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Ecuador Value Update

An Ecuador Living subscriber just shared these good Ecuador value thoughts  from our article today on Ecuador & Value Investing.

Gary,

Your latest article, dated 27 June 2009 on Ecuador and Value Investing had some excellent guidelines.  I might add a few of my own from experience.

1. Since Ecuador has no multiple listing service, finding a trustworthy buyer-broker who can manage the search and negotiate on your behalf becomes critical.

2.  There are no arms-length comps to guide you, as exists in many developed countries. Not even public records will help in Ecuador since listing of past sales prices usually reflects the assessed tax value, not the purchase price.

3.  Most upscale units suitable for Norte Americanos have tenants in them, unless you are buying pre-construction or newly completed.  It takes 3-months to legally move a tenant out if they are Ecuadorian.  So patience is in order and with a good broker working with you, you can enlist them to find suitable alternatives for the tenant to speed up this process.

4.  If  a home or condo for sale is rented, usually appliances are owned by the tenant, not the unit owner.  So when you get possession, you are faced with buying new appliances, which adds to the capital cost of the unit. So ask going in if appliances are included and whether you want those appliances included.

5.  While I agree that location and other personal amenities are part of added-value that translates to cost per sq. foot, again not having comps to gauge what that value might be, makes putting numbers to it very difficult.  My rule of thumb is to talk to renters in the building or in the neighborhood, with the aid of my broker, to gain comparable value and asking them what attracted them to rent their unit.  I learn more about the neighborhood that way, then the more narrow perspective of the local broker.

6.  My search grid starts not with what is for sale, but the city and the neighborhood. Effectively where would I like to live and why.  If I plan to rent out part-time my unit, and to do so to other Norte Americanos, my own instinct for value may be better than local advisers.  So I spend a lot of time, walking the areas, getting a feel. Then go to a selected buyer-broker and direct them to find what might be available in selected areas.

My wife and I applied this strategy prior to our purchase of a condo in Cuenca.  We used a hotel in the center of the city as our start point and fanned out from there, on foot.  We wanted to be within walking distance of “old town.”  In the process we fell in love with the fast moving Rio Tomebamba on the edge of old town and the new city and then walked the river front. Found a bldg with terraces overlooking a nice section of the river, a quiet cobble-stone street in front with city owned river’s edge to protect our view. Hung around and cornered a person coming out of the building and engaged her in conversation about the  building, the mix of people. wrangled an invitation to see their unit and the lovely views, learned local issues and what was around the area.  Then approached a broker and found that in that building with only 6-units in it, the penthouse 3rd & 4th floor unit “might be” for sale by an owner stressed with financial issues.  And, well, we bought it.

So the strategy works, at least for us.  Just thought I’d pass this commentary along.

I know you and Merri use similar strategies in your comments about seeking out a new investment/home in Florida.  Sometimes you are lucky quickly, sometimes not.  But employing a system and following it, whether in finding a home or investing in general has always been a good strategy.  Regards,

These are good ideas on Ecuador value and can help you make a good purchase of Ecuador real estate.

Gary

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