At TheLatinvestor, when we make new documents and update our Argentina Property Pack, we want to understand the problems that potential buyers face.
We create documents to help them avoid common mistakes and problems that others have experienced before. We want these documents to be very helpful.
We ask for feedback from our customers who have bought property in Argentina before, talk to local experts in real estate, and even do surveys on social media.
Here, we'll talk about the most common problems and mistakes we've found, and how you can avoid them. We hope this information is helpful to you.
Getting money in
The first challenge to be aware of happens during the property payment stages.
In Argentina, most transactions are conducted using cash, primarily in the form of US $100 bills. It sounds primitive but this is how it is.
These transactions typically require payment in U.S. dollars, especially when dealing with property purchases, as property prices are consistently quoted in US dollars.
There is an exception: if the seller has an offshore bank account.
Some foreigners who bought our Argentina Property Pack have shared their experiences with us, noting that in their cases, the money never left the United States. This was because the sellers either had existing accounts in the United States or opened new ones, into which the funds were wired—making the process very convenient.
However, if your seller does not have a US bank account, you'll need to explore alternative payment methods.
In this case, once you've signed a reservation contract, the next step is to meet with the seller and a notary on the agreed-upon date.
During this meeting, you are required to provide the purchase amount in USD and sign the purchase contract.
Then, you have the option to pay in cash or utilize a financial service to obtain the required USD in cash, albeit for a fee.
Consequently, if you plan to make a purchase, you should prepare for the need to transport a substantial amount of U.S. dollar bills into the country—potentially as much as $250,000. While this is possible, it's important to note that the process is not straightforward, and you will incur a commission fee.
If you opt to pay with cash, there will likely be money counting machines involved. Additionally, when conducting a cash transaction, you will be required to provide a justification for the source of the money to AFIP (Administración Federal de Ingresos Públicos) through a local accountant. UIF (Unidad de Información Financiera) will almost always request information from both parties regarding the origin of the funds.
Get the full checklist for your due diligence in Argentina
Don't repeat the same mistakes others have made before you. Make sure everything is in order before signing your sales contract.
Getting money out
Selling your property and converting the money back into U.S. dollars in Argentina can be quite complex. Many people have told us about their challenges, such as high tax payments and difficulties in transferring the sales proceeds out of the country.
There are different methods you can use to navigate this process.
For example, you can work with a company authorized to operate in the securities markets. They can help you buy an Argentine public debt bond in Argentina, which is denominated in both pesos and dollars and listed on the New York market. Afterward, you can sell these bonds in the New York market, and the proceeds from the sale will be credited to your U.S. account in dollars. This method is entirely legal.
If you already have a bank account in dollars, you can also withdraw the money through that account. However, this can sometimes involve complex paperwork and procedures.
If you don't have a U.S. dollar account, a financial intermediary can assist you, but it will come at a cost. The cost may vary depending on the current situation, but you should expect to pay at least 4%, although it's possible to negotiate a lower fee depending on the circumstances.
Something to keep in mind then.
Not speaking Spanish fluently
When you're trying to find a property in Argentina and you don't speak Spanish well, it can be tough to work with a real estate agent.
In Argentina, the primary language is Spanish (but we’re sure you’re aware of it), and while some agents may know some English or other languages, there can still be problems with understanding each other.
This can lead to misunderstandings about things like property details, contracts, prices, and local real estate rules.
Also, the way people communicate and act in Argentina might be different from what you're used to, which can make things even more confusing.
In real estate, it's crucial to communicate clearly, so a language barrier can make it harder to get the property you want.
Short term buying and selling
The costs associated with buying and selling in this country are higher compared to the USA, and moving money in and out of the country is also “expensive” (there are fees and processes, as we just saw).
As a result, short-term transactions (those under 5 years, for example) tend to be a bad idea.
Additionally, Argentina is known for its political and economic instability, which has a more significant impact on short-term investments.
However, over the long term, these fluctuations have a less significant effect.
This is something worth considering.
Investing in real estate that won't attract renters
People buy real estate in Argentina for various reasons. This advice is primarily for those who want to purchase property as an investment for renting out.
One common mistake we've observed is people buying a property with the intention of living in it themselves. Often, they choose a property that's too large and located in an area where it's challenging to find renters.
To put it into perspective, the average size of a high-end hotel room is less than 30 square meters. If you buy an apartment that's 70 to 80 square meters, it's more than double the size of most upscale hotel rooms.
Our local experts have frequently encountered a scenario where potential buyers visit an apartment and remark, "It's too small for my family to live in." However, when our partners ask how often they bring their entire family to Buenos Aires, the answer is usually "never." They are also asked how frequently they plan to use the apartment each year, and the typical response is once a year. In such cases, it often makes more sense to rent the apartment for that one annual visit and buy a property that can generate consistent rental income.
In simpler terms, many foreigners make the mistake of choosing a property based on their own living preferences rather than considering what tourists would want for a short stay.
For example, if you have a substantial budget and a high income, you might want a large living space. However, your target market may not have the same preferences.
Conversely, don't buy a large property in areas that attract budget-conscious travelers. In Buenos Aires, trendy neighborhoods like Las Cañitas may be appealing, but they are typically frequented by a younger crowd who can't afford luxury apartments. San Telmo, on the other hand, is charming, but it doesn't cater to business travelers and high-net-worth individuals. It's often chosen by tango enthusiasts and students looking for budget-friendly accommodations. If your goal is steady rental income, San Telmo may not be the best choice.
If you buy a property that exceeds the budget of most potential renters, it's likely that your apartment won't be in high demand, and you won't be able to charge the rental rates you desire.
For better rental income, consider investing in premium properties located in areas like Recoleta, Palermo Soho, or Palermo Hollywood. These locations tend to attract the kind of renters who can afford higher rental rates, resulting in more substantial cash flow.
Thinking you will get a mortgage
A mortgage serves as a valuable financial tool for several reasons, making it easier for people to become homeowners:
- it enables easier home ownership through lower upfront payments.
- mortgage rates are usually lower, reducing borrowing costs.
- regular payments build equity, promoting financial stability.
- mortgage interest payments may qualify for tax deductions, providing tax benefits.
However, obtaining a mortgage in Argentina is extremely challenging due to the country's history of high inflation rates, frequent devaluations, and strict exchange controls.
To put this into context, Argentina's mortgage market accounts for just 1% of the country's Gross Domestic Product (GDP), whereas it represents 6% in Colombia, 9% in Brazil, 24% in Chile, and 77% in the United States.
The mortgage market in Argentina continues to shrink as political and economic challenges and risks persist.
As a result, the mortgage market in Argentina is almost non-existent.
This situation is leaving middle-income and even some high-income families unable to purchase their first homes. This situation creates a scarcity of buyers when you want to resell your property.
Mortgages are unlikely to happen in Argentina
Investing in a property nobody will want to buy later
The location and type of property you choose to buy in Argentina can significantly impact your investment.
High-quality apartments in desirable areas of Buenos Aires like Recoleta through Belgrano continue to sell well. Older buildings with features like tall ceilings, hardwood floors, and terraces are still in demand.
In our view, if you invest in something that appeals to a broad range of buyers, including expats looking for charm and locals with financial means, you'll have a better chance of selling at a profit. For us, this means opting for a classic pre-World War II apartment or house in a desirable neighborhood, such as the area extending from Palermo to Recoleta and down to San Telmo.
There are some timeless properties built around 1900 with impressive features like four-meter-high ceilings, stone, stained glass, woodwork, and beautiful architecture, and they consistently attract buyers.
However, we advise against buying a new unit in a nondescript 11-story concrete building, as the quality of construction and character in these buildings tends to be lacking. It will be hard to resell.
If you want more advice like this one, there is a document called “Anatomy of a good / bad property deal” in our Argentina Property Pack.
Hiring the wrong escribano
You have to hire a notary, known as an "escribano" in Argentina, when buying property. They typically charge a fee of 1.5% to 2% of the total transaction, but it's well worth it for a smoother process.
In our Argentina Property Pack, we have a document about due-diligence, that will tell you what to check. However, we will be honest and transparent, it will not replace the work that can be done by an escribano. They will be your best ally during the whole buying process for a property in Argentina.
An escribano plays a crucial role by conducting research to ensure that property titles are clear and identifying any outstanding bills that need to be settled during the closing. Often, the seller's share of the proceeds will be used to cover back taxes, utility bills, and other expenses at closing.
In some cases, there might be unresolved legal issues related to the entire building. Realtors on both sides may not be aware of or concerned about these issues, but an escribano will uncover them for you.
Additionally, if you need official translations for documents required by your US lender, the escribano can assist with that as well.
Working with unregulated realtors
One thing that most foreigners don’t realize when they embark on their adventure of buying real estate in Argentina is that for the most part there is absolutely no regulation in the real estate industry.
If you walk around the streets of Buenos Aires, you will notice a real estate office on almost every other block. For every one real estate office you see, there are probably 15 independent realtors or companies that are operating as a “realtor agent”.
There is no real experience needed to operate as a realtor and there is no real regulation like there is in the United States or other first world countries. Some may have previously worked in entirely different professions and switched to real estate just because they could speak English. Some of them may never have personally owned property or gone through the buying process themselves.
Trusting your realtors regarding prices
In Argentina, there's a significant difference compared to many other places in the world when it comes to buying property – the buyer is charged a commission.
Here, the standard commission is 4% of the purchase price, plus a 21% VAT tax on that 4%. So, if you're buying an apartment for $200,000, you'd be paying a realtor's commission of $9,680 ($8,000 plus $1,680 in taxes as professional service fees are subject to VAT).
From what we’ve seen, Argentinian realtors are generally considered trustworthy and honest to deal with.
However, it’s not always the case. For example, you won't often hear a realtor advising you not to buy a property because it's overpriced. Realtors receive a percentage of the purchase price, so it's in their best interest for you to pay the highest price possible. They typically won't suggest offering a lower price.
The lack of a "comps" (comparables) system in Buenos Aires poses a challenge. A realtor might tell you a property is fairly priced, only for you to discover that you've paid tens of thousands of dollars more than someone else did for a similar property in the same building the day before.
Also, please know that navigating property listings in Argentina is a unique process.
Unless the same realtor represents both the buyer and seller, you'll usually have your own realtor, the seller's realtor, and sometimes even the owner involved. Trust is often scarce in these transactions, and realtors tend to be cautious with their listings. It's a somewhat weird system where everyone is wary of being taken advantage of.
Even locals who have spent their whole lives in Argentina have encountered issues with local real estate companies, so caution is advised.
Everything you need to know is included in our Argentina Property Pack
Getting the wrong specs about the property
When you're looking at apartments in Argentina, you'll usually get a document that provides information about each unit.
This document has details like the size of the apartment in square meters, which floor it's on, its address, monthly expenses, and more. It also includes a 'luminosity scale' that rates how much natural light the apartment gets, but it's the seller's agent who decides this rating on a scale from 1 to 10. However, what they consider a perfect 10 might not be the same as what most people would think.
Additionally, the accuracy of the square meter measurement on these documents is not always reliable. It's a good idea to measure the size yourself.
When questioned about inaccuracies, they often claim it was a simple mistake. The precise square meter measurement is actually recorded on the property title. Since property prices are based on square meters, having an accurate size is very important
Not knowing that most list prices are highly inflated
Yes, indeed, many LIST prices are often much higher than what you'll actually pay.
The true cost becomes clear during negotiations. Your real estate agent may have some insights, but prices can vary widely due to factors like location, the condition and size of the property, and the type of building.
In Argentina, it’s a good idea to aim for a 15-25% reduction during negotiations.
For instance, if a property owner initially asks for $200,000, they might set the listing price at $215,000 to leave room for negotiation and ultimately get the $200,000 they desire.
Ultimately, understanding property prices in different parts of town is key to making a successful deal. That’s why we have made a document about prices, rents and yields in our Argentina Property Pack.
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Not accounting for repairs
When purchasing a property in Argentina, it's important to be aware of additional fees.
Typically, homes are sold without appliances, and light fixtures are often not included either. In many cases, you should be prepared to renovate, at the very least, the kitchens and bathrooms.
For properties priced below $200,000, it's advisable to allocate around 30% of the purchase price for pre-move-in repairs.
Additionally, it's a good idea to seek local recommendations for an architect who can oversee these renovations on your behalf.
Being in a rush and trying to do everything online
The best way to avoid mistakes and navigate this process effectively is to live in Argentina for a year first. This will give you the opportunity to connect with people and explore dozens of potential properties.
In terms of the buying process, you should be prepared to commit 3 to 6 months of your time to find and purchase a property. This isn't something that can be done online. Typically, you'll rely on word-of-mouth recommendations to find a trustworthy lawyer and escribano (notary).
Real estate agents may not be of great help; they're often a necessary part of the process, but having a reliable escribano is crucial, as mentioned earlier. It's important to understand that the real estate process in Argentina can be quite complex and slow-moving.
Faking the property sale’s price on the title deed
One common issue you'll encounter in Argentina is that sellers often want to understate the property's sale price on the title deed.
This practice is unfortunately widespread here. Sellers do this to avoid paying taxes and to prevent government agencies like AFIP from looking into their financial transactions, including how they acquired the money for the property and what they plan to do with the sale proceeds.
Until 2018, there was no capital gains tax in Argentina. However, because so many people were declaring lower-than-actual sale prices, the government realized they were losing revenue from transfer taxes. As a result, they introduced a 15% capital gains tax on property sales.
It's always advisable to insist on legal, transparent transactions ("white" deals). However, it's important to note that many sellers won't agree to sell their properties unless you agree to report a lower sale price on the title deed.
Additionally, in many new construction projects, sellers may only be willing to sell to you if you agree to declare a sale price that's as low as 50% of the actual amount you're paying.
Some reputable real estate firms that are involved in new construction projects may advise their clients to report only 50% of the actual sale price on the title deed. However, it's strongly discouraged to engage in such practices.
Buying rural lands without thorough verification
Rural land ownership comes with its own challenges, particularly concerning the issue of large groups of extremely impoverished individuals establishing makeshift settlements on the land.
Unfortunately, there are limited options available to address this situation, which can be quite distressing given the lack of alternative housing for these people.
Consequently, landowners can find themselves in a difficult and morally complex position.
However, it's essential to note that the extent of this issue varies depending on the location of the land. These encroachments occur most frequently in areas such as Buenos Aires and in the southern regions near the indigenous Mapuches communities.
Buying real estate in Argentina can be risky
An increasing number of foreign investors are showing interest in Argentina. However, 90% of them will make mistakes. Avoid the pitfalls with our comprehensive guide.