Argentina Real Estate Investing: Property and rent the best option
Real estate has been the most popular option for investors in Argentina, carrying with it stability and consistent return. Although not to the same degree as in previous years, it not only offers a place to safe-keep savings, but it also brings in monthly rent. Trusts, buying apartments to rent them out, and garages are all popular choices for a refuge for savings. And in light of recent events and how the local market has reacted, this belief is even stronger than ever.
As just a sample, if someone bought an apartment in Palermo in 2002 for US$650 per m2, they have now earned 250% on their investment. It could be argued that 2002 isn’t the best year to sample from, but even taking numbers from 2003, the investment has still gained a 135% return, not a disappointing number.
Despite a lack of credit for buyers, real estate continues to be a growing industry in Argentina, as the social classes with a higher buying power continue to invest their savings in real estate. Other investment options tend to have a high volatility rate, and investing in real estate also means getting a monthly return in the form of rent. Profitability from rent alone usually comes in at 5 to 6 percent annually above the invested capital. And if the dollar loses buying power here and internationally, rent can bring in a revaluation percentage in dollars of 5 to 10 percent, depending on the current dollar value.
Rents can be even higher if buying at the very beginning of a project, taking advantage of presale prices — up to 20 or 30 percent. Most projects and developments finance themselves this way, taking money up front from investors. And the smaller units, which are most popular these days, are the easiest to sell. While a larger return may be made on bigger units, they also take longer to sell. But the real estate market has such a diverse slew of buyers, there is something for everyone and for every reason.
Those who decide to buy in to a project before land is even broken also run the risks of a new development, but again, higher risk means higher return. And these investors also often choose to see the project through its first period, then sell before the project is complete, restarting the entire process. This can bring twice as much profitability as buying simply to rent out, but it isn’t for everyone.
Most brokers will advise investors to find the most sensible balance between profitability and risk for each individual investor. Prices have gone up by about 10% over the last year, an important sign of a very good recovery from the slight hit the market took with the international crisis. Trusts are another popular way to invest, but as they are much more complicated, they must be analyzed at a deeper level before investing.
Speaking of profitability can also be difficult because nothing is ever sure, and the investor will really only see the end profitability once the transaction is complete. Looking at past years is a great way to make an estimation, but one should never count his chickens before they’re hatched. There are just too many factors that go into the final outcome, from trends, to location, to the international and domestic market and economic situation. However, even in light of the worst months of the international crisis, Argentina managed to hold its own; while not much was made in the way of profit, not much was lost, either.
Another popular trend is buying to rent to tourists, taking advantage of two growing markets in Argentina: real estate and tourism. Again, the risk is going to be a reflection of the possible return; vacation rentals are not as reliable, but they can certainly bring in a higher return.
And for those looking to invest on a smaller scale, garages and parking spaces are a great way to do so, allowing for a small investment in a segment with a large demand. As with all other real estate investments, the location and building has a lot to do with the amount required and the amount that can be expected in profitability, and these choices need to be made carefully on an individual level.
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