Welcome Avatar! Not a week goes by without someone landing in my dms with the same plan of buying a wreck and fixing it up with cheap local labor, so he can sell it for a 2x to the next gringo. Easy gainz, no es cierto? If you walk around San Telmo, Recoleta or Retiro and see some French facades with plants growing out of the balconies, and then check the price per m2 against Madrid or Miami, there’s a high chance that you will conclude that this is the obvious play.
During my first 10 years in Buenos Aires, I had the same thoughts. Even now, whenever I see a crumbling house or PH in complete shambles with a Se Vende sign on it, I still look up the price online at the realtor site promoting it.
As discussed in one of my first Buenos Aires real estate articles, Buying property in Argentina - Part 1, I have some experience in fixing up worn down PHs.
So when a fantastic interview popped up on El Club del Ladrillo, a local real estate podcast, I took notes like a degen reading a new memecoin whitepaper. Episode #60 features Manuel Irurzún, who has been flipping apartments in Buenos Aires for more than fifteen years and has become THE influenza on Instagram talking about flipping in CABA, but not without merit: all his flips are real and his content is very good. He has amassed close to 1 million followers in just 1.5 years, so his business model definitely appeals to more people than just me.
Irurzún is very open about his numbers, which is great and a rare ocurrence in Argentina where most pricing is opaque, and very few folks in the business community will actually show their margins.
This article will run his playbook through the eyes of a foreign investor interested in flipping homes in Buenos Aires. We’ll go over what still works and what does not work anymore, what the ideal macro backdrop is for this business model, and some of the ways it can go horribly wrong.
The Balvanera Dental Office
Irurzún’s first flip he discusses in the video was a dental office on Avenida Pueyrredón and Córdoba, in Balvanera (also called Once), in 2011. I have lived in this area and if there’s one ideal place to find run down properties with beautiful façades, it’s here (still is, but that is also because it still is a very illiquid neighborhood).
The dental office was in such a bad shape that the realtor didn’t even want to show it to him, and the people who had seen it ran away in horror.
His parents lent him the start up cash to fund the purchase ($65,000 USD) for the 100+ m2 property. His total renovation costs amounted to only $12k USD, converting the clinic into a four-room home. Try doing this today and it would be a multiple of that number for such a big job, whereas the purchase price for something that run down would probably only be a 2x now.
While lifting the old pine floor the crew found a hidden 3x3 meter cellar. A free extra room, which not even the realtor knew about. Two months after finishing the remodeling, he sold the property for $135,000 USD.
That 2x+ sounds great, and it is a great return, but Irurzún does give some context of the downsides he had to face during the whole process: the job should have taken seven months and instead took almost a full year. He hired a crew boss who told him not to worry, “I’ll handle everything”, paid him weekly on Friday, and by month 3-4 the handler had already collected almost the whole budget for the job, with the bathroom still unfinished.
This is guaranteed to happen to newbies, and it happened to me exactly like this when merging those two PHs into one: the plan was six months, and it ended up being close to double that time, and in the end everything was way over budget in dollar terms despite the peso depreciating faster than inflation at that time.
Luckily for me, my crew did finish it, but in Irurzún’s case he had to hire a second crew to finish the rest. He hired the dude he knew or was recommended to him, which is what most people will do, but depending on the scale of the remodeling, some things turn out to be too much to handle for certain contractors.
Why that trade is no more
Despite the fact that most of the things that could go wrong, did go wrong, Irurzún still walked away with a 2x+ in 2011. In my case had I sold, it would have been closer to a 1.5x at the end of the 2010s. With construction and labor costs in USD terms now, this return would shrink even further.
Back then, in his words, you bought a property and the next year it was always a little more expensive. This was the famous “property prices only go up” era, that ran from 2003 all the way to Macri’s forced devaluation in mid-2018. Up until that fateful year, after which RE prices started to decline -50% in real terms until mid-2023, price appreciation was baked into the cake, prices were still relatively low, and labor costs paid in pesos melted away against the dollar. Most of the benefits I discussed in Currency Arbitrage for Real Estate in Argentina in 2023, are no more.
All three of these headwinds have dropped out of the equation now. Under Milei the peso is strong in real terms, so renovation and construction costs are high in dollar terms. Distressed properties are less of a bargain compared to 2020-2023, even though used properties are still heavily discounted versus new construction.
So is the fixer-upper trade a thing of the past for foreign investors? No. It can still be profitable, albeit that margins are now lower and need to be examined on a deal by deal basis. It also depends more on your role in the transaction. Below we will go over these roles, the numbers including tax traps, and my own scar tissue in this segment.
