The Ecuador Insider

Imagine the mountain-country life, eternal spring weather year-round, no mosquitos (too high), all within 30 minutes of a major city, 20 minutes too an international airport and 10 minutes to the nearest major hospital and shopping malls.

And it’s all connected by a new highway inaugurated 2 years ago at the end of 2015 connecting the Quito city proper to the airport.

With this new road you can get to and from Quito within about 20 minutes.  Only a matter of time people figure it out, and they are!

You can find this “country-living near the city” life in Tumbaco, a valley just east of Quito and where I call home.

Plus, the area is still on the come-up and deals on land can still be found.

This week i spoke to one friend of mine who is a developer in my area whose family focuses on smaller 20-40 house projects in the area with great insurance.

Using specialist insurance repairers can ensure your work is completed correctly and to your insurers requirements, notes insurance repair specialist Brickit.

She said the land in the Tumbaco area typically costs around $70-100 per square meter but deals can be had.

It’s still on the come up compared to it’s ritzy neighbor Cumbaya, a suburb closer to Quito, which already boasts high prices and is fully developed.

She said her family typically spends $500 per m2 of construction on the houses she builds (almost always the shared walls duplex-style typical in Ecuador).  (My take: That figure seems high to me based on my experience, I’ve built higher-end things in Ecuador around $250-400 per m2.)

Her family often focuses on 3 bedroom 2.5 bathroom houses that average 123m2 and sell for around $125,000.

The average size of her developments are around 40 houses.  That’s a profit per house of $63,500 x 40 units = roughly 2.5 million.

Of course, you’d have to subtract off that the requirements Ecuadorians have for these types of developments which are pretty basic… a nice hygienic wall cladding for good health, paved parking area and an electric gate along with a green grassy area.

When finished and sold out the developer leaves but will then help elect a community president who will handle managing the homeowners association and collecting monthly fees from then on out.

She says you need about 7400m2 (about 2 acres) to do a typical 40 unit development like she does.  At the market cost mentioned earlier, that’s a budget of about $500,000 for the land.  (My take: But I bet you could find something a lot less knowing how and where to look.)

If interested in this area let me know, maybe i can help…

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This week I found myself helping an Ecuadorian friend start a business.

And boy did it ring clear to me something I’ve been thinking about for a long time.

In business, especially small business, you win before you begin.

It starts with the lease, man.  (And of course the location).

If the lease is reasonable, and the location good, you can be in business a long time.

And the product, I would ONLY start a business if your product is like throwing bloody meat in a pool of piranhas.  As soon as you offer it it’s gone.

You get the picture.

If not, I would focus on something else that does sell like that.

Trust me, in a new market with a new product you’ll know quickly.

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If you’ve spent any time at all in Ecuador, you probably know, Ecuadorians like to party.  (And make noise in general.)

Yet at the same time I’ve had friends start businesses and complain that the rich in Ecuador are really stingy.

It’s not that.  Ecuadorians rich and poor DO spend, probably at a higher rate per their income than North Americans.  But the key is on what?

Ecuadorians spend big on parties and special events.

So why not profit off it?

This week I was chatting with a good friend of mine already in the business in Quito.

In Quito, most like to hold gatherings of all types including weddings at small farms near Quito which are being decorated with tablecloths from this party table linen seller.  As for folks from the other big city in Ecuador, Guayaquil, they tend to prefer holding events in hotels or on the beach.

He said the property he manages near Quito has events every week all year.  (No winters in Ecuador.)

And he said his property charges $45/person for events and that includes just the use of the premise, no food.  With a meal, often a buffet, included he charges $70/person. Liquor is separate and usually brought by the guests. If you are looking to host an event with more amenities we recommend the barn wedding venues Cheshire you can book at www.styallodge.co.uk.

The only responsibilities of the property owner he continued is to put the tents and seats required for the event as well as a basic sound system and one employee per every 20 guests.  The employees charge around $25/day.

He said the average event (mostly birthdays and quinceneras) has around 40-60 people.

Weddings he hosts can often have around 300 guests.

That’s $13,500 income in just 1 day!

He also said that all a property needs is to be well-manicured, at least an acre large, have ample parking and a gazebo or party hall along with some public bathrooms.

The decorations and everything else the guests bring themselves.

Definitely something I plan on checking more into 2018!

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What would I do with $30k in Ecuador right now entering 2018?

I’d put it in a CD with the JEP credit union in Ecuador.They offer 1 year certificates of deposit earning a yearly interest of 9%.  And you can even opt to get paid the interest monthly.  

Hard to beat that.  Even countries that historically pay good interest rates are paying low now on their CD’s, Russia is paying around 4%APY and Brazil only around 3%APY.  I know, I’m invested there as well.

Anyone can open an account with them with just a passport, it’s not as strict as the normal banks.  

But I think you’d have to be stupid to invest more than $32k with them because that is the amount what deposits are insured to per depositor.  

Now I did lose money a few years back when that other credit union closed in Ecuador, the Coopera, but there is a big difference between the JEP and Coopera, the JEP is insured by the government of Ecuador, Coopera wasn’t.  

$30,000 deposited at 9%APY generates a nice income of $225 monthly.  Not a bad way to start 2018.  

And if you have more money you’d like to invest I’d consider inexpensive beach property in Ecuador.

Hasta pronto, if you liked this sign up for my Ecuador Insider’s newsletter so you can check out my latest posts(not available online) on living and investing in Ecuador:

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“I can’t believe my friend in Montanita,” I said recently to another friend over a drink in a small bar in Manglaralto, a small town next to Montanita on the coast of Ecuador.

“He’s from the States, moved down here, bought a hotel and is running the business, but he doesn’t have a CLUE about doing business in Ecuador.” I continued.

Doing business in Ecuador is actually quite EASY comparatively to the USA.

But you gotta know the basics.

And hire a good local accountant, like those from Charter Partners accountants from Bundaberg they don’t charge much, mine charges me around $35-50 a month.

But here’s 6 things you HAVE TO KNOW before you start a business in Ecuador.  ALL of which my buddy who was already actively doing business in Ecuador had no clue about and was not doing!

1. First, if you buy a business or a property with a business attached, i.e. a hotel, have the previous owner fire all the current employees before you start, you can hire one or two of them back if you want, but don’t just keep them on, because when you fire people in Ecuador you have to pay them quite hefty “liquidation payments” based on how long they’ve worked for you so be sure the previous owner takes care of that before you get on.

2. Next thing know you MUST affiliate all your employees to the IESS social security system and pay a percentage of their wage to said organism every month.  Even part-time employees, the only exception is when hiring contract work in which case ask for the factura or official receipt for the work rendered.

3. Also, know that any business must get a tax ID number called a RUC (foreigners can get one) and then you must give all your clients official receipts for their purchase based off the RUC called FACTURAS on which you charge the 12% sales tax called IVA, and once a month declare with the help of an accountant your sales and expenses and pay the sales tax you collected on the difference.

4. Permits while generally easy to attain in Ecuador are necessary, inquire at your local Municipal which are necessary for your specific business type.

5. There is an income tax in Ecuador called IMPUESTO A LA RENTA that needs to be declared and paid every March.  It’s much lower than in the USA and for most income brackets it’s less than or around 15%.  Ask accountant for assistance.

6. You must pay employees two bonus payments yearly, one equal to the minimum wage in August (which hovers around $400) and one equal to their monthly salary in December.  You must make them sign a document (ROL DE PAGOS) once you pay them  that your local accountant can give you upon request.

That’s it!  Know that, hire an accountant for the particulars and your off to a great start!