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Everything you need to know is included in our Guatemala Property Pack
Guatemala, with its breathtaking scenery, vibrant cultural history, and friendly locals, draws in numerous foreigners looking for real estate investment prospects.
Nevertheless, understanding the complexities of buying property in a foreign country can be difficult, especially with regards to the legal framework and regulations involved.
That's why this guide is here to help! We'll explain how the property market works in Guatemala in a straightforward and easy-to-grasp way, covering all the information you need to know.
Also, for a more in-depth analysis, you can check our property pack for Guatemala.Can you purchase and own a property in Guatemala as a foreigner?
If you are American, we have a dedicated blog post regarding the property buying and owning process in Guatemala for US citizens.
Yes, buying real estate in Guatemala as a foreigner is quite feasible, but there are some nuances and rules you should be aware of. Let's go through them in a straightforward manner.
Firstly, as a foreigner, you can indeed own property in Guatemala, including land. This is a significant point because in some countries, foreign nationals are restricted from owning land outright.
In Guatemala, your rights as a property owner are largely similar to those of local Guatemalans. This means you have the right to sell, lease, or develop your property, just like a local would.
However, there are certain special rules that apply. One key rule relates to properties located near international borders or coastlines. In these areas, there are restrictions on direct ownership of land by foreigners.
Typically, this includes land within a certain distance from the coast or national borders. In these cases, foreigners often use a trust or a Guatemalan corporation to hold title to the property.
Regarding the difference according to the country you're from, there is no discrimination or different treatment based on nationality. All foreigners, regardless of their home country, are generally subject to the same property ownership laws in Guatemala.
You do not need to reside in Guatemala to buy property. Many foreigners purchase real estate as an investment or as a vacation home without living in the country full-time. Similarly, there's no specific visa or residency requirement just for the purpose of buying property. However, if you plan to stay in Guatemala for an extended period, you'll need to comply with the country's immigration and residency laws.
As for the need for a specific authorization from a governmental institution, you will be happy to know that there's typically no special authorization required for foreigners to purchase property in Guatemala.
However, it's essential to go through the standard legal processes, which include due diligence to ensure the property has a clear title, paying the necessary taxes, and registering the property in your name (we have a document dedicated to the due diligence process in our Guatemala Property Pack).
There isn't a minimum investment requirement set by the government for foreigners buying property. The investment size will depend on the property's market value and your negotiation with the seller.
Lastly, it's crucial to work with a reputable real estate agent and a lawyer who is experienced in dealing with property transactions in Guatemala. They can guide you through the process, help with the necessary paperwork, and ensure that all legal requirements are met. It's also wise to be aware of the local market conditions and to understand the process of transferring funds for the purchase, as there might be regulations concerning international money transfers.
In summary, buying property in Guatemala as a foreigner is relatively straightforward, but it's important to be aware of the specific rules, especially concerning properties near borders and coastlines, and to ensure all legal processes are correctly followed.
Restrictions for properties facing a body of water
There is one type of property that foreigners cannot own in Guatemala, which is any property facing a body of water, including rivers, oceans, and lakes.
This restriction is in place to protect the country's natural resources and maintain control over its waterfront areas.
This restriction is stated in the Article 122 of the Guatemalan Constitution, which establishes that the State has territorial reserves on land areas along oceans, shores of lakes, and rivers. This restriction is further regulated by Decreto Número 126-97, also known as the "Ley Reguladora de Áreas de Reservas Territoriales del Estado".
According to Decreto Número 126-97, the minimal distance for properties facing bodies of water in Guatemala is as follows:
- 3 kilometers along the ocean coast
- 200 meters along the shores of lakes
- 100 meters on each side of the banks of navigable rivers
- 50 meters around springs and sources of water that supply populations
The Guatemalan government agency known as OCRET (Oficina de Control de Áreas de Reserva Territorial del Estado) administers these properties, and they are reserved for Guatemalan citizens only.
Actually, these properties can be leased (with an "arrendamiento") to individual or entities (but not sold).
Can you become a resident in Guatemala by buying and owning a property?
Right now, despite what you might read on some blogs, there's no official way in Guatemala to become a resident just by buying property.
To address this question, we explored official websites and found a directory of forms for applying for permanent residence (Formularios Para Trámite De Residencia Permanente).
This page, hosted on a government website, clearly indicates that only five categories of foreigners are eligible to become permanent residents in Guatemala:
- people who have relatives from Guatemala
- people who have resided for more than 5 years in the country
- people who have been married for more than a year to a local
- people who are from Central America and have been residing in the country for more than a year
- people who are retired
Nothing about real estate investing.
To clarify, you can indeed own a residency and become a permanent resident in Guatemala. However, it's important to note that simply buying property does not provide a direct path to permanent residency for foreigners in Guatemala.
How is the real estate market in Guatemala?
Market data
You can find fresh and updated data in our pack of documents related to the real estate market in Guatemala.
By taking a closer look at the GDP per capita indicator, it becomes apparent that Guatemalan people have become 8.2% richer throughout the past 5 years.
As people's wealth grows, the demand for real estate could rise, resulting in potential price increases down the road.
If we check the data reported on Numbeo, we see that residential real estate in Guatemala offer gross rental yields between 5.7% and 8.4%.
These strong rental yields reflect a positive rental market environment, which can foster long-term sustainability and growth.
To know more, you can also read our dedicated article: is it a good time to buy a property in Guatemala?
Daily life of an expat
Life as an expat in Guatemala can be quite rewarding.
The country is known for its beautiful landscapes, vibrant culture, and friendly people. It is also one of the most affordable countries in Central America, making it an attractive destination for those looking to live abroad. In addition, the country is home to a number of world-renowned Mayan archaeological sites, making it a great place to explore and learn about the region's history.
The cost of living in Guatemala is relatively low, making it a great option for those looking to stretch their budget. There are also plenty of activities to enjoy, ranging from exploring the country's lush jungles and volcanoes to taking part in traditional Mayan ceremonies. Additionally, the country has a wide range of international cuisines, making it easy to find something to suit any taste.
The safety of expats in Guatemala can vary depending on the region. Generally, most areas are safe, but it is important to take precautions and be aware of one's surroundings. Additionally, there is a language barrier, so it is important to take the time to learn Spanish or hire a translator if needed. Although the country has its challenges, expats who take the time to learn about the culture and adapt to the local way of life can have a fulfilling experience in Guatemala.
What are the best places to purchase a property in Guatemala?
This table summarizes some of the best places to buy a property in Guatemala.
| City / Region | Population | Strengths |
|---|---|---|
| Guatemala City | ≈ 3 million | Capital city, business center, cultural attractions, shopping malls |
| Antigua Guatemala | ≈ 45,000 | Colonial charm, UNESCO World Heritage Site, expat community |
| Lake Atitlán | ≈ 30,000 | Stunning lake views, indigenous culture, outdoor activities |
| Quetzaltenango | ≈ 225,000 | Second-largest city, cultural hub, Mayan heritage |
| Flores | ≈ 25,000 | Gateway to Tikal, lakefront town, access to Maya ruins |
| Panajachel | ≈ 12,000 | Tourist destination, scenic beauty, handcrafted textiles |
| Retalhuleu | ≈ 50,000 | Amusement parks, hot springs, proximity to Pacific coast |
Do you need a lawyer to buy a property in Guatemala?
When purchasing a property in Guatemala, engaging a local lawyer can provide valuable assistance in navigating the legal aspects and ensuring a successful transaction.
One crucial document they can help you with is the Purchase Agreement (Contrato de Compraventa), a legally binding contract between the buyer and seller that outlines the terms and conditions of the sale.
The Guatemalan lawyer can also assist with conducting a Property Title Search (Búsqueda de Títulos de Propiedad) to verify the property's ownership status and identify any potential legal issues or encumbrances.
Additionally, they can guide you through the process of obtaining necessary permits and approvals, such as approval from the local municipality or relevant authorities.
They will ensure that all applicable taxes and fees, such as the Property Transfer Tax and Notary Fees, are paid correctly and in compliance with Guatemalan laws and regulations.
What are the risks when buying real estate in Guatemala?
We've got an article dedicated to the risks associated with purchasing property in Guatemala.
When buying a property in Guatemala, there are some unique risks that may not be present when purchasing a property in other countries.
One risk is that of an unclear land title. In Guatemala, land titles may be unclear due to the lack of a reliable land registry system. This can lead to disputes over ownership and even claims of ownership by third parties.
Another risk is that of expropriation. The Guatemalan government has the right to expropriate land for public use without prior notice. This can result in the loss of a property without any compensation.
Finally, there is the risk of corruption. Corruption is a major problem in Guatemala, and it is not uncommon for government officials to be involved in fraudulent activities. This can lead to the loss of money or property, or to the purchase of a property that is not legally owned.
Everything you need to know is included in our Guatemala Property Pack
What are the documents needed for a real estate transaction in Guatemala?
When buying a property in Guatemala, the documents typically needed include:
1. A valid passport;
2. A deed of sale;
3. A certificate of title;
4. A tax declaration;
5. A contract of sale;
6. A notarized copy of the seller’s identification;
7. A notarized copy of the buyer’s identification;
8. A notarized deed of sale;
9. A copy of the seller’s registration at the local tax office;
10. A copy of the buyer’s registration at the local tax office;
11. A copy of the property’s tax declaration.
We review each of these documents and tell you how to use them in our property pack for Guatemala.
What strategies can you use for successful negotiations with Guatemalans?
When negotiating with locals in Guatemala, it's important to remember that patience is key.
Take the time to establish a friendly rapport before diving into the negotiation process. Show respect for their traditions and customs by learning a few basic phrases in Spanish, such as "Hola" and "Gracias."
Keep in mind that Guatemalans value personal relationships, so try to build trust and create a comfortable atmosphere. Don't rush the negotiation process; take breaks and allow time for reflection.
Be prepared for indirect communication and read between the lines to understand their true intentions.
Avoid aggressive or confrontational behavior as it may harm the negotiation process. Remember that Guatemalans appreciate a calm and composed demeanor, so try to remain patient and composed.
Consider offering fair prices and avoiding excessive bargaining, as Guatemalans value fairness and integrity.
Of course, be open to compromise and finding win-win solutions that benefit both parties. Always express gratitude and say "Muchas gracias" to show appreciation for their time and efforts.
Can foreigners obtain a bank loan in Guatemala?
Foreigners can get property loans in Guatemala, but the eligibility criteria and requirements vary depending on the lender and loan terms.
As a foreigner seeking a property loan in Guatemala, it is generally necessary to possess a valid residence permit, demonstrate a stable income, maintain a favorable credit history, and potentially contribute a specific percentage of the property's value as a down payment.
Some banks in Guatemala that can grant mortgages to foreigners include Banco Industrial, Banco G&T Continental, and Banco de los Trabajadores.
However, mortgage rates in Guatemala for a 20-year term range from 6% to 10%. Although they are slightly high, they are still within an acceptable range. Consider exploring other countries for potentially better financing options.
What are the taxes related to a property transaction in Guatemala?
Here is a breakdown of taxes related to a property transaction in Guatemala.
| Tax | Description | Calculation | Who pays |
|---|---|---|---|
| Value Added Tax (VAT) | Tax on the sale of new residential properties | 12% VAT for new properties, exemption for existing properties | Buyer |
| Rental Income Tax | Tax on rental income generated from the property | 25% of the rental income after deducting total costs | Owner |
| Property Tax | Annual tax on the property's value | Between 0% and 0.9% of the cadastral value of the property, as determined by the tax authorities | Owner |
| Property Transfer Tax | A tax on the transfer of real estate properties | Rages from 1% to 12% of the property value or sale price, depending on the history of the property | Buyer |
| Capital Gains Tax | A tax on the profit earned from the sale of a property | 10% on the net capital gain (the difference between sale price and acquisition cost) | Seller |
What fees are involved in a property transaction in Guatemala?
Below is a simple breakdown of fees for a property transaction in Guatemala.
| Fee | Description | Calculation | Who pays |
|---|---|---|---|
| Registration Fee | Fees for registering the property transfer and updating the official registry records | Around 0.15% of the property value or sale price | Buyer |
| Notary Fee | Fees charged by the notary public for their services in facilitating and certifying the property transfer | A percentage of the property's value or a fixed fee set by the notary | Buyer |
| Legal Fee | Fees for legal services provided by an attorney or law firm involved in the property transfer process | Typically 1% of the property value | Buyer |
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