The Ecuador Insider

 
I know what you’re thinking.

Where’s part 1-9 of this series?

Well, they were released about this time last year and tell the story from step one of how I found an undervalued beachfront lot near Salinas, Ecuador, legalized and resold it.

Well, about a year later, it’s now sold.

First, the specifics… 

In October of 2012 I bought a 500m2 lot right on the beach in a small fishing village 30 minutes south of Salinas near the town of Chanduy for $4000.   The lot was cheap for a number of reasons, the lot was located in a rather impoverished, completely undiscovered area of the coast, the papers of the lot were out of date and needed to be legalized (or attained for the first time), and the previous owner didn’t know much about marketing and sales.  The lot took about one month to legalize and cost around $500.  (No lawyer fees except for the notary.)

Then, in November of 2013, after negotiating I came to an agreement to sell the lot and sold it for $8000, a price where I still made money and the buyer still got a great deal (even for Ecuador) on a front-line beachfront lot.

How I sold it?

Due to time constraints and other priorities, I didn’t spend much time or money marketing it, all I did was post it on my own blog ecuadorealestate.org as well as on viviun.com .  Nothing else!  I didn’t list it in Spanish, or in the local paper (like I planned), or with any real estate agents.  Then I left it be.  And after a lot longer than I thought I had a buyer, a year later.

What I learned from the experience?

– That contrary to popular belief in Ecuador it is possible to take publicly owned “communal” land and privatize it and legally deed and register it in the notary, municipal and property registrar just like any other privately-owned property if you get some knowledge on your side.  But it can be a process and is a bit risky cause you never know.

– That if you buy property in an undiscovered, out-of-the-way location it is NOT a short-term play and will take you a lot longer to turn than you thought, even if the property is nice and right on the ocean (ideal).

– That the quality of the beach and proximity to a legit city with shopping and other services is important.

– That it will be a harder sell if NO other foreigners are in the area.

– That simply being beachfront is not quite enough to ask what other beachfront lots in more discovered, developed places on the coast are asking ($80-$100 per m2) .  If I would have got that I would have sold for around $40-50,000!  I started by asking $20k then I lowered to $16k but I didn’t start seeing any real interest until I lowered the asking price after several months to $12k.  Albeit I didn’t do a whole lot of marketing.

– That stating publicly on my blog how much I paid for the lot doesn’t help to sell it for a profit (duh).

– That using an agent probably would have been a good idea, it’s just that I had a bad experience with an agent previously.

– That there are a lot of areas on the Ecuador coast that are actually pretty stagnant while other areas are moving quickly.  Best find the areas moving quickly (which Ill cover on future newsletters).  For instance, this lot had a ‘for sale’ sign when I bought it that had been there 6 years!

– Not to waste time with all the (dozens) of tire-kickers online, the person who is actually going to buy your lot is probably someone already in Ecuador beit foreiger or local.
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Even if you don’t like to party, party towns are good places to base yourself as you explore the nearby areas of the Ecuador coast. Even if you merely take a limo service from Sacramento to Napa Valley, you can get to enjoy a ton of things along the way.

The places to eat.

A larger variety of places to stay at a much lower average cost.

It’s easier to meet more people.

And you have access to services that you wouldn’t have in more remote locations, like laundry, internet, organized activities, etc.

Everyday I ask other foreigners where they plan to travel on the coast of Ecuador.

And they always tell me the same damn thing, “Salinas, Montanita, Manta, Canoa”.

Yet theres one popular party town on the coast that is completely overlooked by foreigners.

Atacames.

For me, Atacames arguably has the nicest beach of all the locations mentioned above.

It certainly has one of the widest beaches of the country, and one of the few white sand beaches lined with coconut palms in Ecuador.

Beaches with good surf are nearby.

And beaches that are coves with flat water great for swimming are just a short Tuk Tuk ride away (in neighboring Sua).

Plus, when the other beaches mentioned above are likely overcast, you can usually count on Atacames to have sun.

Nightlife. Check, Ecuadorians know how to party, trust me on that one.

Accommodations. Cheap and plentiful with budget places starting around $10 per person and the nicer places around $20 per person.

Food. You bet. Each region of the Ecuadorian coast has their own unique blend of seafood gastronomy. But the north coast has the best cuisine out there! Try the seafood in coconut curry (encocados) or the seafood in nut based curry (cazuela) and you won’t be dissappointed!

Foreigners. Almost none to date yet the area has been popular with Ecuadorian tourists for weekend getaways (particularly from Quito) for decades.

Airport/Hospitals. Yes and yes. Atacames is one of the few beaches within just 20 minutes or so from an airport reachable by commercial flights (Esmeraldas). Plus, being just 15 minutes or so from Esmeraldas there are plentiful private health clinics and free public hospitals available.

Safety. This has been the knock on Atacames as most folks think its too close to Colombia for comfort, but actually its still several hours from the border (like a place called Quito), and with the added police force I believe safety has improved greatly over recent years.

The locals. Different from the rest of the Ecuador coast, the locals are mulatos by ancestry. And by far the friendliest and best looking people on the Ecuador coast.

Real Estate. Cheap! The best deal I see this week in the area is a finished and FURNISHED 20 room, 20 bathroom hotel one block from the beach right in the center of town built just 8 years ago complete with reception, oceanview terrace, and cistern asking $170,000 negotiable.

But the owner sounded like he’d go down even lower, I’d try for around $150,000. Its possible, and it would be a steal.

Im a hotelier myself, and I can tell you, to furnish a 20 room place (well) you’re looking at easily $45,000. And depending on the state of the building (which looks good in the photos) at this price it could pay for itself in 2 years if you market it right.

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I get it all the time…

“Well nowadays I can also buy a $40,000 property in Waco, Texas, what’the big deal about Ecuador?”

OK, well, one thing is the holding costs.

Lets take a look at my 4 bedroom, 3 bath house on the coast near Montanita. I currently rent it out.

I pay…

$0 for insurance (with so much concrete construction home insurance is not common). Although I should say I still remember that terrible fire. I shudder to think of what would have had transpired if it weren’t for the Tallahassee Fire Watch Guards. Passive Fire Protection it isn’t just getting fire extinguishers logically placed in any development, is not the full answer to fire safety. You can check here for more about the fire protection for critical infrastructure. Ask yourself are you aware exactly where your extinguisher can be found, and also would you know how to make use of it, additionally, on what sort of fire? The answer then is probably no, the actual extinguisher can help suppress a little fire, nevertheless without in-built fire protection in the fabric of the structure, the potential risks of containing a fire as well as avoiding it being a flaming inferno may drastically increase. If you’ve decided to invest in radiant barrier as a means to help boost your energy-saving techniques at home, then you probably already know many of its features from your research. But did you know that while many radiant barrier products may appear the same on the outside, the raw materials and features can actually vary? So called ‘fire protection’ is effectively insulation of the mezzanine floor steelwork to prevent it from heating up quickly in a fire. Unprotected steelwork heats up quickly and can suddenly collapse. Fire protection is specified for a certain period of time such as ‘half hour’, ‘1 hour’, ‘2 hour’ or ‘4 hour’. The time period refers to the time that the protected elements remain structurally sound in the event of a fire. The fire protection required for different parts of buildings is specified within the Building Regulations part B.You can have class A,B,C fire extinguisher at  mrfireextinguisher which can be more effective for resisting fire and protecting us.

The requirement for fire protection depends upon the use, size and extent of the mezzanine floor. Mezzanine flooring that is less than 10m x 10m in size, and occupying less than 50% of the area of the building in which it is located and which is not permanently occupied and infrequently accessed (used for storage) does not need to be fire rated. The most common means of fire protecting mezzanine floors is through the use of four key elements of insulation, column casings, a suspended ceiling, bulkheads/fascias and cavity barriers. This means of fire protecting mezzanine floors is used because of its speed of installation and low cost. Column casings comprise a two part sheet metal case lined with ‘Promalit’ or similar board bonded to the inside of the casing. The sheet metal case usually has a galvanized or white ‘plastisol’ finish to suit the application, but can be stainless steel or coloured ‘plastisol’, and the two parts have an unobtrusive locking seam enabling them to be quickly and neatly fitted with a few taps from a rubber mallet. Suspended ceilings comprise wires hung vertically on clips from the secondary beams of the mezzanine supporting length of ceiling runner. The runners clip together and are joined in turn by intermediate lengths of ceiling runner to create a ceiling grid. Minaboard tiles are then inserted to fill the grid. The grid is commonly and most economically based around 1200mm x 600mm ceiling tiles, however by adding further intermediate 600mm ceiling runners, 600mm x 600mm tiles can be used. The tiles fitted must be certificated to provide the necessary level of fire protection when used in the grid under a mezzanine floor. This restricts the available choice of tiles and finishes.

If you were impacted by the Woolsey fire, you will remember to insure your property.
$0 for condo or association fees (not in gated community)
$102 a year in property taxes
$7 electric bill last month (with one single person living on the property full time.)
$4 water bill last month
$2.50 gas (bought one tank of gas, this is also subsidized by the government)

Now lets compare this to a 2 bedroom condo in my home state of Montana, USA currently valued around $180,000…

$1200 annual property taxes
$583 every 3 months association fees.
electricity $80 a month (varies)
water $125 every 3 months
$180 annual insurance
gas $250 (varies)

How about a 2 bedroom house in Montana valued around $350-400k…

$3400 annual property taxes
$1200 annual homeowners insurance
$0 association fees (not in gated community)
electricity/gas $300 a month in winter
$25/month garbage collection that also included a wide range of skip bins offered by the service

Now, lets throw in the extra cost of my Ecuador ‘property management’ because I do not live nearby (I live in Quito) and I rent it out short term as a vacation rental.

$20 a month to caretaker who visits property twice a week and lets me know if there are any problems, waters grass once a week and takes out the garbage.
$5 each time the caretaker has to go and turn in key or recover key from an entering or exiting guest.
$10 for each cleaning between guests.

The caretaker also is in charge for paying the energy bills, and does NOT live on the property. All guests prepay online, I do all the marketing myself.

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Forget about exporting handicrafts a minute.

Ecuador has some VERY rich people, but they export different things, for instance, the product I’m going to mention today is one of Ecuador’s chief exports… cacao (or cocoa, the seed chocolate is made from).

As the breeze off the plantation whisked past my forehead I sat in a hammock across from a friend of mine who is the plantation owner of a 100 hectare cacao producing farm near the border town of Huaquillas in the South of Ecuador.

I was picking his brain. The business really interests me… here’s what I learned:

Cacao needs a tropical climate and a lot of moisture in order to grow effectively.

Rarely will you find folks with farms in full production willing to sell, because it’s a cash machine. But sometimes we can get lucky.

Cacao requires two full years after planting the seeds to begin to deliver fruit, but once it begins to deliver fruit, it will continue to for a long time as long as you take care of the trees.

When looking at listings for already-producing cacao farms for sale you’ll notice a big difference in prices… right now in the south of Ecuador cacao farms in full production are costing around $20,000 per hectare if they have CCN51 type cacao, and around $9,000 per hectare if they have the local, national type cacao.

Why the difference? The purple colored CCN51 produces a little over twice the fruit as the green colored national type cacao, and both fetch the same prices at market. So if you think you found a bargain, be sure to ask which type cacao is being produced!

For every 3 hectares of cacao farm in full production you’ll need one employee, to whom you’ll have to pay about $300 a month or $3,600 a year. Those same 3 hectares in full production will produce around $15,000 a year in sales, which is a low-ball figure, according to the plantation owner, who was my friend and wasn’t trying to sell me anything.

He said after water, fertilizer and irrigation costs as well as subtracting the above cost for the employee, each 3 hectares will leave around $9,000 in annual profit.

Once in production, you will harvest different sections every 15 days, giving you a constant stream of income, for the rest of your foreseeable life! People love Chocolate. I believe my mom’s actually addicted.

One big benefit to working with Cacao instead of Banana is that if you don’t sell the Cacao for whatever reason, you can store it, dry it, and it becomes even more desirable to the exporters, whereas banana, if you don’t sell it immediately, you lose the whole crop.

It’s actually a much more hands off business than most assume. Most plantation owners have a “Jefe” or farm manager who runs the farm for them, the owner I spoke to rarely visits his farm (maybe once every week or 2).

And as for selling your production, it’s easy, most just sell it directly to an intermediary in their town, who then turns around and sells it to an exporter in one of the ports in Ecuador (like Guayaquil), who then sell it to an importer in the destination country, who then sell it to a distributor who then sells it to the final production plants.

Why don’t the producers try to skip the supply chain and export themselves for higher profits?

Volume.

The importers require a certain, large amount of the product delivered to them regularly, and most farmers can’t guarantee such a large amount with frequency… so that’s why they use an exporter who gathers the product from various farmers and intermediaries to ensure they always have product on a steady basis for the importers.

You can find cacao farms along the coast and lowland areas of Ecuador, as well as in the eastern Amazon third of the country. To make good money, consider farms only of at least 20 producing hectares or more.

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There’s only one place in Ecuador with Caribbean-like, snow-white sand beaches and emerald green water…it’s a little bit of the South Pacific, and a little bit of Ecuador….

… and it’s the only place in Ecuador that attracts the high-rollers…

…you know, the ones that spend $10,000 for a week-long cruise.

And you’ve never heard it mentioned as a possible retirement destination, until now…

The Galapagos Islands.

Problem is that the whole area is considered a National Park, making immigration and foreign investment laws tight.

Foreigners (not even Ecuadorians who aren´t from the Galapagos) can not buy property in their own name, or spend more than 3 months a year in the Galapagos.

But I think I found a loop hole.

And I’ll share it with you.

Recently, I discovered this loop-hole right from the source, talking to the current manager of the Property Registry Office while I was in the Galapagos.

With at least one local from the Galapagos as a minority partner, foreigners can start a business in the Galapagos.

The local partner can own a small, almost symbolic percentage of the shares, they don’t have to be the majority owner (I asked).

And then you can buy a property in the Galapagos under the name of the Galapagos-founded company.

Foreign companies can NOT buy property in the Galapagos in this manner.

And then the easiest way to become a legal resident is to get a work permit, as investor and retiree visas are not given.

One way to do so would be for your Galapagos company to hire you. Yes, in essence, you’d be hiring yourself.

But that’s the only way I’ve found for foreigners to live and invest in the Galapagos.

Buying in the Galapagos can be a complicated, risky venture. But it just may be worth the risk.

Of course, this theory still has to be proven, I’ll let you know how it goes.

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