Category: Investor News/Analysis

“What the hell am I doing here?” I thought as I sat in a cramped living room of a tiny shack-like-house on the coast in Ecuador.

I was there to talk about a small beachfront lot I found in another part of town. When, all of a sudden, the owner came into the room… an elderly, overweight man who seriously needed a shower.

He said, “That property you’re interested in has been in my family for decades.” It was beautiful too, a small vacant lot right on the beach, in a zone exploding with growth all around. And boy, was it cheap, but for reasons, one was the lot was “occupied by an invader (“invasor” as the Ecuadorians call it)”. Some elderly guy who was deeply settled in one end of the lot, living in a stick shack.

He had no legal right to be there, he just was… he was a land “invader”. The owner said, “Oh, don’t worry about him, I know ‘em, I’m sure he’ll leave once the lot sells.” “Yea right,” I thought.

Ecuador, like most Latin American countries, has a problem with land invasions or poor people with nowhere else to go who “occupy” vacant lands and call them home.

Contrary to popular belief, as I confirmed with a local lawyer before writing this piece, there are no laws in Ecuador that protect land invaders, or “squatters”, and the process to get them off your land is pretty straight forward. Go to the police in your local area with the title of your land and place a “denuncia” (charges) and the local authorities will take it from there evicting the unwanted trespassers.

Now, the reality. The police in Ecuador are not as efficient as what you may be used to, and sometimes you may even have to pay to get them to do their job (although they are getting better). And uprooting someone who has been there for years is certainly not easy.

But yes, you certainly CAN make a lot of money “land-banking” in Ecuador, and it certainly makes more sense than storing all your wealth in the American dollar or Euro these days.

So to prevent problems with invaders, walk the entire land you plan to buy before you buy and be sure it has both proper title and is unoccupied. If it is occupied, be sure to get the current owners to vacate it before handing over any deposit money! Also, if you plan to leave the lot vacant for a while, be sure to visit your lot occasionally and maybe even put a fence to show the land is spoken for.

Recently, this year, it made big news that the government evicted hundreds of “invaders” off lands in the poor areas around Guayaquil city proving property rights of lawful owners are being respected.

And in case you were wondering, I ended up not buying the lot I mentioned earlier because, besides the invader, also had title issues … there’s always next time!

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There you are, in the cozy sales office looking at the plans of a beautiful, soon-to-be beachfront condo complex.

The enthusiastic sales rep is making it sound perfect.

Everything looks and sounds great, and for buying in before completion, you get a huge discount.

Heck, as it looks, you could probably double your investment in less than 2 years time.

As the sales rep pauses, you think to yourself, “Worst case scenario, I’m “stuck” with an oceanfront condo.”

So you buy, pay a hefty deposit and fly back to your country, eagerly awaiting the inauguration.

But there’s one thing the sales rep didn’t tell you that you really need to know.

In most parts of Latin America, what happens behind the scenes in these construction projects is way different than what happens in the US.

In the US, what typically happens is the builder will buy the land and make the building plan. Then they begin to sell units. You can read this article to know about best plans for granny flats.  You can even see here how to appoint best granny flat builder. Discover More info here about appointing best builder.

The money they receive from their sales goes into a secure escrow account that the builder can show the bank in order to help get financing to finish the project. Only upon completion of the project does the builder get access to YOUR money. As you are investing your money and waited for long time for new home. You should appoint the best home builder. Read More Here for more guidance.

Down here in Latin America, it’s a little different.
Financing from banks is almost non-existent. So as the builders sell units during construction, they use that money, your money, to fund the project!

Even worse, often, they will tell you your money is in a secure, third party, escrow-type account, but really, the day after you paid, that money is in the builder’s pocket.

So what happens if the project goes bankrupt and can’t finish?

You lose your money.

But what normally happens is that the builders just wait it out if they run out of funds, which means years could pass without you getting your property.

The best way to avoid this is to buy into a project of a large, reputable, solvent company and not to pay a large deposit. Instead, pay in small intervals marked not by dates, but by specific completion points of the project.

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A new paved road was inaugurated this past December from Progreso (a small town on the way from Guayaquil to Salinas) to Playas, reducing the transit time from Guayaquil to Playas.

Many feel this was one of the key factors that played a role in one of the largest turnouts in Playas for a New Year’s celebration. Playas received 120,000 visitors (but only has capacity for 80,000). As reported by the Comercio.

Interesting note for those investing on the coast. I’ve always liked Playas, it’s “off the cuff” and undeveloped, but has potential.

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On Friday, the government of Ecuador announced that unemployment has fallen to it’s lowest rate in the last five years… to 5%, the Minister of Planning and Development (Senplades), René Ramirez, told reporters on Friday.

Remember however that this rate does not take into account the under-employed in Ecuador, that would be interesting to see…

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