3 real estate business models that do NOT work in Ecuador

This week I´m checking in from my hometown of Cleveland, Ohio on a quick trip back from Ecuador.

And everyone I run into seems to be in real estate.

But it´s a completely different animal than what I´m used to in Ecuador…

…here are three common business models I´m seeing here that would NOT work in Ecuador.

1. Purchase low-income rental properties.  In Cleveland, that means the properties in the inner-city where my family lives selling for around $20-40,000.  In Ecuador, I would not touch this business model with a 10-foot pole.  Low-income rents in Ecuador are really low (like $100-300 a month) and the rental laws just don´t protect homeowners with long, complicated eviction processes for this to be worth the hassle to me.

2. Live-in flip.  Where you buy a fixer-upper property and live in it until you are able to resell it.  Well, when you buy a beat-up property in Ecuador chances are it won´t be livable (if you have an average North American living standard).  I know, I´ve done this one and it was ROUGH.

3. Sell on contract.  This is when you tie up a property in a contract for a period of time usually 15-30 days and then resell the contract (or right to buy the property) for a profit of usually a few thousand dollars to another investor.  This COULD work in Ecuador and something I may try in the near future, but this is usually done in RED-HOT markets like we are seeing in the western USA now.  In Ecuador, properties usually take much longer than a month to sell due to the primarily cash-only market.

So what would I do to make money in Ecuador property? Stay tuned to this newsletter and you´ll find out!

Hasta pronto, if you liked this you’d love my Insider’s newsletter on living and investing in Ecuador,

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How I got approved for a home loan in Ecuador being a foreigner

If you’ve ever been to Ecuador, you know, as a new arrival often on a tourist visa it is almost impossible to so much as get a bank account open in Ecuador, let alone get approved for a home loan.

Once you have your residency visa and cedula (ID card) it is easy to open bank accounts, but getting approved for a mortgage still is difficult.

But there is a way.

I just got approved. And I as well am a new arrival expat (4 years ago) in Ecuador from the USA with no credit history in Ecuador.

Here’s what I would do to get approved as a foreigner…

1. Forget the big banks in Ecuador and focus on the credit unions or COOPERAS like JEP or Mutualista Pichincha. Open an account there and better yet leave a substantial CD of $20-30,000. 3-6 month term is fine. Both of the institutions listed above are insured on deposits up to $32k, I wouldn’t deposit much more than that.

2. Open an account as well and have any steady income you receive deposited directly there for a few months (preferibly at least 6).

3. Make friends with the banker at your nearest branch, maybe buy a few bank products from them, and maybe help them sign up a few other people, try to show them (albeit maybe not true) you are a “high-roller” type with cash and connections to boot although new to Ecuador.

4. On one of your bank visits while chatting up your new banker friend mention to her a great property deal you saw and that you were wondering on the possibility of a home loan. Chances are if you’ve built up rapport and shown that you have a little bit of money (by investing in a CD in their bank) or a steady income through monthly deposits they’ll ignore the regular requirements like showing tax statements of proof of Ecuador income or mandatory time in country and approve you for the loan. Your banker friend will often help push the application through her boss.

This is the exact albeit unsophisticated process I used to get approved for an up-to $70,000 home loan in Ecuador in 2017 with one of the above-mentioned institutions.

The next immediate step after you’ve been approved is they will send an appraiser to check out the property you are interested in, and from that will be able to loan up to 70% of the purchase price usually over a 10-15 year term. Oh yea, but did I mention mortgages aren’t cheap in Ecuador at 10.5% annual interest.

The challenge for me now is to find a property that can generate a POSITIVE CASH FLOW that puts money in my pocket each month above and beyond what I have to pay to the bank each month even at that expensive interest rate. Possible? You bet! Stay tuned.

Shopping time!

Hasta pronto, if you liked this you’d love my Insider’s newsletter on living and investing in Ecuador,

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7 businesses I would put in Canoa, Ecuador right now

Disaster breeds opportunity.

The ying and the yang, there is a positive side to everything if you look for it.

This fact has became particularly clear to me since I started investing in currencies online (more on that soon).

But particularly since the earthquake last April, here are 7 businesses I personally would consider putting in Canoa (if I had the time to do so).

1. Rentals- So I’ve heard from sources on the ground, since the quake acceptable American-quality rentals are few and far between.

2. ATM- Everyone I know who lives in Canoa complains there is no ATM, solve this problem somehow and you will be rewarded.

3. Coffee shop- A good one with inside and outside tables, right on the ocean, with WiFi and good pastries, yea, I’d like to see something like that here (think Sweet and Coffee).

4. Liquor store- with ample selection of both foreign and local liquors and wine plus a whole bunch of other hard-to-find edible goodies like thai curry powder, Heinz ketchup, etc.

5. Late night street food, but something different (like a taco bus)– Right now the late night options are limited to average hamburgers on the street, shwarma (kebab), and pizza (moan).  How about a taco stand or pita pit, that’s what I’d put.  Add hot dogs and you can appeal to the local crowds too!

6. Chinese food (Chifa)- According to sources, no Chinese in town currently, could be a big hit with both locals and foreigners.

7. Bathrooms/showers on the beach- Especially since the quake pretty much non-existent.  Def. a need.

So, what are you waiting for? Give it a go!

Hasta pronto, if you liked this you’d love my Insider’s newsletter on living and investing in Ecuador,

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