Buying property in Argentina - Part 1
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Buying property in Argentina - Part 1
Rough guide for acquiring property in Buenos Aires
Welcome Avatar! Before crypto, border crossings with some bricks of USTT cash was a pretty regular thing to buy a home in Argentina as a foreigner (besides being illegal, it’s also a great way to lose your cash if not declared). Nowadays, the process is a lot easier, although it still involves cash in many transactions.
After asking peeps on if they would be interested in receiving a post on buying real estate in Argentina, looks like there was interest.
This will be a deep dive into how to acquire property, and possible pitfalls due to local market / currency conditions. In part 2 of this post that will come out later this week I will dive into purchasing land.
The Covid Real Estate Crash
Everyone is familiar with the lockdown insanity that took hold of nation states during the start of 2020, and Argentina is no exception.
However, in a highly inflationary economy combined with an exodus of emigrants leaving for Europe or the US in search of a better life, lockdowns can have an even worse effect for property prices, especially in a market without mortgages and a lack of credit overall. People tend to start selling their homes for less, only to see that even at lower prices buyers are scarce.
This resulted in an overall drop in property prices of -20% between 2020-now and in some cases even -30% (mainly outside of BA). This price floor has stuck over time until today, and can be tested. Some local friends of mine were able to buy a nice house last year for an additional -15% below the listing price, just because sellers needed cash fast.
This means you can find some real bargains if you take the time, and there are many distressed home owners willing to sell you their property for even less than listed prices in USTT terms.
Property in Buenos Aires, La Ciudad de la Furia
One of the most important things to keep in mind when investing in literally anything in the Argentine market, is that risk is always around the corner.
If you want to learn more about the local currency devaluation and inflation dynamics, I recommend you read my guest post on BowTiedBull here:
The Argentine property market is no different: degens only.
Buenos Aires is by far the most liquid market with regards to buying and selling property. The city (population 3.5M) and the outskirts (pop. 15M+) host almost half the population of the country. Most available unit types are 1) apartments & studios, 2) PH’s (propiedad horizontal, or connected houses), and mansions.
Good BA Neigborhoods to buy / rent
Traditional evergreen neighborhoods are Puerto Madero, Belgrano, Recoleta and Palermo (very interesting gentrification process in the past 10-15 years). Neighborhoods adjacent to the Palermo show a similar gentrification with prices steadily increasing (examples are Almagro, Villa Crespo, Chacarita, Colegiales).
Microcentro is the financial district comprised of barrios San Nicolás and Montserrat, and property here is mainly commercial. I own a shared office space with partners in this area and for that purpose it is fine (although during and after covid income from this has been virtually non-existent). I would recommend against buying residential property here unless it is on the other side of the avenida 9 de julio westward.
In recent years, the city government has tried to gentrify also the southern part of the city by providing local tax cuts for certain businesses categories settling there (Parque Patricios, Barracas), but these efforts have not resulted in higher prices for properties there, even though there has been a lot of construction.
This is mainly due to the fact that these neighborhoods “feel” a bit disconnected to the rest of the city, and have less gastronomy and nightlife options. Still, if you have to be in Microcentro every day for an office job, Barracas would actually be a great neighborhood.
Price levels
Keep in mind that even the Buenos Aires property market can be very stale so once you bought it might be hard to get rid of the property (this is my experience after the covid crash, specifically), but I doubt prices will go a lot lower than this.
This is the pendulum swinging the other way: in Argentina there are no mortgages, credit bubbles, etc, since there is no credit and people pay for their homes in cash UST trash token. This is why local investors tend to put their savings in local real estate or dollars. Both tend to be a better store of value over time.
Here you can find an interactive map with average USTT prices per neigborhood so you can browse around.
Returns on rentals are best for high-end properties that can be turned into luxury Airbnbs in a good neighborhood, see a $4,500/mo rent example here.
This is an example of a good apartment in a A+ neighborhood (Palermo). Higher yielding property is usually in the $300k-$500k range or more. There are a lot of deals though so differences can be huge. In the remodelling section below I will give a practical example of cheaper property.
Sometimes the owners have to get rid of the property asap because of moving / lack of liquidity and you can find really good deals in terms of price/sq ft according to a certain neighborhood.
Buying into a new construction project - Pozo
Buying a property in a construction project (also called comprar en pozo) is a way of buying properties when they are still in the initial construction stages. It is an investment system that consists of a pre-sale; buying the property before it is 100% finished.
Again, this is usually only available to permanent residents, but it can be a very interesting option for investors, since it only requires an initial 25% deposit and after that you pay the remainder of the 24 or 36 instalments on a monthly basis.
In a highly inflationary economy this can be very beneficial if you happen to come across instalments in pesos (hard to find these days and most are in dollars now), because even when adjusted for inflation by the Chamber of Construction rate (called CAC), you end up paying less for the property in US trash token.
At the end of 2017, I converted some of my crypto gainz and bought an Airbnb rental in Palermo with PESO pozo instalments. This turned out to be a great call, besides making it right before the next 2018 crypto bear market, I was able to pay a lot less in US Trash Token terms, because I had 3 elements working in my favor:
A devaluating peso (this made the monthly payments cheaper in dollars over time, even with instalments adjusted for inflation);
The adjustment rate applied to the instalments was closer to the official inflation rate, which was below the real inflation rate and;
The neighborhood I bought in actually went up a lot in price in the period after my purchase.
Long term rentals - scarcity, garantías & ley de alquileres
Long term rentals in pesos are only available to permanent residents (after 3 years of living on a temporary residency). Foreigners without permanent residency have to rent in dollars, either through Airbnb or other local platforms.
Real estate agencies and owners will almost always request a guarantee (garantía) for long term peso rentals, which is an existing property in Buenos Aires that can be used as collateral.
This makes it harder to get access to the permanent (3 year) rental contracts in pesos: if you don’t have a family member or good friend that is willing to be a guarantor, no rental for you.
There are some services that charge you a 1 or 2 month fee for a garantía, but you have to do your due diligence before using any of these - before being a property owner myself I actually got duped with a fake guarantee that was worthless - when I went back to complain the office that gave it out was no longer there (quick pump and dump of 1-2 days and then they disappear). Probably the services promoted by the city government are safe to use.
As of late, there has been a lot of media buzz around the ley de alquileres (rentals law), which was so badly drafted and implemented that it basically took a big chunk of the rental supply off the market.
With the new law, property owners are tied to 3 year rental periods and have even less possibilities of ending a long term rental contract because it gives the renter a lot more rights (even if the renter is clearly in breach of contract). As Infobae.com describes here in an article in April, only higher end rental properties remain on the market (emphasis in original):
The supply [in Buenos Aires] is so scarce that it is difficult to satisfy the demand. The problem is a federal one: in Buenos Aires there are only 5,000 units for rent, of which 70% are in the premium market (valued at more than USD 1,000 per month) and temporary (they are rented between one month and with renewals of up to one year). at most). And in the interior, according to sources in the sector, 25% of the owners decided to move their homes that they previously offered on lease for sale or directly prefer to have them empty until the panorama is clarified (estimated at more than 300,000 units).
Politicians seem to learn about the laws of supply and demand only after government intervention. EVERY sane person mentioned this law would diminish supply and severely increase rent prices, but the urge to “protect” the renter was high, and now the renter can’t find a normal rental property.
After seeing the negative consequences of this law, politicians wanted to revert it and change it again. However, the new draft proposals going around with amendments don’t make it seem there will be a change for the better even if they end up changing it, so I don’t see current rental market dynamics changing anytime soon.
This is good news for foreign investors, as long as this new law does not mess with temporary & short term rental options like Airbnb. So far, that segment of the rental market has been spared from intervention and continues to provide nice US trash token revenue streams. I will provide an update if this changes.
Renovating & remodelling
Although local laws like the one mentioned above might scare foreign law-abiding citizens, it is important to keep in mind that:
Meaning: even though there are rules, these are meant to be tested or bent to the limit, and virtually anything goes. The same is the case for renovating and remodelling. Of course there are limits, depending on your future plans of reselling or not. Buenos Aires tends to be a bit stricter in terms of official permissions for remodelling.
An official permit is only needed if you decide to extend the square footage. If you request an official permit (paperwork can take months), you are able to include that addition/extension in the official property deed. That way you can include it on the books in a future sale.
In my personal experience though, if you don’t care about getting an official permit, the process is very smooth. After buying my primary residence (PH) in 2010 for $75k, and the adjacent house for $50k in 2018.
After renovations I joined the two units and remodelled everything (plus additional bathroom + bedrooms on the top floor) for $90k total. Process took about 9 months (the neighboring property basically had to be redone completely). See the result here:
The property is located in a neighborhood adjacent to A+ Palermo, and quickly gentrifying. Original state was pretty abismal as you can see and I did have the energy to go through that process with architects and a construction company.
Finished like this it is probably worth around $250-300k now (potential profit would be $35k-$85k). Not a great return if sold but since it is my primary residence and I don't intend on selling it any time soon I don’t really mind.
The purchase process
Local property deeds can be a bit creative sometimes, in the sense that for older properties you’ll sometimes see deeds that do not include all sq. footage of the property (because more was added after purchasing and the owners never took the effort of getting a permit).
This is not an issue as long as you can agree to an additional “off the books” price with the seller, which you pay outside of the contract/deed. Keep in mind though that this is not registered anywhere, so once you want to sell the property you will have to take that same route as the seller.
Payment / getting money out
As a foreigner, the easiest way is to pay for the property outside of Argentina. Many sellers and real estate brokers have escrow accounts in the US, so the easiest and cleanest way is to wire the money directly into the seller’s account. That way you keep the official trail of the money, and you can include that as evidence in the future.
Another way is to open up a local bank account in USD, wire the money to that bank account and to withdraw it / transfer it to the seller. Keep in mind that this process includes additional local points of failure / hold ups and can take significantly longer.
The third and least “clean” way of purchasing would be to get money in through a cueva1 and pay the seller directly in cash, if the property is below $100k you will likely get away with it (this is not financial advice).
Selling a property
When you sell the property, the taxes due depend on if you’re a resident or not.
If you are a foreign resident, the person who pays the value of the property must retain 15% capital gains tax as a single and definitive payment and pay it to the National Treasury. The capital gains tax rate is 15% of the net profit. If the property is a your own personal residence, the sale is exempt from capital gains tax.
Only the expenses actually incurred in Argentina such as commissions, fees, taxes, rates, etc. may be deducted for the capital gains tax.
One thing to keep in mind is that if you did not use the property as your primary residence, the government will *assume* you used it as a rental, even if you didn’t (they check this based on kwh usage; if the property used 100 kwh or more, you automatically rented it out).
Only if you’re able to prove that you were the main beneficiary of the property, this additional rental tax would not be due. Of course if you paid rental tax during the years you owned the property, this would not be due.
If are a resident in Argentina and you acquired the property before 01/01/2018, and you are not a taxpayer of Income Tax, you pay 1.5% of the value of the transfer. If the sale of the property corresponds to the only home and/or land you have and said sale is for the purpose of acquiring another for your own home, the operation is excluded from this 1.5%. For properties acquired after 2018, you do not pay the 1.5% but the same capital gains tax of 15% over the gainz difference between purchase and sale.
Other costs are usually legal fees (sales have to be concluded through a notary) and local taxes, can amount to an additional 4-5% of the sale.
This is also why many sellers lower the price of an official sale contract, to pay less taxes and notary fees. They receive the rest under the table, and the sale is completed. The danger with this is if you pretend to sell the property and the buyer insists on including the full market price in the deed, you would be hit with a pretty significant capital gains tax that isn’t even real. That is a risk that most foreigners don’t realize because they just assume to put the full price in the contract once they sell it (happened to a friend of mine and he wasn’t too happy about that).
BowTiedMara’s plans for the near future
I’m personally looking to relocate to Mar del Plata and buying another house as a primary residence. Not planning on selling my rentals or current primary residence here in Buenos Aires, I’ll probably rent that out long term (my neighbors will likely not accept having an Airbnb next door - that’s the downside of PH’s and having a shared corridor).
Recommended property portals
The best real estate portals to use here locally (in no particular order) and to get an idea of prices, are:
soloduenos.com (higher chance of finding even better deals, since only owners can list here)
Knowing at least some basic Spanish would help, since none of them have an English version.
Let me know in the comment section (paid subscribers) if you have any particular questions or comments about RE in Argentina. The next post will dive into land purchases.
For a detailed overview of how cuevas work, see my guest post on BowTiedBull
Buying property in Argentina - Part 1
¿Lo he entendido bien: el primer inmueble que poseo no está sujeto a impuestos? Si poseo más de 1 apartamento, ¿tengo que pagar impuestos?
¿Es el agente inmobiliario responsable de la legalidad y, por ejemplo, de la correspondencia de los documentos con los metros cuadrados reales?