The Ecuador Insider

The Ecuadorian Bromelius Flower, found both in the Andes and Amazon regions.

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Loja, Ecuador

“This s-h-i-t’s chess down here, not checkers.”

I told my friend referring to buying property in Ecuador.

You see, in North America you have things like an MLS system, licensed investment real estate agents, appraisers, escrow, insurance for everything including the title, and lawyers who have to pass a bar exam and abide by a code of ethics to keep their practice.

None of that exists in Ecuador, and if it does, rarely seen.

That’s why a lot of us foreign buyers get it wrong when we buy in Ecuador, and it can cause us to LOSE EVERY CENT of an investment we made in Ecuador.

Yes, GREAT deals can be had on beautiful properties in Ecuador for under $50k, heck, even under $25k, but there’s also a much larger risk of being took most don’t tell you about!

You shouldn’t pay US prices for Ecuador property. Plain and simple. They’re two different animals.

So, here are 3 of the biggest mistakes I’ve seen foreign buyers make (including myself) when buying property in Ecuador. It was hard to just choose three, but here goes…

3. Buy and leave before closing. The biggest mistake I’ve seen foreign buyers make is they come down in a rush, buy a property and leave before the property closes and the deed is officially in their name.

Many even leave a power of attorney wth some lawyer they just met in Ecuador.

Big mistake.

You really have to see things through in Ecuador or they may never get done. I know of one instance where one lawyer simply didn’t finish the job for a foreign buyer and a year passed and the property still wasn’t registered under the new buyers name!

The closing process takes about a month in Ecuador so if you buy down here you better plan on staying at least that long.

2. Buy a house with “cancer”. Safe to say Ecuador building codes are rarely enforced and especially on the coast, many buildings have “cancer”.

By that I mean the cement has been eroded by the salt-filled sea air through the years and the cement loses its composition turning houses basically into “houses of sand”. Best to have house inspected by an architect before buying to ensure there is not any costly structural damage the eye misses.

1. Leave property vacant for extended periods time. Ecuador is not the US. It shouldn’t be treated as such. I know many of you come down here looking to invest and never plan on moving here, and that’s fine, but you should never just leave a property you purchased vacant and unguarded for extended periods of time.

In Ecuador, “squatting” happens.

It’s when someone comes in and occupies a vacant piece of land or home and eventually consider’s it their’s, although they have no legal right to be there.

Often your neighbors will be the biggest culprits expanding their borders into your vacant lot.

Although you are the official, registered owner, it can be very difficult to get these people off your property, especially if they’ve been there several years and have built there.

Best to fence in your vacant land investment and pay someone monthly to keep an eye on it. Or pay a local to watch over a vacant house. $20 or less a month will often do. For instance, when my partner and I decided to become first home builders in Perth we found a local to pay $20 a month to watch over the property and oversea the build, they also water the plants once a week.

If you liked this, you’d absolutely love my Weekly Ecuador Insider´s Newsletter, where you’ll learn everything YOU NEED TO KNOW before you invest in Ecuador, you can unsubscribe at any time:

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I know, I know.

It’s about time I talk about the first business idea that comes to the mind of many foreigners when buying property in Ecuador.

Start a Bed and Breakfast.

I know the business quite well, in fact, I have a B&B in Guayaquil.

Here are 8 lessons I’ve learned the hard way about this business in Ecuador so you don’t have to: 

8. Location.  Often in this business your success or failure is dependent on this first very important decision.  Where to buy.  I recommend buying property you’d like to turn into a B&B in a destination with a nice constant flow, or demand, of travelers.  Don’t try to get too far off the beaten path in an unknown location, or risk withering away on the vine.  People visit locations, not B&B’s, remember that.

7. Location within the location.  Often, your only significant advantage over your competition will be your location within your town.  The closer you are to where your clients want to be, for instance, the beach… the better.

6. Get an accountant involved early.  Unless you plan on selling exclusively to foreigners it is next to impossible to run a cash business in Ecuador these days.  Over the last few years the local IRS (SRI) has really tightened up and for the first time local businesses feel the need to pay their taxes.  When buying from you, most in Ecuador will ask for an official receipt (factura) with your local tax ID number on it (RUC) so they can legally write the expense off their taxes.  A good accountant can manage your tax payments and social security payments of your employees.

5. Have lots of rooms.  Your rooms are your products, they are your money makers.  The B&B business is a very hands-on, long-hours business which requires at least 2 employees (one day and one night shift), and it’s simply not worth it if you don’t have at least 7 rooms with private baths to rent it… trust me on this one!

4. Target the high-end.  I know it’s tempting to be the cheapest option in your area and ego-satisfying to see your place fill up.  But trust me, I’ve tried it, that’s not the crowd you want in your place.  The low-end, bargain basement dwellers are the most demanding and troublesome bunch of all.  If you target at least a slightly-higher-end crowd you can make the same money, probably a lot more, with only a quarter of the effort and your place won’t deteriorate nearly as fast.

3. Buy, don’t rent.  In order to keep your place a higher-end locale, you’ll need to invest in constant improvements, why invest sometimes thousands in ultimately someone else’s property?  Nuff said.

2. Sell extras.  Remember why people choose to stay in hotels instead of other types of accommodations.  Often, for the extra services.  Sell them and you can increase your bottom line.  Everything from laundry service to drinks to even meals and more if you can swing it.

1. Install cameras.  Why invest thousands in a business so your employees can walk away with all the profits?  Don’t laugh, I’ve seen it happen.  Think about it, what will prevent your employees (if you aren’t around) from receiving a guest, cleaning the room and pocketing the payment?  In Ecuador, like most of Latin America where many folks have to scrape just to get by, although normally honest, many won’t hesitate to skim a few bucks if they think they could easily get away with it.  You need a solid system in place with survellance cameras you can check via the internet whenever you like.

As my valued Insider subscriber, let me invite you to a coffee at my B&B in Guayaquil, if you reserve this week for a stay of 2 nights or more receive 1 free van ticket from Guayaquil to Cuenca (1 per room booked).  We are 1 short block, 2 minutes by foot, from the main departure point.

If you liked this, you’d absolutely love my Weekly Ecuador Insider´s Newsletter, where you’ll learn everything YOU NEED TO KNOW before you invest in Ecuador, you can unsubscribe at any time:

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