Category: Ecuador for Investors

3 things to consider before you lie on your property deed in Ecuador

This past week in this newsletter we touched on the reality of Ecuador property in that the municipally appraised values often are MUCH less than the real commercial values the property sells at.

I just want to inform on the reality of the situation, the choice is yours to put the real price you paid on the deed or just the minimum needed or the municipally appraised value.

But there are three things to consider when making the choice…

1. Do you need this property to get an investors residency visa in Ecuador?

If so then you MUST put at least $25,000 value on the property plus $500 for each dependent.  Still valid in 2016.

2. How long do you plan on keeping the property?

Putting the lower amount can help minimize notary and municipal fees now at time of purchase and your yearly property taxes (predios), but keep in mind the next buyer might not want to put the lower amount meaning you’d get nailed with a hefty capital gains tax bill!  So if you plan to keep the property for the long term this may not be an issue.

3. Is there any chance this property could be expropriated by the government?  Like to widen a road (I’ve seen many times in Ecuador), or build a bridge, park, etc…

If so, keep in mind the government only pays according to the low-ball MUNICIPAL APPRAISED VALUE of the property but if you have the higher real value on the property you could make a good case that the property is actually worth that and get all or part of that higher value.
Now, the choice is yours!

 

Up goes the walls, costs and more: Ecuador building project week 2-3

Now with the floor and columns up thanks to http://www.cormacmetalspray.com.au/ now is time for the walls…

After building with blocks on this house, next time, I’m going to use bricks, why?

Although the labor time is much more, the walls won’t crack, are more solid and after all you may use less cement cause you don’t have to plaster over the walls when finished.

We used 15 cm wide blocks for walls and filled with cement for noise protection.

For a 190 square meter house that we are building on the coast of Ecuador.  We needed 2100 cement blocks at 38 cents each.   TOTAL price $798.

Cheaper than bricks, you bet, and much faster to build!

Why Ecuadorians lie about how much they paid for their property on their deed

3 things you got to know before you buy property in Ecuador…

1. Municipal’s official property appraised values in most cases are WAY out of wack, or under the actual market value.  It’s common to see properties selling in the six figures while municipally valued at $5,000 USD or less.

2. The buyer of a property can put the real price she paid for the property on the deed but must put at least the official Municipal appraised value.

3. Ecuadorians HATE paying taxes, even more then we North Americans do, because I suppose we are more used to it.

Put these three facts together and most who buy property in Ecuador don’t put the actual amount they paid on the deeds but the minimum amount they must put which is the Municipally appraised value.

The reason for this is because it greatly lessens your tax burden, both for your transfer fees at time of purchase and also your annual tax payments (predios) due to the Municipal each year of ownership.

Here is a real life 2016 example of a property I am looking to buy and how putting the actual amount the owner is asking on the deed effects the transfer and notary fees you will have to pay at purchase plus the annual property taxes vs just putting the Municipally appraised amount.

Figures were attained directly from a notary in Ecuador.  

Actual asking price of property: $77,000

$355 Notary fees
$760 Alcabalas (Municipal transfer fees)
$228 Junta de beneficencia (Municipal transfer fees)
$4000 capital gains tax or plusvalia (the seller pays)

Annual property tax payment if based on actual purchase price (predios): $190

Current Municipal appraisal of same property(and the current value on the deed): $37,745 

$237 Notary fees
$377 Alcabalas
$120 Junta de beneficencia
$0 capital gains tax or plusvalia (the seller pays)

Annual property tax(predios) currently being paid based on current appraised value: $71

Conclusion:  Buyer could save over $600 in notary and transfer fees/taxes at time of purchase by just putting the Municipally appraised value.  Could also save over $100 a year in the annual property tax due.  The seller would save greatly in the capital gains tax (maybe something the buyer could ask for concessions on from the seller for saving them so much in tax by not upping deed to actual value).

Possible consequences:  Nothing I know of, everyone does it in Ecuador except when there is a bank loan involved in which case the bank does NOT take the Municipal appraisal but will send a guy to do their own for a more accurate figure on which they will base their loan amount to you.

The choice is yours.

Hasta pronto,

How starting a hotel moves you towards your dream

“Oh, man, empty” I thought…

This past week I went to the inauguration of a friends restaurant here in Quito, Ecuador.

Empty.

It’s tough to start a restaurant, he’ll probably be done within a month or two.

Later that same afternoon, I had to rush out of there to go serve dinner to 32 people in my hotel who were staying there.

I don’t even like having to serve food.  I wouldn’t if I didn’t have to, there’s just not many options near me.

But that’s my point.

Maybe your real dream is to start your own restaurant, or transportation service, or relocation specialist, or real estate agency, sell art work, do surf tours, or Hummingbird walks… whatever…

It’s much easier to get clients for any of the above when you have people sitting on your couch staring at you practically begging you to feed them and give them interesting things to do.

So first host them. Then sell them what you really want to sell them.

Start a B&B, hostel, hotel or even just offer lodging via AirBnb.

 

Stolen groceries in Ecuador

“That’s strange,” I thought glancing in my rear-view mirror as I parked on a rather vacant street about to walk to the nearby market.

I thought it was strange that a taxi pulled up right behind me and parked within inches of my car when they had the whole vacant street to park alongside.

Anyway, i got out of my car and without looking back I quickly pressed the electronic lock button on my key and off I walked to the open-air market in Quito, Ecuador.

As I walked back to my car with the groceries, I opened my trunk and to my surprise, the trunk was completely empty!

Prior to the produce market I had went to Supermaxi (like a walmart of Ecuador) and bought the bulk of my hotels groceries for the week, about $300 worth.All of those groceries, that once filled my trunk and back seat… were gone.

Robbed.

I figure someone had pulled up behind me and nudged open my back door before I had electronically locked my car which activates the alarm, emptied me out and left.

I imagine it was the guys in the taxi that pulled up right close to me as i parked.

T.I.E. (this is Ecuador)… better always be looking at your car when locking it before you walk away!