux<\/strong> link found on the navigation bar on the Home Page. \u00a0If you are interested in further current details, being kept on an email list for future opportunities, or would like to schedule a showing for some of these special homes of distinction, then please fill out the form below.\u00a0 Whatever you do, don\u2019t forget the wise words of Warren Buffett, \u201cPrice is what you pay.\u00a0 Value is what you get.\u201d<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Warren Buffett, dubbed the \u201cOracle of Omaha\u201d, succinctly stated a sage piece of investment advice: \u201cPrice is what you pay. Value is what you get.\u201d<\/p>\n","protected":false},"author":308,"featured_media":38734,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"content-type":"","om_disable_all_campaigns":false,"footnotes":"","_jetpack_memberships_contains_paid_content":false},"categories":[3],"tags":[],"yst_prominent_words":[31747,7731,31738,1882,16758,31739,31745,16751,1732,31746,31744,1878,2349,31742,31741,31748,31740,31743,3919],"acf":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/www.escapeartist.com\/wp-content\/uploads\/2020\/08\/How-To-Work-In-Ecuador-As-An-Expat.jpg","_links":{"self":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/38726"}],"collection":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/users\/308"}],"replies":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/comments?post=38726"}],"version-history":[{"count":1,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/38726\/revisions"}],"predecessor-version":[{"id":38751,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/posts\/38726\/revisions\/38751"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media\/38734"}],"wp:attachment":[{"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/media?parent=38726"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/categories?post=38726"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/tags?post=38726"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.escapeartist.com\/wp-json\/wp\/v2\/yst_prominent_words?post=38726"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}